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CERTAIN DEFINED TERMS AND CONVENTIONS
In this annual report, we use the terms “we,” “us,” “our” and the “Group” to refer to Grupo Supervielle S.A. and its consolidated subsidiaries, including Banco Supervielle S.A., unless otherwise indicated. References to “Grupo Supervielle” mean Grupo Supervielle S.A. References to the “Bank” mean Banco Supervielle S.A. and its consolidated subsidiaries. References to “Tarjeta” mean Tarjeta Automática S.A. References to “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”“IOL” mean Viñas del Monte S.A.
InvertirOnline S.A.U. and InvertirOnline.com Argentina S.A.U. References to “MILA” mean Micro Lending S.A.U.
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.
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 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 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. For information since January 1, 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.
i
The term “ROAE” refers to return on average shareholders’ equity. ROAE is frequently used by financial institutions as a benchmark to measure profitability compared to peers but not as a benchmark to determine returns for investors, which is affected by multiple factors that ROAE does not consider.
The term “NIFFI” refers to Net Income from Financial Instruments.
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, 31,2018 and 2017 and 2016 and for each of the three years ended December 31,January 1, 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, and for the years ended December 31, 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, which included comparative financial information for the year ended December 31, 2017. All IFRS standards issued by the IASB effective at the time of preparing the audited consolidated financial statements have been applied.
The opening IFRS statement of financial position was prepared as of our transition date of January 1, 2017. Prior to the adoption of IFRS, we prepared our audited consolidated financial statements in accordance with Argentine Banking GAAP.
The application of IFRS 1 “First Time Adoption of IFRS” required us to adopt accounting policies based on the standards and 2015. interpretations effective at the reporting date of our first IFRS financial statements (December 31, 2018). As a result of adopting IFRS, we have changed many of our previous accounting policies. These IFRS accounting policies have been applied consistently in preparing our audited consolidated financial statements, and in the preparation of the opening IFRS statement of financial position at transition date.
At the same time, IAS 29 “Financial Reporting in Hyperinflationary Economies” 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 of the financial statements.
In order to conclude on whether an economy is categorized as highly inflationary, IAS 29 outlines a series of factors to be considered, including the existence of an accumulated inflation rate in three years that is approximate or exceed 100%. As of July 1, 2018, Argentina reported a cumulative three-year inflation rate higher than 100% and 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.
In preparing the opening IFRS statement of financial position, we have adjusted amounts reported previously in our audited consolidated financial statements prepared in accordance with Argentine Banking GAAP. An explanation of how the transition from Argentine Banking GAAP to IFRS has affected our financial performance and financial position is set out in note 2.3 of our audited consolidated financial statements.
Unless otherwise indicated, all financial information of our company included in this annual report is stated on a consolidated basis under Argentine Banking GAAP. Our audited consolidatedIFRS.
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 have been approved by our ordinary and extraordinary shareholders’ meeting held on April 24, 2018.the date of the financial statements. All the amounts included in the statement of financial position which are not stated in terms
ii
of the measuring unit current as of the date of the financial statements should be restated adjusted applying the general price index. All items in the statement of income should be stated in terms of the measuring unit current as of the date of the financial statements, applying the changes in the general price index occurred from the date on which the revenues and expenses were originally recognized in the financial statements.
Adjustment for inflation in the initial balances has been calculated considering the indexes based on the price indexes published by the National Institute of Statistics and Census (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.
The effect of inflation in the Company’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 paragraphs.
Upon initially applying inflation adjustment, the equity accounts were restated as follows:
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.
The resulting amount was included in the “Results from exposure to changes in the purchasing power of money” account.
Consolidated Statement of Comprehensive Income were restated as from each accounting allocation.
The legal reserve and other reserves in the statement of income were not restated as of the initial application date.
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, 20172018 was Ps.18.7742Ps.37.8083 to U.S.$1.00, which was the reference exchange rate reported by the Central Bank for U.S. dollars as of December 29, 2017.28, 2018. The Federal Reserve Bank of New York does not report a noon buying rate for Pesos. The U.S. dollar equivalent information presented in this annual report is provided solely for the convenience of investors and should not be construed as implying that the Peso amounts represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate. See “Exchange Rates” for more detailed information regardingThe reference exchange rate reported by the translationCentral Bank was Ps.44.90 per U.S.$.1.00 as of Pesos into U.S. dollars.May 6, 2019.
iii
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 otherthird-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.
FORWARD-LOOKING STATEMENTS
This annual report contains estimates andforward-looking statements, principally in “Item 3.D Risk Factors”, “Item 5.A Operating Results”, and “Item 4.B Business overviewOverview.” We have based theseforward-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 ourforward-looking statements, including, among others:
| (i) | changes in general economic, financial, business, political, legal, social or other conditions in Argentina, including the upcoming presidential elections in October 2019, 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 fluctuations in the exchange rate of the Peso and 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 Argentine Civil and Commercial Code; |
| (ix) | credit and other risks of lending, such as increases in defaults by borrowers; |
| (x) | exposure to Argentine government liabilities, and 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. |
(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;v
(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 identifyforward-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, theforward-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 andforward-looking statements.
Table of ContentsPART I
| Item 1. |
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Not applicable.
| Item 2. |
Not applicable.
| Item 3. |
| Item 3.A | Selected Financial Data |
Item 3.A.Selected Financial Data
The following tables present selected consolidated financial data for ushas been derived from our audited consolidated financial statements as of the dates and for each of the periods indicated. Youindicated below. This information should also be read this information in conjunction with our audited consolidated financial statements and related notes beginning on pageF-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, 2018 and 2017 and the selected consolidated statement of financial position data as of December 31, 2018 and 2017 and 2016 and for the three years in the period ended December 31,as of January 1, 2017 hashave been derived from our audited consolidated financial statements included in this annual report. The selected consolidated financial data as of December 31, 2015, 2014 and 2013 and for the years ended December 31, 2014 and 2013 has been derived from our audited consolidated financial statements,report which are not included in this annual report. Our audited consolidated financial statements as of December 31, 2017 and 2016 and for the three years ended December 31, 2017 have been audited by Price Waterhouse & Co. S.R.L., member firm of PricewaterhouseCoopers an independent registered public accounting firm.
Our consolidated financial statements were prepared and presented in accordance with IFRS, as issued by the PricewaterhouseCoopers network, independent accountants, whose audit report is included elsewhere in this annual report.
IASB and the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC). We maintain our financial books and records in Pesos and prepare and publishapplied IFRS for the first time for the year ended December 31, 2018 with a transition date of January 1, 2017. We have applied all IFRS issued by the IASB effective at the time of preparing our audited consolidated financial statements in Argentina in conformity with Argentine Banking GAAPstatements. The opening IFRS statement of financial position was prepared as these are the rules and regulations applied by the Bank,of our main subsidiary, which differ in certain significant respects from U.S. GAAP, and from Argentine GAAP.transition date of January 1, 2017. Note 352 to our audited consolidated financial statements provides a descriptioncontains the details of our transition to IFRS and application of IFRS 1.
The consolidated financial statements and the principal differences betweenfinancial information included in this Annual Report for all the periods reported are presented in Argentine Banking GAAP and U.S. GAAP, as they relate to us, and a reconciliation to U.S. GAAP of net income and shareholders’ equitypesos as of December 31, 2017 and 2016 and for2018, which is our functional currency.
IAS 29 establishes the years ended December 31, 2017, 2016 and 2015.
On February 12, 2014,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 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 an entity that reports in the entities under its supervisioncurrency 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 thenon-monetary items as from the acquisition date or the revaluation date, as applicable. These requirements also comprise the comparative information of the financial statements.
In order to conclude on whether an economy is categorized as highly inflationary, IAS 29 outlines a series of factors to be considered, including the existence of an accumulated inflation rate in three years that is approximate or exceed 100%. As of July 1, 2018, Argentina reported a cumulative three-year inflation rate higher than 100% and therefore financial information published as from that date should be adjusted for inflation in accordance 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 33IAS 29. Therefore, we have applied IAS 29 to our audited consolidated financial statements provides a description of the principal differences between Argentine Banking GAAP and IFRS, as they relatestatements. See Note 1.2 to us, and a reconciliation to IFRS of shareholders’ equity as of December 31, 2017 and January 1, 2017 and of net income for the year ended December 31, 2017.
our audited consolidated financial statements.
Solely for convenience of the reader, we have translated certain Peso amounts as of and for the year ended December 31, 2017 have been translated2018 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, 2018 which was Ps.37.8083 to U.S.$1.00. The reference exchange rate reported by the Central Bank was Ps.44.90 per U.S.$.1.00 as of May 6, 2019. 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.
|
| Grupo Supervielle S.A. |
| ||||||||||||||||
|
| Year ended December 31, |
| ||||||||||||||||
|
| 2017 |
| 2017 |
| 2016 |
| 2015 |
| 2014 |
| 2013 |
| ||||||
|
| (in thousands of Pesos or U.S. dollars, as indicated) |
| ||||||||||||||||
Consolidated Income Statement Data |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Argentine Banking GAAP: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
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 |
|
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 |
| ||||||
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 |
| ||||||
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 |
| — |
| ||||||
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 |
| ||||||
Miscellaneous income |
| 29,074 |
| 545,842 |
| 429,884 |
| 367,165 |
| 190,005 |
| 129,245 |
| ||||||
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: |
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|
|
|
|
|
|
|
|
| ||||||
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,These consolidated financial statements differ in certain material respects from our locally filed financial statements as of December 31, 2018 and 2017 2016, 2015, 2014 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,January 1, 2017 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, 2018 and 2017 Ps.319.8 million forprepared in accordance with Argentine Banking GAAP.
We are subject to the year ended December 31, 2016, Ps.151.8 million forprovisions of Article 2 – Section I – Chapter I of Title IV: Periodical Reporting Requirements of the year ended
December 31, 2015, Ps.122.9 million for CNV Rules and we are required to present its financial statements in accordance with the year ended December 31, 2014valuation and Ps.122.9 million fordisclosure criteria set forth by the year ended December 31, 2013. In January 2016,Argentine Central Bank.
The Argentine Central Bank, through Communications“A” 5541, as amended, set forth a convergence plan towards the stockapplication of preferred shares was converted to Class B shares.
(8) Loans include loans and receivables from financial leases.
(9) Liquid assets include cash, securitiesIFRS 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 have presented our local financial statements under these rules on March 7, 2019. Shareholder’s equity under the rules of the Argentine 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 asis presented in Note 25 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 2016 and 2017, the Peso lost approximately 21.9% 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.
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 |
|
(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 December 31, | ||||||||||||
| 2018 | 2017 | |||||||||||
| U.S.$. | $ | $ | ||||||||||
| (in thousands of Pesos or U.S. dollars, as indicated) | ||||||||||||
Consolidated Income Statement Data IFRS: | ||||||||||||
Interest income | 804,486 | 30,416,242 | 22,264,831 | |||||||||
Interest expenses | (460,570 | ) | (17,413,360 | ) | (8,309,665 | ) | ||||||
Net interest income | 343,916 | 13,002,882 | 13,955,166 | |||||||||
Net income from financial instruments (NIFFI) at fair value through profit or loss | 166,904 | 6,310,371 | 3,545,647 | |||||||||
Exchange rate difference on gold and foreign currency | 29,800 | 1,126,705 | 393,112 | |||||||||
NIFFI and Exchange Rate Differences | 196,704 | 7,437,076 | 3,938,759 | |||||||||
Net Financial Income | 540,620 | 20,439,958 | 17,893,925 | |||||||||
Service fee income | 156,783 | 5,927,689 | 6,063,719 | |||||||||
Service fee expenses | (37,510 | ) | (1,418,180 | ) | (1,220,427 | ) | ||||||
Income from insurance activities | 22,447 | 848,665 | 899,491 | |||||||||
Net Service Fee Income | 141,720 | 5,358,174 | 5,742,783 | |||||||||
Subtotal | 682,340 | 25,798,132 | 23,636,708 | |||||||||
Result from exposure to changes in the purchasing power of money | (159,092 | ) | (6,015,001 | ) | (2,591,255 | ) | ||||||
Other operating income | 65,424 | 2,473,558 | 1,838,024 | |||||||||
Loan loss provisions | (136,981 | ) | (5,179,033 | ) | (4,033,187 | ) | ||||||
Net Operating Income | 451,691 | 17,077,656 | 18,850,290 | |||||||||
Personnel expenses | (232,187 | ) | (8,778,580 | ) | 8,736,238 | |||||||
Administration expenses | (148,129 | ) | (5,600,508 | ) | 4,918,531 | |||||||
Depreciations and impairment of non-financial assets | (11,436 | ) | (432,389 | ) | 621,988 | |||||||
Other operating expenses | (114,047 | ) | (4,311,940 | ) | 4,156,824 | |||||||
Income / (loss) before taxes | (54,108 | ) | (2,045,761 | ) | 416,709 | |||||||
Income tax | (26,737 | ) | (1,010,888 | ) | (1,171,969 | ) | ||||||
Net loss for the year | (80,845 | ) | (3,056,649 | ) | (755,260 | ) | ||||||
Net loss for the year attributable to owners of the parent company | (80,088 | ) | (3,028,003 | ) | (754,370 | ) | ||||||
Net loss for the year attributable tonon-controlling interest | (757 | ) | (28,646 | ) | (890 | ) | ||||||
Other Comprehensive Income | 6,390 | 241,573 | 46,882 | |||||||||
Other comprehensive income attributable to parent company | 6,383 | 241,322 | 46,869 | |||||||||
Other comprehensive income attributable tonon-controlling interest | 7 | 251 | 13 | |||||||||
Comprehensive Loss | (74,457 | ) | (2,815,076 | ) | (708,378 | ) | ||||||
Comprehensive loss for the year attributable to owners of the parent company | (73,706 | ) | (2,786,681 | ) | (707,501 | ) | ||||||
Comprehensive loss for the year attributable tonon-controlling interest | (751 | ) | (28,395 | ) | (877 | ) | ||||||
Item 3.BCapitalization and indebtedness
| Grupo Supervielle S.A. | ||||||||||||||||
| As of December 31, | As of January 1st, | |||||||||||||||
| 2018 | 2017 | 2017 | ||||||||||||||
| U.S.$. | $ | $ | $ | |||||||||||||
| (in thousands of Pesos or U.S. dollars, as indicated) | ||||||||||||||||
ASSETS | ||||||||||||||||
Cash and due from banks | 891,010 | 33,687,553 | 16,384,924 | 14,795,794 | ||||||||||||
Cash | 126,684 | 4,789,701 | 4,486,951 | 3,463,786 | ||||||||||||
Financial institutions and correspondents | 764,326 | 28,897,852 | 11,897,973 | 11,332,008 | ||||||||||||
Argentine Central Bank | 724,412 | 27,388,784 | 10,408,716 | 10,358,422 | ||||||||||||
Other local financial institutions | 39,639 | 1,498,669 | 1,415,251 | 937,828 | ||||||||||||
Others | 275 | 10,399 | 74,006 | 35,758 | ||||||||||||
Debt Securities at fair value through profit or loss | 399,704 | 15,112,115 | 16,837,925 | 782,547 | ||||||||||||
Derivatives | 421 | 15,924 | 39,740 | 52,152 | ||||||||||||
Repo transactions | — | — | 4,945,864 | — | ||||||||||||
Other financial assets | 44,912 | 1,698,054 | 2,388,795 | 3,458,243 | ||||||||||||
Loans and other financing | 2,042,104 | 77,208,464 | 87,108,670 | 69,996,876 | ||||||||||||
To thenon-financial public sector | 868 | 32,802 | 48,143 | 7,934 | ||||||||||||
To the financial sector | 10,541 | 398,551 | 586,358 | 710,798 | ||||||||||||
To theNon-Financial Private Sector and Foreign residents | 2,030,695 | 76,777,111 | 86,474,169 | 69,278,144 | ||||||||||||
Other debt securities | 114,025 | 4,311,095 | 529,891 | 3,802,747 | ||||||||||||
Financial assets in guarantee | 53,089 | 2,007,217 | 1,921,219 | 2,699,392 | ||||||||||||
Current income tax assets | 15,659 | 592,058 | 180,458 | — | ||||||||||||
Inventories | 1,849 | 69,918 | 156,306 | 55,829 | ||||||||||||
Investments in equity instruments | 275 | 10,404 | 68,881 | 6,197 | ||||||||||||
Property, plant and equipment | 57,758 | 2,183,734 | 2,060,551 | 1,630,618 | ||||||||||||
Investment property | 10,933 | 413,357 | 287,072 | 887,242 | ||||||||||||
Intangible assets | 71,700 | 2,710,837 | 459,420 | 639,705 | ||||||||||||
Deferred income tax assets | 21,736 | 821,818 | 1,156,980 | 985,294 | ||||||||||||
Non-current assets held for sale | 74 | 2,800 | — | — | ||||||||||||
Othernon-financial assets | 23,504 | 888,648 | 703,454 | 328,103 | ||||||||||||
TOTAL ASSETS | 3,748,753 | 141,733,996 | 135,230,150 | 100,120,739 | ||||||||||||
Average Assets | 4,112,303 | 155,479,182 | 126,519,446 | 103,990,160 | ||||||||||||
LIABILITIES | ||||||||||||||||
Deposits | 2,510,190 | 94,906,014 | 83,284,983 | 66,075,709 | ||||||||||||
Non-financial public sector | 293,731 | 11,105,477 | 9,112,185 | 4,767,148 | ||||||||||||
Financial sector | 667 | 25,236 | 23,183 | 20,902 | ||||||||||||
Non-financial private sector and foreign residents | 2,215,792 | 83,775,301 | 74,149,615 | 61,287,659 | ||||||||||||
Liabilities at fair value through profit or loss | 7,091 | 268,086 | — | — | ||||||||||||
Derivatives | 2,492 | 94,222 | — | — | ||||||||||||
Repo transactions | — | — | — | 1,088,747 | ||||||||||||
Other financial liabilities | 112,865 | 4,267,239 | 5,774,555 | 5,584,663 | ||||||||||||
Financing received from the Argentine Central Bank and other financial institutions | 212,462 | 8,032,837 | 5,205,766 | 3,161,327 | ||||||||||||
Unsubordinated negotiable Obligations | 246,167 | 9,307,171 | 12,681,237 | 3,775,525 | ||||||||||||
Current income tax liabilities | 20,929 | 791,272 | 1,217,961 | 1,022,463 | ||||||||||||
Subordinated negotiable obligations | 36,601 | 1,383,817 | 1,012,661 | 2,540,433 | ||||||||||||
Provisions | 2,299 | 86,915 | 118,357 | 117,231 | ||||||||||||
Deferred income tax liabilities | 5,907 | 223,351 | 29,808 | 14,587 | ||||||||||||
Othernon-financial liabilities | 142,958 | 5,404,998 | 5,613,054 | 4,689,194 | ||||||||||||
| Grupo Supervielle S.A. | ||||||||||||||||
| As of December 31, | As of January 1st, | |||||||||||||||
| 2018 | 2017 | 2017 | ||||||||||||||
| U.S.$. | $ | $ | $ | |||||||||||||
| (in thousands of Pesos or U.S. dollars, as indicated) | ||||||||||||||||
TOTAL LIABILITIES | 3,299,961 | 124,765,922 | 114,938,382 | 88,069,879 | ||||||||||||
Average Liabilities | 3,605,783 | 136,328,538 | 110,304,908 | 91,485,235 | ||||||||||||
SHAREHOLDERS’ EQUITY | 448,793 | 16,968,074 | 20,291,768 | 12,050,860 | ||||||||||||
Shareholders’ equity attributable to owners of the parent company | 448,420 | 16,953,987 | 20,069,467 | 11,719,477 | ||||||||||||
Shareholders’ equity attributable tonon-controlling interests | 373 | 14,087 | 222,301 | 331,383 | ||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 3,748,753 | 141,733,996 | 135,230,150 | 100,120,739 | ||||||||||||
Average Shareholders’ Equity | 506,520 | 19,150,644 | 16,214,538 | 12,504,925 | ||||||||||||
| Grupo Supervielle S.A. | ||||||||
| As of December 31, | ||||||||
| 2018 | 2017 | |||||||
SELECTED RATIOS | ||||||||
Return on average equity(1) | (14.6 | )% | (4.4 | )% | ||||
Return on average assets(2) | (1.8 | )% | (0.6 | )% | ||||
Net Interest Margin(3) | 17.7 | % | 18.3 | % | ||||
Net Financial Margin(4) | 17.0 | % | 18.4 | % | ||||
Net Fee Income Ratio(5) | 28.6 | % | 31.4 | % | ||||
Efficiency Ratio(6) | 53.7 | % | 57.5 | % | ||||
Cost/assets(7) | 9.2 | % | 10.8 | % | ||||
Basic earnings per share (in Pesos)(8) | (6.63 | )% | (1.92 | )% | ||||
Diluted earnings per share (in Pesos) | — | — | ||||||
Basic earnings per share (in U.S.$.) | (0.18 | )% | (0.05 | )% | ||||
Diluted earnings per share (in U.S.$.) | — | — | ||||||
Liquidity and Capital | ||||||||
Loans to Total Deposits(9) | 86.6 | % | 110.1 | % | ||||
Total Equity / Total Assets | 12.0 | % | 14.8 | % | ||||
Proforma Consolidated Capital / Risk weighted assets | 14.0 | % | 19.6 | % | ||||
Proforma Consolidated Tier1 Capital / Risk weighted assets | 12.9 | % | 17.2 | % | ||||
LCR Pro forma | 173.4 | % | 113.9 | % | ||||
Risk Weighted Assets/Assets | 73.0 | % | 81.7 | % | ||||
Asset Quality | ||||||||
NPL as a percentage of Total Loans | 4.1 | % | 3.1 | % | ||||
Allowances as a % of Total Loans | 6.0 | % | 5.0 | % | ||||
Cost of risk(10) | 5.4 | % | 5.0 | % | ||||
Cost of risk, net(11) | 5.1 | % | 4.7 | % | ||||
Coverage Ratio | 147.2 | % | 162.3 | % | ||||
Other Data | ||||||||
Dividends paid to the common shares (Ps.million) | 303,000 | 328,363 | ||||||
Dividends paid to the preferred shares (Ps.million) | — | — | ||||||
Dividends per common share (Ps.) | 0.7 | 0.8 | ||||||
Dividends per preferred share (Ps.) | — | — | ||||||
Employees | 5,307 | 5,320 | ||||||
Branch and sales points | 344 | 326 | ||||||
ATMs, Self Service Terminals and Cash Dispensers with biometric identification | 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 Government & Corporate Securities at fair value through profit or loss+ divided by averageinterest-earning assets. |
| (4) | 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 averageinterest-earning assets. |
| (5) | 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 and ets |
| (6) | 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. |
| (7) | Annualized Administration expenses divided by average assets, calculated on a daily basis. |
| (8) | 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, 2018 and 392.8 million for the year ended December 31, 2017. |
| (9) | Loans and Leasing before allowances divided by total deposits. |
| (10) | Annualized loan loss provisions divided by average loans, calculated on a daily basis. |
| (11) | Annualized loan loss provisions including recovered loan loss provisions divided by average loans, calculated on a daily basis. |
| Item 3.B | Capitalization and indebtedness |
Not applicable.
| Item 3.C |
Not applicable.
| Item 3.D |
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.
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 from the 2001-20022001/2002 crisis, the pace of growth of Argentina’s economy diminished, suggesting uncertainty as to whether the growth experienced between 2003 and 2011after the crisis 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 2001-20022001/2002 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. After the crisis of 2011/2002, Argentina’s GDP grew considerably in real terms, growing by 9.2% in 2005, 8.4% in 2006 and 8.0% in 2007. During 2008 and 2009, however, the Argentine economy suffered a recession attributable to local and external factors, including a severe drought that affected the agricultural sector, and the effects of the global economic crisis of 2008. 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, GDP grew 10.1% and 6.0%, respectively and decreased 1.0% in 2012. GDP grew 2.4% in 2013, contracted 2.5% in 2014, grew 2.6%2.7% in 2015 and decreased 2.2%2.1% in 2016. However, during 2017, Argentina’s real2016 and grew 2.7% in 2017. In 2018 GDP increased by 2.9% comparedcontracted 2.5%.
With respect 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 deficitGDP 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.”
Sinceother statistics, 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 byThis circumstance caused the International Monetary Fund (“IMF”) state that their staff uses alternative measuresofficial statistics to differ sometimes significantly from privately-sourced estimates until the methodological regularization 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,was completed 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.
mid 2016.
Presidential and Congressional elections in Argentina took place on October 25, 2015, and a runoff election (ballotage)(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 CongressCongress. However, the Macri administration managed to implement several significant economic and aspolicy reforms, including those related to foreign exchange, the INDEC, financial policy, foreign currency-denominated bonds, foreign trade reforms, amendment to the Argentine 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.
Presidential elections in Argentina are scheduled for October 2019. The impact that the presidential elections could have on Argentine politics and economy is uncertain. This uncertainty may also have a result, some or allmaterial adverse effect on Argentina’s economy.
The political uncertainty in Argentina about the measures that the Macri administration should take with respect to the economy could generate volatility in the price of the Macri administration’s reforms aimed at improvingArgentine companies’ securities or even a decrease in their prices, in particular companies in the economyfinancial sector like us.
Furthermore, presidential and investmentfederal congressional elections in Argentina will be held in October 2019, and their impact on the future economic and political environment (includingis uncertain, but likely to be material.
We can offer no assurances as to the reduction of the fiscal deficit, reduction of the inflation rate and fiscal and labor reforms, among others)policies that may not be implemented which couldby the next Argentine administration, or that political developments in Argentina will not adversely affect the continued improvement of theArgentine 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,In addition, we cannot assure you that future economic, regulatory, social and the Head of Government of the City of Buenos Aires entered into an agreement pursuant to which guidelines were establishedpolitical developments 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 hasArgentina will 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 forimpair our business, by stimulating economic activity but it is not possiblefinancial condition or results of operations, or cause the market value of our shares to predict such effect with certainty and such liberalization could also be disruptive to the economy and fail to benefit or harm our business.decline.
Inflation, any decline in GDP and/and / or other future economic, social and political developmentsdevelopment that may occur in the future in Argentina, over which we have no control, may adversely affect our financial condition or the results of our operations.
Economic conditions in Argentina from 2012 to the first quarter of 2018, included increased inflation, continued demand for wage increases, a rising fiscal deficit and a volatile economic growth. The current administration intends to implement measures with the aim of reversing these variables and stabilizing the economy. In this regard, with the aim of reducing fiscal deficit to 0% of GDP in 2019, the Argentine government will expand the tax base and promote a stricter control of the monetary base by restricting the issuance of local currency until December 2019,
foreseeing that the Central Bank would be able to withdraw Pesos from the market through daily tenders of liquidity bills (“LELIQs”) that only banks would buy, with a goal of controlling inflation and the demand for foreign currency which in turn could help mitigating the exchange volatility. However, in a restrictive context of monetary expansion, it is expected that access to productive credit will also be restricted. These measures, accompanied by high interest rates, could deepen the recession.
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 higher 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.
If the current levels of inflation continue, the Argentine economy and our financial position and business could be adversely affected.
Argentina has confronted inflationary pressures since 2007. According to INDEC data, the CPI grew 9.5% in 2011, 10.8% in 2012, 10.9% in 2013, 24.0% in 2014 and 11.9% in theten-month period ended October 31, 2015. The INDEC did not publish the CPI for the period between November 2015 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.
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 11.8% for the CPI measuredfirst three months of 2019.
In January 2016, the new INDEC authorities appointed by the Argentine Congress registered an increaseMacri administration announced the discontinuance of 24.6%. The CPI variation was of 1.8%, 2.4% and 2.3% for the months of January, February and March 2018, respectively, compared tomethodology used by the previous month.
administration to calculate national statistics and declared a state of administrative emergency, suspending the publication of all indexes by the INDEC until the INDEC was able to calculate such indexes based on accurate official data. During this period the INDEC continued to publish the inflation rate based on data provided by the province of San Luis and the City of Buenos Aires.
Also, 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 originalyear-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.
The Argentine government under took measures with the aim to reduce the preliminary fiscal deficit in accordance with the agreements entered into with the International Monetary Fund (“IMF”). Notwithstanding the foregoing, by virtue of the first agreement with the IMF, the government committed to the following inflation targets: 17% for the year 2019, 13% for the year 2020, and 9% for 2021, while an inflation of 27% was expected for 2018. However, by virtue of a second agreement with the IMF, the government and the IMF agreed to replace the inflation targeting scheme with a regime that establishes a stricter control of the monetary base by the Central Bank, which will remain in place until December 2019.
In the past, inflation has materially undermined the Argentine economy and the government’sArgentina’s ability to generatecreate conditions that fostered economicwould permit growth. In addition, highHigh inflation ormay also undermine Argentina’s competitiveness abroad and lead to 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,decline in private consumption which, in turn, could adverselyalso affect the level of economic activityemployment levels, salaries and employment.
Ainterest rates. Moreover, a high inflation rate also affectscould undermine confidence in the Argentine financial system, reducing the Peso deposit base and negatively affecting long-term credit markets.
There can be no assurances that inflation rates will not continue to escalate in the future or that the measures adopted or that may be adopted by the current or upcoming Argentine government to control inflation will be effective or successful. Inflation remains a challenge for Argentina. Significant inflation could have a material adverse effect on Argentina’s competitiveness abroad, real salaries, employment, consumptioneconomy and interest rates. in turn could increase our costs of operation, in particular labor costs, and may negatively affect our business, financial condition and results of operations.
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.”
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. In April 2016, the Argentine government settled U.S.$4.2 billion outstanding principal amount of untendered debt.
As of the date of this annual report, litigation initiated by bondholders that have not accepted Argentina’s settlement offer continues in several jurisdictions, although the size of the claims involved has decreased significantly. As of September 30, 2017,December 31, 2018, the amount of the Argentine government’s non-restructurednon restructured debt was of approximately U.S.$107.1 million 2.9 billion based on the most recent publicly available data.
Although the vacating of thepari passu injunctions removed a material obstacle to access to capital markets by the Argentine government, as evidenced by successful bond issuances in April 2016, January 2017, and January 2017,2018, future transactions may be affected as litigation with holdout bondholders continues, which in turn could affect the Argentine government’s ability to implement certain expected reforms and foster economic growth, which may have a direct impact on our ability to access international credit markets, thus affecting our ability to finance our operations and growth.
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, the Peso has fluctuated significantly in value. The devaluation of the Peso in real terms in 2002 had a negative impact on the ability of certain Argentine businesses to honor their foreigncurrency-denominated debt, and also led to very high inflation initially and significantly reduced real wages. The devaluation has also negatively impacted businesses whose success is dependent on domestic market demand, and adversely affected 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. 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. payments which may have a negative effect on GDP growth and employment, and reduce the revenues of the Argentine public sector by reducing tax revenues in real terms, due to its current heavy dependence on export taxes.
After several years of moderate variations in the nominal exchange rate, in 2012 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 devaluation of the Peso with respect to 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 of 2018, the Peso lostdepreciated approximately 7.3% of its value101% against the U.S. dollar.
As a result of the greater volatility of the Peso, the Argentine government announced several measures to restore market’s confidence and stabilize the value of the Argentine Peso. Among them, during 2018, the Argentine government negotiated two agreements with the IMF, increased the interest rates and the Central Bank decided to intervene in the exchange market in order to stabilize the value of the Peso. More recently, 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. In addition, the administrationArgentine government originally established that the Central Bank has the power to intervene in the exchange market selling dollars when the exchange rate exceeds Ps.44 per dollar and buying when the exchange rate falls from Ps.34 per dollar (range that was adjusted daily at a rate of former President Cristina Fernández3% per year until December) of 2018, and for the first quarter of 2019, is adjusted daily at a rate of 2% per year and later decreased to 1,75% per year, considering the intermediate zone, as a“non-intervention zone”. In April, 2019, among a set of measures designed to soften the impact of Argentina’s economic situation, the Central Bank fixed the“non-intervention zone” between Ps.39.75 and Ps.51.45 until December 2019 and eliminated the monthly adjustment. On April 29, 2019, the Monetary Policy Committee (Comité de Kirchner adopted numerous measuresPolítica Monetaria the “COPOM”) of the Central Bank decided to control directly or indirectly foreign trade andintroduce changes to the monetary policy, with an aim to reducing
volatility in the foreign exchange market. From 2011 until President Macri assumed office,According to the Argentine government adopted increasingly stringent exchange controls, most of which have been eliminated by the Macri administration.
Any foreign exchange regulations to be issued and any modification resulting therefrom ofnew scheme: (i) if the exchange rate is between Ps.39.755 and Ps.51.488, the Central Bank may intervene, subject to market conditions, in the foreign exchange market and sell U.S. dollars in the market, and (ii) if the exchange rate is above Ps.51.488, the Central Bank will sell foreign currency for up to U.S.$250 million (from U.S.$150 million). Also, the Central Bank could decide to perform additional interventions in the exchange market. The Argentine pesos resulting from such sales will be discounted from the monetary base. The COPOM also confirmed that the Central Bank will not intervene until June 2019 in the foreign exchange market if the exchange rate decreases below Ps.39.755.”
As of May 6, 2019, the exchange rate was Ps.44.90 per dollar. The success of the measures described 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 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 aone-year period without any accrual of interest, benefit or other use as collateral for any transaction.
In addition, from 2011 until President Macri assumed office, 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 foreign exchange transactions to prior approval by Argentine authorities or the Central Bank, the measures taken by the previous administration significantly curtailed access to the foreign exchange market (Mercado Libre de Cambios or “MLC”) by individuals and private sector entities. In response, an unofficial U.S. dollar trading market developed in which thepeso-U.S. dollar exchange rate differed substantially from the officialpeso-U.S. dollar exchange rate. For more information on foreign exchange restrictions see “Exchange Controls.”
Currently, as a result of the repeal of certain measures that limited access to the MULC, the exchange rate of the dollar, fluctuates freely, and it is expected that the parallel market will not be significant in volume and price.
Additionally, through Communications “A” 6037 and “A” 6244, the Central Bank structurally modified the current exchange regulations eliminating the set of restrictions for access to the MULC. Through the Decree 27/2018 and Communication “A” 6436 dated January 19, 2018, with the objective of providing greater flexibility to the financial system, favoring competition, allowing the entry of new operators to the foreign exchange market and reducing costs generated by this system, the free exchange market was established (the “MELI”), replacing the MULC. Through the MELI, exchange operations are carried out by financial entities and other persons authorized by the Central Bank to engage permanently or regularly in the trade of buying and selling foreign coins and banknotes, gold coins or gold bars and traveler’s checks, drafts, transfers or similar operations in foreign currency. For more information see “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, suchtransfers. Such 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) could have a material adverse impact on Argentina’s balance of trade and adversely affect Argentina’s economic growth. In 2017,2018, there were increases in exports of 13.7%14.8% to Chile, 0.2%18.5% to MERCOSUR (Brazil, Paraguay, and Uruguay and Venezuela)(Venezuela is a state party but it has been currently suspended from the MERCOSUR)), 1.2%5.6% to the European Union, each as compared to 2017, while exports decreased 3.3% to NAFTA countries (United States, Canada and Mexico), while there was a decline of 1.6% in exportsand 2.6% to China, each as compared to the same period in 2016.2017. Declining demand for Argentine exports could have a material adverse effect on Argentina’s economic growth.
Argentina could be adversely affected by negative economic or financial developments in other countries, which in turn may have an adverse effect on our financial condition and results of operations. In addition, a slowdown in economic activity in Argentina would substantially affect our business.
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. Currently the Brazilian economy recorded an estimatedfaces several challenges such as achieving reverse the deterioration of public finances, stabilize a sustained growth of 1.1% after two years of recession.and achieve greater commercial openness. Given that Brazil is the largest economy 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 potencially 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.
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 of the date of this annual report, it is uncertain how Brexit may impact the relationship between the United Kingdom and the European Union, as the commercial terms under which the effective withdrawal of the United Kingdom from the European Union, which was officially notified on March 29, 2017 and its completion is currently scheduled for March 2019,now expected to be completed bymid-2019, remain subject to negotiation. 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 in the United States, and a new administration, led by Mr. Donald Trump, took office on January 20, 2017. The results of the presidential election have 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,Even though President Trump’s protectionist measures are not, for the time being, aimed at Argentina, we cannot predict how will they evolve, nor will the effect that the same or any other measure taken by the perception that any of themTrump administration could occur, may have a material adverse effectcause on global economic conditions and the stability of global financial markets.
During August 2018, an increase in inflation and a sustained deficit in current accounts, as well as the protectionist measures taken by the United States, doubling the tariffs on steel and aluminum from Turkey, caused a collapse of the Turkish lira against the dollar that triggered a wave of sales of assets from emerging markets and the significant fall in the prices of shares of companies from these markets, generating a contagion effect in international markets and several stock exchanges in the world, including Argentina.
Changes in social, political, regulatory and economic conditions in the United States ofother countires 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.
Moreover, emerging markets have been affected by the change in U.S. monetary policy, resulting in the sharp unwinding of speculative asset positions, depreciations and increased volatility in the value of their currencies and higher interest rates. When interest rates rise significantly in developed economies, including the United States, it may be more difficult and burdensome for emerging market economies, including Argentina, to borrow capital and refinance their current debt, which could affect in a negative way its economic growth. The general appreciation of the U.S. dollar resulting from a more restrictive U.S. monetary policy contributed to the fall of the international price of raw materials, further increasing the difficulties of emerging countries which are exporters of these products.
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.
In addition, each company is entitled, regardless ofunion-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, 2018,28, 2019, the INDEC published new data regarding the evolution of private and public-sector salaries.salaries for the fiscal year 2018 . The total salaries index registered a growth of 27.5%29.7% during 2017,2018, as a result of the 26.5%30.4% increase in the registered sector and an increase of 31.5%27.2% in thenon-registered private sector.
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 terms of President Fernández de Kirchner’s administration increased its direct state intervention in the Argentine economy, including the implementation of expropriation and nationalization measures, price controls and exchange controls.
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.
Former President Cristina Fernández de Kirchner adopted numerous measures to directly or indirectly control foreign trade operations and the foreign exchange market. From 2011 until President Macri took office in 2015, the national government adopted increasingly stricter exchange controls, which had the effect of greatly restricting access to the exchange market and generating a parallel market for the exchange of foreign currency with significant gaps with respect to the official exchange rate. Such exchange controls were largely eliminated or mitigated by the Macri administration.
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 theInternational 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,December 2012 and August 2013, the Fernández de Kirchner administration sentNational Congress established new regulations related to domestic capital markets that, in general, establish greater intervention in the capital markets by the national government, authorizing, for example, the CNV, to designate inspectors with the ability to veto, under certain circumstances, the decisions of the board of companies that are listed in authorized markets and suspend the board for a period of up to 180 days. On November 17, 2016, the Macri government presented a bill to the National Congress in order to revoke certain train concessions, returnamend the national rail network to state control and provideArgentine Capital Markets Law, which could, among other significant changes, eliminate these powers to review all concessions currently in force. The bill was enacted ondesignate inspectors. On May 20, 2015 as9, 2018, the Argentine Congress approved the Argentine Productive Financing Law, which amended the Argentine Capital Markets Law, the Mutual Funds Law No. 27,132.
In September 2015,24,083 and the Argentine government, through Resolution No. 646/2015 issued byNegotiable Obligations Law, among other regulations and introduced substantial changes to regulations governing markets, stock exchanges and 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 currencyvarious agents operating in which they were issuedcapital markets, as well as certain amendments 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.CNV’s powers.
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.
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, the Argentine government substantially increased public expenditure, resorting 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.Macri administration was to achieve a primary fiscal deficit equivalent to 1.3% of GDP in 2019, in the context of the recent negotiations with the IMF, the fiscal deficit target was adjusted to 0% of GDP for 2019 and a surplus of 1% for 2020. If the Macri 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.
Notwithstanding the measures taken by the current government to anchor the fiscal deficit and increase the tax revenues, there is uncertainty as to what effects the adopted measures and other future policies on the Argentine economy and our business could have, as well as regarding effective compliance of the proposed goals. In addition, if the Macri government seeks to finance its deficit by increasing the exposure of local financial entities to the public sector, the liquidity and quality of the Bank’s assets could be affected and, consequently, adversely affect our 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 implementimplemented 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 allowsallowed 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 former 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. For instance, on March 10, 2017, a public hearing was held in order to discuss the increase in gas rates as of April 2017. On March 31, 2017, the new gas tariff for small and medium sized companies scheme was published by the Macri administration with an increase of 30% in February and 18% in March. In addition, to further address the potential impact of the new tariff scheme during the 2018 winter peak season of natural gas consumption by retail customers, an optional program was implemented through Resolution No. 97/2018 issued by the Argentine Gas Regulator (Ente Nacional Regulador del Gas) under which consumers would finance the payment of up to 25% of natural gas monthly bills for the 2018 winter peak season. Furthermore, on May 9, 2018, the lower house of the National Congress approved a bill to modify the current tariff scheme for natural gas for local companies and PyMES and the Senate approved it on May 30, 2018, however, the President vetoed it on the same day.
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 20172018 Corruption Perceptions Index survey of 180 countries, Argentina was ranked 85, improvingremaining unchanged from the previous survey in 2016.2017. In the World Bank’s Doing Business 20182019 report, Argentina ranked 117119 out of 190 countries, down from 116117 in 2017.2018.
Recognizing that the failure to address these issues could increase the risk of political instability, distort decision-making processes and adversely affect Argentina’s international reputation and ability to attract foreign investment, the 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 Argentine government’s ability to implement these initiatives is uncertain as it would require the involvement of the judicial branch, which is independent, as well as legislative support from opposition parties.
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 during the Kirchner and the Fernández de Kirchner administrations.
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.
Although 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, if the universe of individuals and companies investigated on corruption related matters were to increase significantly, our exposure may increase and bring material losses to us.
We cannot predict for how long the corruption investigations will continue, or the effects on the different sectors in the Argentine economy.
The amendment of the Central Bank’s Charter 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 of the Central Bank and the Convertibility Law. This law amended the objectives of the Central Bank (as established in its charter) and removed certain provisions previously in force. Pursuant to the terms of the law, the Central Bank focuses on promoting monetary and financial stability as well as development with social equity. In addition, the concept of “freely available reserves” was eliminated, granting the Argentine government access to additional reserves to pay debt. Further, this law provides that the Central Bank 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 adversely affect the Argentine financial system’s capacity to withstand 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.
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 has seen a recovery in the amount of deposits since then, this trend may not continue and the deposit base of the Argentine financial system, including the deposit base of our main subsidiary, the Bank, could be negatively affected in the future by adverse economic, social and political events. Furthermore, the Argentine financial system 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,Until the first months of 2018, 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 isendure, as the upcoming Argentina’s presidential elections give uncertainty as to whether the current availability of funds from the international markets will continue in coming years.
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 weakens and the deposit base contracts, such loss of confidence and contraction of deposits will have a substantial negative impact on the ability of financial institutions, including the Bank, to operate as financial 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 and 32.91% in 2018 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.
| 1 | Figures correspond to nominal values provided by the Central Bank in nominal values which have not been adjusted by inflation. |
If longer-term financial intermediation activity does not grow, the ability of financial institutions, including us, to generate profits will be negatively affected.
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.
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 limiting 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 newpre-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 our industry, we are subject to a wide range of federal, provincial and municipal regulations and supervision generally applicable to businesses operating in Argentina, including laws and regulations pertaining to labor, social security, public health, consumer protection, 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 ability 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, onafter President Macri took office, some of these regulations were eliminated or modified in an effort to normalize the banking system and boost credit. On December 17, 2015, the limits imposed on interest rates applicable to transactions referred to in items (ii) and (iv) were eliminated and financial entities and their customers may now freely agree upon such interest rates. By virtue of Communication “A” 6680, 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. See “Item 4.B Business overview—Argentine Banking Regulation—Interest Rate and Fee Regulations.”
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, orD-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.institutions and according to Communication “A” 6244 effective as of July 1, 2017, financial institutions can freely determine the level and use of their general foreign exchange position, allowing them to manage their currency positions, both in terms of composition of their assets and the possibility of managing the foreign cashflows in foreign currency.
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 ofOn May 10, 2018, the date of this annual report,Central Bank issued Communication “A” 6507 establishing that the positivenet negative global position in foreign currency net global position, calculated by using–on a monthly averagesaverage of daily balances converted into Pesos at the reference exchange rate at the end of the previous month for the computation of this ratio- may not exceed 25%30% of the lesser of the financial institution’s RPC (as defined below) computed forof the relevant preceding monthprevious month. Although currently the net positive global position in foreign currency may not exceed 5% of the RPC or liquid equity, whichever is less, by virtue of communication “A” 6526, effective as of June 18, 2018, the financial institution’s ownCentral Bank permits that this position can reach up to 30% of the RPC or liquid assets forequity, whichever is less, as long as the preceding month.total excess with respect to the general limit originates as a consequence of: (i) position increase in National Treasury bills in United States Dollars with respect to those held on June 15, 2018; and/or (ii) position in National Treasury bills in US Dollars as of June 15, 2018, in excess of the current limit as of that date. For a more detailed description of changes, see “Item 4.B Business overview—Overview—Argentine Banking Regulation—Foreign Currency Net Global Position.”
The absenceFurthermore, by virtue of a stable regulatory framework orCommuncation “A” 6661, the impositionCentral Bank established that financial entities holdings of measures that may affectLELIQs (Letras de Liquidez) shall not exceed the profitabilitygreater amount between (1) its previous month’s RPC and (2) 100% of the monthly average of the total deposits in Pesos, excluding the financial institutionssector’s and limit the capacity to hedge against currency fluctuations could resultnotes in significant limits to financial institutions’ decisions, such asPesos issued until February 8, 2019 in the Bank and CCF, regarding asset allocation. In turn, this could cause uncertainty and negatively affect our future financial activities and results of operations. In addition, existing or future legislation and regulation could require material expenditures or otherwise have a material adverse effect on our consolidated operations.
current month.
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.
The absence of a stable regulatory framework, or the imposition of measures that may affect the profitability of financial institutions and limit the possibility of covering their positions against currency fluctuations, could result in important limitations with respect to the decisions of financial institutions, as is the case of us, in relation to the allocation of the asset. In turn, this situation could cause uncertainty and may adversely affect future financial activities and our result of operations. On the other hand, current or future laws and regulations may require substantial expenses or otherwise have an adverse effect on our consolidated operations.
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, there can be no assurances that new and tighter regulations will not be implemented in the future, which could cause uncertainty and could negatively affect our future financial activities and results of operations. Also, the imposition of measures that may affect the profitability of financial institutions and limit the capacity to hedge against currency fluctuations could result in significant limits to financial institutions’ decisions, such as the
Bank and CCF, regarding asset allocation. In addition, existing or future legislation and regulation could require material expenditures or otherwise have a material adverse effect on our consolidated operations.
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, future developments in provincial and municipal legislation concerning taxes, provincial regulations or other matters may adversely affect our business or results of operations.
Future governmental measures or regulations may adversely 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 Charter and the Convertibility Law may adversely affect the Argentine economy.Bank.
On March 22, 2012,Argentine financial institutions usually hold public sector debt issued by the Argentine Congress passed Law No. 26,739, which amended the charter ofNational Government, Provinces and Municipalities and securities–generally short term–issued by the Central Bank as part of their portfolios. As of December 31, 2018, the financial institutions’ exposure to the public sector represented 10% 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 13% of total assets. As of December 31, 2018, our exposure to the termspublic sector amounted to Ps.8.0 billion, representing 6% of the new law,our total assets as of that date and our exposure to short term securities issued by the Central Bank will focus on promoting monetary andamounted to Ps.11.3 billion or 8% of our total assets as of such date.
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 concept of “freely available reserves” was eliminated, grantingpublic sector’s creditworthiness, which is in turn dependent on the Argentine government accessand the provincial government’s ability to additional reserves to pay debt. Further, this new law provides that the Central Bank 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 adversely affect the Argentine financial system’s capacity to withstand and overcome the effects of an economic crisis (either domestic or international), negatively affectingpromote sustainable long-term economic growth, generate tax revenues and control public spending. Should the public sector fail to fulfill its commitments in turn,due time and proper form, this could have a negative adverse effect on our consolidated resultsbusiness, financial situation and results of operations.
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.
Our consolidated loan portfolio is concentrated in 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 Information.equipment.”
The loan portfolio of the retail segment, which includes individuals and companies with annual sales of up to Ps.70 million, depending on commercial activity, represented approximately 40% of the consolidated loan portfolio (net of provisions) as of December 31, 2018. 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 subsequentwrite-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 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%85.2% of our net financial incomeoperating revenue in 2018 and services income fee in 2015, 66.0% in 2016 and 70.2%81.7% in 2017. Changes in market interest rates could affect the interest rates earned on ourinterest-earning assets differently from the interest rates paid on ourinterest-bearing liabilities, leading to a reduction in our net interest 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. 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.
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 ofnon-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 asix-year period. In December 2017,2018, the Bank made payments on behalf of ANSES to approximately 1,123,000844,000 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%(30.0% as of December 31, 2017)2018) from the sale of financial services through senior citizens dedicated branches. The Bank’s agreement with ANSES provides that it will continue in effect as long as the parties continue performing their obligations for asix-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%67.3% of our total liabilities as of December 31, 2017.2018. 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,March 31, 2019, 126,738,188 Class A shares and 37,030,42235,062,713 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, atwo-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 for renewal, 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 computerbreak-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.
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 serviceAdoption of process withinIFRS (which includes adjustment for inflation) affects the United States upon us,presentation of our directors and officers and certain advisors.financial information, which had been historically prepared under Argentine Banking GAAP.
AllOn January 1, 2018, we began preparing our financial statements in accordance with IFRS as issued by the IASB. Prior to and including the year ended December 31, 2017, we prepared our financial statements in accordance with Argentine Banking GAAP. Because IFRS differ in certain significant respects from Argentine Banking GAAP, our financial information prepared and presented in our previous annual reports under Argentine Banking GAAP rules is not directly comparable to IFRS financial data. The lack of comparability of the Company’s recent and historical financial data may make it difficult to gain a full and accurate understanding of its operations and financial condition. Our transition to IFRS as of January 1, 2018 affects the comparability of our directorsfinancial information for periods prior to January 1, 2017.
In addition, as of July 1, 2018, the Argentine economy as an hyperinflationary economy, and allin connection with IFRS, we are required to apply inflationary adjustments to our officersfinancial statements pursuant to IAS 29 (Financial Reporting in Hyperinflationary Economies).
IAS 29 does not prescribe when hyperinflation arises, but includes several characteristics of hyperinflation. The IASB does not identify specific hyperinflationary jurisdictions. However, in June 2018, the International Practices Task Force of the Centre for Quality (“IPTF”), which monitors “highly inflationary countries” categorized Argentina as a country with projected three-year cumulative inflation rate greater than 100%. Additionally, some of the other qualitative factors of IAS 29 were present, providingprimafacie evidence that the Argentine economy is hyperinflationary for purposes of IAS 29. Therefore, Argentine companies using IFRS as issued by the IASB are required to apply IAS 29 to their financial statements for periods ending on and certain advisors named herein resideafter July 1, 2018. See “Item 5.A Operating Results—Presentation of Financial Statements in ArgentinaPesos. Inflation.”
Adjustments to reflect inflation, such as those required by IAS 29, were prohibited by law No.23,928 (the “Law 23,928”). Additionally, Decree No.664/03, issued by the Argentine government (“Decree 664”), instructed regulatory authorities, such as Public Registries of Commerce, the Superintendence of Corporations of the City of Buenos Aires and the CNV, to accept only financial statements that comply with the prohibition set forth in Law 23,928. However, on December 4, 2018, Law No.27,468 abrogated Decree 664/03 and amended Law 23,928 indicating that the prohibition of indexation no longer applies for financial statements. Notwithstanding the foregoing, pursuant to Argentine Banking GAAP, the Company cannot perform inflation adjustment in its financial statements for fiscal year 2018 or elsewhere outsideany other periods.
Consequently, due to the United States. Asadoption of IFRS and adjustment for inflation our result differ significantly from the results determined on a nominal basis (historical results) by the application of such methodology, applicable mainly as a result you may not be able to effect service of process within the United States upon such persons.composition of the accounting monetary positions and the evolution of the rates, the inflation and other components of the result, which could adversely affect our financial statements, results of operations and financial condition.
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 20162018 and 2017, we received the following dividend payments in cash from our subsidiaries: (i) Ps.73.0Ps.144.6 million in 2018 and Ps.115.6 million in 2017 and Ps.61.3 million in 2016 from SAM, (ii) Ps. Ps.23.1Ps.27.8 million in 2018 and Ps.42.3Ps.36.5 million in 2017 and 2016 from Espacio Cordial, and (iv) Ps.150 million and Ps.76.8(iii) Ps.97.4 million in 20172018 and 2016Ps.233.9 million in 2017 from Supervielle Seguros, and (v)(iv) Ps.25.6 million in 2018 and Ps.0 million and Ps.6.5 million in 2017 and 2016 from Sofital. Moreover we received an advance dividend payment from Supervielle Seguros for the period which will be ending on June 30, 2019 of Ps.152.0 million. We did not receive dividend payments from the Bank or our other subsidiaries during 20172018 and 2016.
2017.
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.
Changes in the Argentine tax laws may adversely affect the results of our operations and the tax treatment of our Class B shares and/or the ADSs for the period prior to December 31, 2017.2018.
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 corporation was subject 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, the excess is subject to a rate of 35%, for both Argentine and non-Argentine resident shareholders. This treatment applies only to 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.
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. AFIP General Resolution (AFIP) 4.227,4227, which will comecame 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 iswas 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 tax at a 35% tax rate on the the net capital cagingain 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 of 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 companies 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 controls 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 of any sale of Class B shares underlying the ADSs, as of the date of this annual report, the conversion from Pesos into U.S. dollars and the remittance of such U.S. dollars abroad is not subject to prior Central Bank approval provided the foreign beneficiary is either a natural or legal person residing in or incorporated and established in jurisdictions, territories or associated states that are considered “cooperators for the purposes of fiscal transparency.” If such requirement is not met, prior Central Bank approval will be required.
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 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 be subject to restriction. See “Item 10.DExchange Controls—Other Regulations—Sale of Foreign Currency toNon-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.
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 couldtheByMAcould 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:
·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, 2017,2018, the ten largest Argentine companies in terms of market capitalization represented approximately 80%90% 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 fornon-Argentines to buy shares in the secondary market in Argentina. See “Item 10.DExchange 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.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. 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).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 andnon-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, thenon-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.
Under Communication “A” 6443, which entered into force on March 1, 2018, companies from any sector that operate in the foreign exchange market may operate as an exchange agency solely by submiting an electronic form entitled the “Registry of Exchange Operators” (Registro de Operadores de Cambio).
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 offeredshort-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 theDeclaraciones Juradas Anticipadas de Importaciónsystem 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.
Furthermore, as part of a reform package intended to reduce the fiscal deficit and enhance public accounts, the Argentine government issued Decree No. 793/2018, which established a 12% duty on all exported products and services which will remain in effect until December 31, 2020. Decree No. 793/2018 caps the exchange rate for export duties on most products at Ps.4.00/U.S.$1.00 based on the taxable base or freeon-board value, depending on the product. However, the exchange rate cap for certain products (mainly manufactured goods) is Ps.3.00/U.S.$1.00 of the taxable base or freeon-board value, depending on the product. Hydrocarbons are subject to the general cap of Ps.4.00/ U.S.$1.00. As an additional measure, Decree No. 793/2018 reduced export duties on soybeanby-products to 18%, 16% or 11%, depending on the type of product.
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 2018Argentine budget bill of the federal government projects a fiscal deficit representing 3.2% of GDP in 2017. Although the objective of the Macri administration was to achieve a primary fiscal deficit equivalent to 1.3% of GDP in 2019, in the context of the recent negotiations with the IMF, the fiscal deficit target was adjusted to 0% of GDP for 2019 and a surplus of 1% for 2020.
Correction of monetary imbalancesimbalance and changes in monetary policy. 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 effortsaims to reduce excessensure that, in the period from October 2018 until December 2019, the monetary imbalances and raised Peso interest rates to offset inflationary pressure. Since January 2017,base will register a zero growth (based on a monthly average), through its Monetary Aggregates Regime (Agregados Monetarios) as agreed in 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.
IMF Agreement (as defined below).
National electricity state of emergency and reformsEnergy Sector. Following years of very limited investment in the energy sector, as well as the continued freeze on electricity and natural gas tariffs since the2001-2002 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 remainceased to be in effect untilas of 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”),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 citiesend-user electricity tariff increases implemented as of February 1, 2016, and instructed the Ministry of Energy and Mining and the ENRE to conduct anon-binding public hearing prior to sanctioning any such increases. On October 28, 2016, anon-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 the2017-2021 period in the framework of the Integral Tariff Review (as defined below). On December 14, 2016, eightnon-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 the2017-2021 period.
Tariff increases in public services. 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 thetarifa 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 theMonotributoSocial 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 designatedenergy-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 suspendingend-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 anon-binding public hearing prior to sanctioning any such increases. On September 16, 2016, anon-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 period2017-2021, (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 period2016-2022. 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 period2017-2021 in the framework of the Integral Tariff Review.
On October 6 and October 7, 2016, after conductingnon-binding public hearings, the Ministry of Energy and Mining and ENARGAS published a newend-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.
Theyear-on-year increase in the price of energy in the wholesale electricity market forend-users, which excludes transportation and distribution costs and accounts for approximately 45% of the tariff toend-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 forend-users was 68% (from Ps.37/MMBtu to Ps.62/MMBtu on average).
Increase in transport tariffs. In Januaryaddition, to further address the potential impact of the new tariff scheme during the 2018 winter peak season of natural gas consumption by retail customers, an optional program was implemented through Resolution No. 97/2018 issued by the Argentine Gas Regulator (Ente Nacional Regulador del Gas) under which consumers would finance the payment of up to 25% of natural gas monthly bills for the 2018 winter peak season.On May 9, 2018, the Macri administration announced increases in public transport tariffs inlower house of the city of Buenos AiresNational Congress passed a bill to modify the current tariff scheme for natural gas for local companies and PyMES. The project was approved by the Greater Buenos Aires area to be rolled out between JanuarySenate on May 30, 2018 and February 2018.vetoed by the President on the same day.
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 throughnon-cooperating jurisdictions. Thenon-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 tonon-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 ofde-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).Bonaerense. 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.AHistoryProductive Financing Law.On May 11, 2018, the National Congress passed the Argentine Productive Financing Law (Ley de Financiamiento Productivo), which introduced amendments to the Capital Markets Law, the Mutual Funds Law No. 24,083 and the Argentine Negotiable Obligations Law, among others, with the aim of modernizing and favoring the development of the domestic capital markets. Furthermore, the amendments seek to increase the number of investors and companies which take part in the capital markets, promoting productive financing, especially regarding SMEs, setting forth a regime to ease access to financing. Furthermore, the law eliminates certain controversial articles of the previous Argentine Capital Markets Law which gave the CNV the authority to intervene the management of publicly traded companies.
In addition the aforementioned law promotes a new regulation of derivates and repos and a registry of derivates and repo transactions is created. Furthermore, certain bankruptcy related provisions, the Civil and Commercial Code, the Financial Institututions Law and the Central Bank’s charter shall not apply to derivatives and repos with regard to early termination, settlement, compensation and enforcement of guarantees.
Emerging Market Requalification. On June 20, 2018, Morgan Stanley Capital International (“MSCI”)re-qualified Argentina as an “emerging market”, foreseeing a promotion to the local capital markets, as well as attracting foreign investments from institutional investors. With this requalification, effective as of May 2019, Argentina will cease to be a “frontier” market, and rise to the same level as the main economies in the region.
IMF Agreement. On June 20, 2018, the IMF Board of Directors approved a three-yearstand-by agreement for Argentina for an amount of U.S.$.50.0 billion (equivalent to approximately 1,110% of Argentina’s share in the IMF) (as amended and supplemented from time to time, the “IMF Agreement”). That decision authorized the immediate disbursement of U.S.$.15.0 billion, which was partly used to swell international reserves and thus sustain the price of the local currency and partly to budget support to address the fiscal deficit. The remaining amount was of a precautionary nature and could be disbursed during the term of the agreement, subject to quarterly revisions of the IMF Executive Board.
The economic plan supported by the IMF when negotiating the agreement described above, aimed at strengthening the Argentine economy by focusing on four pillars: (i) restoring markets confidence through the admninistrations commitment to reduce their financial public expenditure through a fiscal adjustment which would ensure that the national government reaches a primary balance by 2020, including a significant initial adjustment to ensure a primary fiscal deficit of 1.3% of GDP in 2019; (ii) protect the most vulnerable social sectors, taking steps to strengthen the social welfare system, including the redesign of current social programs and to increase female participation in the labor force (eliminating the most unfavorable tax treatment of the second income generator and granting assistance for the care of children to working families), among others; (iii) strengthen the credibility of the Central Bank’s ability to control inflation: the administration vowed to grant the Central Bank the necessary independence and institutional and operational autonomy in order to achieve the inflation control projections. In addition, the Central Bank had adopted a goal plan to reduce inflation to one digit over a period of three years; and (iv) progressive decrease of tensions in the balance of payments, which involves rebuilding international reserves and reducing the country’s vulnerability to external pressures on its capital accounts.
Despite the IMF Agreement and the subsequent disbursements thereunder, the Peso devaluation continued to worsen during the month of August 2018, even within a context of high interest rates. As a result, at the beginning of September 2018, the Argentine government restarted negotiations with the IMF in order to obtain a revised agreement upsizing the IMF Agreement in order to help obtain 2019’s financial needs, with the aim of improving confidence of investors in order to curb the volatility of the exchange rate. As a result of these negotiations, on September 26, 2018, the IMF Agreement was raised by an additional U.S.$7.1 billion, totaling U.S.$.57.1 billion of which U.S.$.15.0 billion were disbursed in June 2018. On October 30, 2018 the Argentine government received the first disbursement under the Revised Agreement from the IMF in an aggregate amount of U.S.$5.7 billion. The second disbursement for an aggregate amount of U.S.$10.8 billion was approved by the IMF’s board on April 5, 2019All of these funds are freely available, as opposed to the precautionary nature assigned to funds pending disbursement under the initial agreement. In return, the Argentine government covenanted to make progress in order to achieve fiscal balance by 2019, bringing the primary deficit to 0% of GDP in that year and surplus of 1% in 2020 and, in turn, the Central Bank will not be able to raise the base monetary policy until June 2019. On the other hand, in order to mitigate the exchange rate volatility, intervention zones were defined when the dollar exceeded Ps.44 or was below Ps.34 (range adjusted daily at an annual rate of 3% until December 2018), and the first quarter of 2019, is adjusted daily at a rate of 2% per year), considering the zone between these limits as a“non-intervention zone.” On April 29, 2019, the COPOM decided to introduce changes to the monetary policy, with an aim to reducing volatility in the foreign exchange market. According to the new scheme: (i) if the exchange rate is between Ps.39.755 and Ps.51.488, the Central Bank may intervene, subject to market conditions, in the foreign exchange market and sell U.S. dollars in the market, and (ii) if the exchange rate is above Ps.51.488, the Central Bank will sell foreign currency for up to U.S.$250 million (from U.S.$150 million). Also, the Central Bank could decide to perform additional interventions in the exchange market. The Argentine pesos resulting from such sales will be discounted from the monetary base. The COPOM also confirmed that the Central Bank will not intervene until June 2019 in the foreign exchange market if the exchange rate decreases below Ps.39.755.”
Changes in monetary policy. On September 28, 2018, in connection with the 2018 IMF Agreement, the Monetary Policy Committee of the Central Bank announced the goal of achieving a 0% growth rate in the monetary base until June 2019. This monetary goal would be achieved through daily operations of LELIQS, which began on October 1, 2018. LELIQS areseven-day Peso-denominated securities that can be purchased exclusively by banks. On the first tender offer of LELIQS, the Central Bank awarded Ps.71,060 million at a 67.1% average rate. On March 18, the president of the Central Bank announced that the 0% growth rate policy would be maintained until the end of 2019.
Asset Seizure Decree: On January 22, 2019, the Macri administration published the Decree No.62/2019 related to asset seizure (Extinción de Dominio), which allows courts to seize assets found related to acts of corruption or drug smuggling, whether the defendant has been found guilty or not before a criminal court. This Decree also includes provisions for the creation of a special Ombudsman’s Office to monitor future asset seizures. On February 19, 2019 the decree was rejected by the permanent bicameral commission, but will remain in force until both chambers of the Argentine Congress have rejected it.
Recent Governmental Measures: recently, the Argentine government announced a wide range of measures to stabilize financial volatility and the current economic situation of the country, which includes among others, price agreements for the main products of the consumer basket, a revised public services and transport tariff increase scheme, social benefits and support for SMEs, notwithstanding the foregoing, as of the date of this annual report, certain of the aforementioned measures have not been instrumented yet, consequently, we cannot measure the impact in the Argentine economy of the aforementioned reforms.
Recent Developments
Shareholders General Meeting
On April 26, 2019, the General Ordinary and Extraordinary Shareholders’ Meeting of the Company (the “2019 Shareholders Meeting”), was held, in which, among others, the following items of the agenda were approved: (i) performance of the Board of Directors and the Supervisory Committee, for fiscal year ended December 31, 2018, (ii) remuneration of the Board of Directors and the Supervisory Committee, for fiscal year ended December 31, 2018, (iii) Determination of the number of Regular and Alternate Directors, and to accept the resignations submitted by the directors Laurence Mengin de Loyer, María Gabriela Macagni and Jorge Luis Mocetti, and lastly the appointment of Messrs. Julio Patricio Supervielle, Jorge Oscar Ramírez, Atilio María Dell’Oro Maini, Eduardo Braun, Victoria Premrou, Ricardo De Lellis and Hugo Enrique Santiago Basso as regular directors, for two fiscal years, (iv) appointment of Messrs. Enrique José Barreiro, Carlos Alberto Asato and Valeria Del Bono Lonardi as regular members of the Supervisory Committee and Messrs. Carlos Enrique Lose, Roberto Aníbal Boggiano and Carlos Alfredo Ojeda as alternate members of the Supervisory Committee, all of them for one fiscal year, (v) distribution of dividends for the fiscal year ended on December 31, 2018 which amounted to Ps.1,655,961,851.28 as follows: (a) Ps.303,000,000.00 to Dividends in Cash; and (b) Ps.1,352,961,851.28 to a discretionary reserve, aimed for future investments, for further information, please see:“—Dividends”, and the (vi) appointment of Messrs. Santiago José Mignone and Carlos Alberto Pace of the firm Price Waterhouse & Co. S.R.L. as regular and alternate Certifying Accountants, respectively, for the financial statements of the fiscal year to end on December 31, 2019.
Dividends
2019 Shareholders Meeting and the Board of Directors of the Company approved the distribution of a cash dividend which shall be distributed to shareholders in the amount of Ps.303,000,000.00 on May 15, 2019. The amount to be distributed is equivalent to 66.342279631% of the outstanding capital and the nominal value of its representative shares or Ps.0.66342279631 per outstanding share or Ps.3.31711398155 per ADS. The total amount of dividends to be distributed has its origin in results for the year ended on December 31, 2018.
Changes in Management
On April 9, 2019, the Company informed that on April 8, 2019 the Board of Directors of the Bank had unanimously appointed Mr. Alejandro Stengel as Deputy CEO and COO, reporting to Mr. Jorge Ramirez, CEO of the Bank and the Company. Mr. Alejandro Stengel is a board member of Grupo Supervielle since 2010.
In addition, Mr. Stengel as of the aforementioned date, heads Personal and Business Banking, Corporate Banking, and the Banking Products area, as well as the Technology and Operations, Central Services, Processes and Data Management, and Business Intelligence. He will also be spearheading the Digital Transformation process ensuring its adequate implementation across the organization. In his new role, Alejandro Stengel will work along with the CEO in the execution of the Bank’s growth and transformation strategy which is centered on digital transformation, customer experience, efficiency and profitability.
In addition, the Bank’s Retail Banking area which has been redefined as Personal and Business Banking, is currently led by Mr. Silvio Margaría, replacing Mrs. Beatriz De la Torre who tendered her resignation on April 8, 2019.
Having joined the Bank in October 2016, Mr. Margaría has significant experience in managerial positions overseeing nationwide retail banking networks, as well as corporate banking in different international and local financial institutions.
As part of the operational streamlining that the Bank is undertaking, Mr. Eduardo Urdapilleta, Processes and Digital Transformation manager has also left Banco Supervielle on April 9, 2019. His areas of responsibility have been distributed between the Processes and Data Management, and Business Intelligence areas.
With these organizational changes, Banco Supervielle seeks to further increase its operational leverage, continue to gain market share among its customers and acquire new customers by offering tailor made financial services, enhancing the customer journey and loyalty through digital transformation and innovation.
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” common shares, with a face value of one peso each and entitled to five votes per share, held by Mr. Supervielle, into Class “B” common shares, with a par value of one peso 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.
| Item 4.A | History 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.
Supervielle y Cía. Banqueros
The predecessors of our controlling shareholder emigrated from France in the second half of the 19th century and established L.B. Supervielle y Cía. Banque Francaise (later Banco de Montevideo S.A.) in Montevideo, Uruguay. In 1887, they established Supervielle y Cía. Banqueros (a subsidiary of L.B. Supervielle y Cía. Banque Francaise) in Buenos Aires. Supervielle y Cía. Banqueros offered demand deposits, time deposits, savings accounts, securities trading orders, purchases and sales of foreign currency and drafts and letters of credit payable in European financial centers. Luis Bernardo Supervielle managed the bank until his death in 1901, whereupon the bank’s management
transferred to his son, Luis Supervielle, and subsequently to Esteban Barón,son-in-law of Luis Bernardo Supervielle, who in 1905 became president of Supervielle y Cía. Banqueros. Mr. Barón managed the bank from 1905 until 1930, and subsequently served on the board of the bank as an Honorary President until 1964. Mr. Barón’s son, Andrés Barón, joined the bank in 1925 and took over its general management in 1930, also becoming chairman of the board of the bank in 1940. He carried out these functions until 1964, and then served on the board of the bank as an Honorary President.
On December 30, 1940, Banco Supervielle de Buenos Aires S.A., a bank controlled by the Barón and Supervielle families, acquired the assets and liabilities of Supervielle y Cía. Banqueros and listed its shares on the Buenos Aires Stock Exchange. Esteban Barón and his son, Andrés Barón Supervielle, continued to manage the operations of this bank until 1964.
In 1964, Société Générale (Paris) acquired a majority of the capital stock of Banco Supervielle de Buenos Aires S.A. from the 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. On March 20, 2000, the name Banco Supervielle de Buenos Aires S.A. was changed to Banco Société Générale S.A.
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 andlower-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. On 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 Provincial 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. Only two proposals were presented on March 15, 2019, Banco de la Nacion Argentina and Supervielle. Both of them were accepted and after a short process of contest, the Evaluation Committee is analyzing which one is the more convenient for the Province to define which Bank will be nominated as Financial Agent. There is no date for the abovementioned committee to take the decision, up to that date, Supervielle will be rendering services as financial agent.
Creation of Holding Company
Grupo Supervielle was incorporated in the City of Buenos Aires on October 8, 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.
On 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.
On 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.
On 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 of Banco Regional de Cuyo S.A. with and into the Bank. The merger was completed on November 1, 2010.
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.
Acquisition of Cordial Compañía Financiera S.A. (formerly known as “GE Compañía Financiera S.A.”)
On July 6, 2010, Grupo Supervielle and the Bank 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. On 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.
We acquired GEacquiredCordial Compañía Financiera to further our strategy of increasing our market share in the Argentine banking and financial services industry through the strategic purchasestrategicpurchase of financial services companies and financial institutions.
On August 1, 2011, the shareholders of GECordial Compañía Financiera approved the name change from GE Cordial Compañía Financiera S.A. to Cordial Compañía Financiera.Financiera S.A. On August 29, 2011, the IGJ authorized the name change.
Espacio Cordial Servicios S.A.
For business strategy purposes and with the intention of furthering our goods and services business plan, onOn October 2, 2012, the Board of Directors created a new entity called ECM S.A., which was later renamed Espacio Cordial Servicios S.A. For business strategy purposes and with the intention of furthering our goods and services business plan.
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 by insurance companies, such as Supervielle Seguros, in accordance with laws and regulations as of the date of this annual report.
Acquisition of Supervielle Seguros S.A. (formerly known as Aseguradores de Créditos del Mercosur S.A.)
On 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 on 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 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.
On 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 be 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 on 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.ticker “SUPV”. Additionally, 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 which 114,807,087 were newly issued ordinary Class B shares andwhile 31,818,000 were outstanding.
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. 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 S.A. to Ciudad Microempresas as detailed below:
| (i) |
|
| (ii) |
|
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 anin-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 anin-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. 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 thein-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 shares 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 global 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. 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 andnon-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.
OfferCreation of Fideicomiso Financiero Fintech Supervielle I
On February 16, 2018, the Board of Directors approved the creation of Fideicomiso Financiero Fintech Supervielle I (“FF Fintech I”) to invest in financial technology (fintech) and insurance technology (insurtech) start up projects for the acquisitionan amount up to U.S.$3 million.
Acquisition of the capital stock of Micro Lending S.A.
On April 6, 2018, theour 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.$20 million subject to price adjustment.. MILA specializes in car financing, particularly for used cars. On May 2, 2018, Grupo Supervielle closed the acquisition of MILA for a total price os U.S.$ 20 million, subject to final adjustments.
Acquisition of the capital stock of InvertirOnline S.A. and InvertirOnline.com Argentina S.A.
On May 24, 2018, Supervielle acquired the capital stock of the online trading platform InvertirOnline (“IOL”), through the purchase of both InvertirOnline S.A. and InvertirOnline.com Argentina S.A.
Creation of Supervielle Broker de Seguros S.A.
On December 21, 2018, Supervielle Broker de Seguros S.A. was created, which will have the exclusive purpose of carrying out the insurance intermediation activity, promoting the contract of life insurance, weatlh and pension insurance premiums, and advising customers and potential customers. Grupo Supervielle S.A. owns 95% of the Share Capital directly and 100% directly and indirectly. As of the date of this annual report, the acquisitioncompany is expected to close in the second quarter of 2018, and remains subject to certain customary conditions precedent.the authorization of the Argentine Superintendency of Insurance in order to start operations.
Creation of Fideicomiso FinancieroExecutive Offices
On February 16, 2018, the Board of Directors approved the creation of Finterch 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.
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.+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.
We file reports, including our annual reports on Form20-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 athttp://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 fourtheight largest Argentine private domestically-owned bank in terms of loans and nineth in terms of assets. 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%96.6% 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, 2017,2018, we served over two1.8 million active customers, and our assets totaled Ps.94.0Ps.141.7 billion (approximately U.S.U.$5.0.S. 3.7 billion), in addition to Ps.14.7Ps.13.6 billion (approximately U.S.U.$780.6.S. 361 million) of assets managed by SAM.SAM and Ps.7.3 billion (U.$.S.193 million) of assets managed by IOL. As of December 31, 2017,2018, the Bank and CCF accounted for 90.8%90.9% 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%5.7% of our total assets, respectively.
As of December 31, 20172018 and December 31, 2016, 2017, 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, 20172018 was 6.9%7.3%, compared to a 7.0%6.9% market share as of December 31, 2016;2017;
·Leasing (made by the Argentine private financial system)banks): a 15.2%17.6% market share as of December 31, 2017,2018, compared to a market share of 12.7% (and greater than 13.1% when taking into account our securitized leasing portfolio)15.2% as of December 31, 2016;2017;
·Our factoring market share of the Argentine private financial system as of December 31, 2017,2018, was 7.5%7.4% compared to a 6.9%7.5% market share as of December 31, 2016;2017; and
·MasterCard credit cards for which billing statements were issued (latest available information):issuedas of December 31, 2018: a 8.6% market share as of December 31, 2018, compared to a 9.8% market share as of December 31, 2017, compared to a 9.2% market share as of December 31, 2016;2017;
Based on the latest information published by ANSES, we made 14.1% of all social security payments to senior citizens in Argentina in 2017,September 2018, compared to 14.7%14.1% in 2016.December 2017.
We have a leading position in both the provinces of Mendoza and San Luis, in which we have 291,000 and 232,000 customers respectively. According to calculations performed on Central Bank information, as of December 2018 we had a market share of loans among private banks of 19.4% and 23.8% respectively, and a market share of deposits among private banks of 11.0% and 20.2% respectively.
We offer diverse financial products and services that are specifically tailored to cover the different needs of our customers through amulti-brand andmulti-channel platform. We have developed amulti-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 ourmulti-channel distribution strategy with a strategic national footprint through 340325 access points (compared to 326 access points as of December 31, 2017), which include 180182 bank branches, (compared to 179 bank branches as of December 31, 2017), 78 of these bank branches are fully dedicated to serve senior citizens, 1922 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 6135 consumer finance sales points, and through other retailers, 7 Mila customer support offices, completing a network of 1,000 car dealer, and 521526 ATMs, 217self-service terminals and 193 self-service terminals.
180 Cash Dispensers with biometric identification.
As of December 31, 2017,2018, 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.393.0 million, compared to Ps.191.5Ps.300.8 million as of December 31, 2016 and Ps.120.5 million as of December 31, 2015.2017. 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, 2017,2018, the loan portfolio to branches ratio of (i) Banco Macro S.A. was Ps.379.2 million, (ii) Banco de Galicia y Buenos Aires S.A. was Ps.739.4 million and (iii) BBVA Banco Francés S.A. was Ps.711.1 million. The loan portfolio to branches ratio as of December 31, 2017 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, 2017,2018, the loan portfolio to branches ratio for all Argentine private banks was Ps.363.8Ps.477.2 million.
Building on our banking sector expertise, we identifycross-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, 20172018 and December 31, 2016,2017 on a consolidated basis, we had:
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 ApproximatelyCompanies and Large Corporates as of December 31, 2018, compared to approximately 1.9 million active retail customers (including 1.4 million active retail customers of the Bank and approximately 0.5 million active retailconsumer finance 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;2017;
· Ps.94.0
Ps.141.7 billion in total assets as of December 31, 2017,2018, compared to Ps. 53.2Ps.135.2 billion in total assets as of December 31, 2016;2017;
· Ps.56.0Ps.80.2 billion in loans to the private sector and Ps.2.5 billion in financial leases as of December 31, 2017,2018, compared to Ps. 35.3Ps.89.6 billion in loans to the private sector and Ps. 1.5 billion in financial leases as of December 31, 2016;2017;
· 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.56.5Ps.94.9 billion in deposits, including Ps.6.2Ps.83.8 billion from thenon-financial public sector, Ps.15.7Ps.25.2 million from the financial sector and Ps.50.3Ps.11.1 billion from thenon-financial private sector as of December 31, 2017,2018 compared to Ps. 35.9Ps.83.3 billion in deposits, including Ps. 33.3Ps.9.1 billion from thenon-financial private public sector, Ps. 9.3Ps.23.2 million from the financial sector and Ps. 2.6Ps.74.2 billion from thenon-financial public private sector as of December 31, 2016;2017;
· Ps. 15.1Ps.17.0 billion in attributable shareholders’ equity as of December 31, 2017,2018 compared to Ps. 6.9Ps.20.3 billion in attributable shareholders’ equity as of December 31, 2016;2017; and
·5,307 employees as of December 31, 2018, compared to 5,320 employees as of December 31, 2017, compared to 4,982 employees2017.
In ourcross-selling segments we had as of December 31, 2016.2018:
In our cross-selling segments we had:
· Ps.14.7Ps.13.6 billion (approximately U.S.$780.6361 million) in assets under management through Supervielle Asset Management Sociedad Gerente de FCI S.A. as of December 31, 2017;;
· Ps.789.6 millionPs.7.3 billion (approximately U.S.$193 million) in assets under management through IOL;
Ps.1.2 billion in gross written premiums (approximately U.S.$42.131.7 million) calculated as December 31, 2017,2018, through Supervielle Seguros S.A. for thetwelve-month period ended December 31, 2017;2018; and
·Ps.390.5 million in net revenue (approximately U.S.U.$42.1.S42.1 million), through Espacio Cordial Servicios S.A., our retail company selling non-financialnon financial products and services for the twelve-monthtwelve month period ended December 31, 2017.
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 2016IPO and later thefollow-on equity offering in September 2017.
However, our growth and profitability levels have been negatively affected since May 2018 mainly due to the macroeconomic backdrop of Argentina in the second half of 2018.
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, 2017.2018.
| (1) | As of December 31, 2018, the term “small businesses” refers to individuals and businesses with annual sales up to Ps.70.0 million, the term “SMEs” refers to individuals and businesses with annual sales over Ps.70.0 million and below Ps.550.0 million, the term “middle-market companies” refers to companies with annual sales over Ps.550.0 million and below Ps.2.0 billion and the term “large corporates” refers to companies with annual sales over Ps.2.0 billion. Since January 1, 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. |
(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.
The following charts set forth the breakdown of our deposits by type of account and customer category as of December 31, 2017.2018.
Between 20152016 and 2017,2018, according to financial information made publicly available by the Central Bank and expressed following the Argentina Banking GAAP -nominal historic Peso amounts-not adjusted for inflation- and not including expected loss provisioning, our loan portfolio grew at a CAGR of 47.7%48.6%, as compared to 39.9%37.7% for the Argentine private financial system (excluding public banks). Our ROAE was 30.8%26.3%, 22.7%, 32.2%, 26.3%19.1% and 25.4%19.5% for the fiscal years ended December 31, 2013, 2014, 2015, 2016, 2017 and 2017,2018, compared to an average ROAE of 26.5%27.5%, 29.6%, 28.9%, 27.5%25.0% and 25.0%33.5% for the Argentine private financial system over the same periods. We achieved net interest margins of 16.4%20.6%, 17.4%, 18.1%, 20.6%20.1% and 19.1%19.4% for the fiscal years ended December 31, 2013, 2014, 2015, 2016, 2017 and 2017,2018, which compares favorably to averages for Argentine private financial system of 12.5%14.9%, 14.3%, 19.8%, 14.9%13.4% and 13.4%15.3% for the fiscal years ended December 31, 2013, 2014, 2015, 2016, 2017 and 2017,2018, respectively. As of December 31, 2017,2018, we accounted for 5.1%5.2% of all loans and leasing held by Argentine private financial sector (excluding public banks) and 4.4%4.1% of all deposits maintained with the Argentine private financial sector, compared to 4.0% and 3.5%, respectively, in 2013.
sector.
Ourtechnology-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 five the network from 2010 to 2017.2018. 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-makingcredit-relateddecision-making process.
Segments
We conduct our operations through the following segments:
·Retail Banking
·Corporate Banking
·Treasury
·Consumer Finance
·Insurance
·Asset Management &and Other Services
Retail Banking: The Bank offers its retail customers a wide range of banking products including personal loans, mortgage loans, car loans, short term advances, secured loans, payroll services throughPlan Sueldo, credit cards, debit cards, savings accounts, time deposits, and checking accounts, as well as financing services and investments such as mutual funds, insurance coverage, guarantees and benefits payments to senior citizens and pensioners, among others.
Corporate Banking: The Bank, through its corporate banking segment, generally works with SMEs, middle-market companies and large corporates. The customer service model is based on regionalization. Services to SMEs and medium-large companies in the City of Buenos Aires and its vicinities are provided through regional branches located in the most densely populated areas, industrial areas and areas with commercial activity. The Bank believes that its proximity to its corporate banking customers gives it a competitive advantage.
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 andnon-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 offersnon-financial products and services. Since MILA acquisition, the new portfolio of used car loans and its respective results are 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 Entyreprenuers 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 Medium and Large companies 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 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.
Products and Services
We offer our products and services in Argentina’s main regions and cities through our main operating subsidiaries, which include:
·Banco Supervielle S.A. a universal commercial banking institution,
·
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 sellingnon-financial products and services.services,
InvertirOnline S.A.U. and InvertirOnline.com Argentina S.A.U., an online broker, and
Micro Lending S.A.U., a company specialized in car financing.
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 |
|
subsidiary does business | ||
Banco Supervielle S.A. | Argentina | Supervielle | ||
Cordial Compañía Financiera S.A. | Argentina |
| ||
|
| |||
|
| |||
Tarjeta Automática S.A. | Argentina |
Pesos Ya | ||
| Argentina | Supervielle Seguros | ||
Supervielle Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión S.A. | Argentina | Supervielle Asset Management | ||
Espacio Cordial de Servicios S.A. | Argentina | Cordial | ||
Sofital S.A.F. e I.I. | Argentina | N/A | ||
Micro Lending S.A.U. | Argentina | MILA | ||
InvertirOnline S.A.U. | Argentina | IOL | ||
InvertirOnline.com Argentina S.A.U. | Argentina | IOL | ||
Supervielle Broker de Seguros S.A. | 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, loans to retail customers of the Bank 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
| • | 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, 2018, we had approximately 1.8 million retail customers, accounting for Ps.51.7 billion (approximately U.S.$1.4 billion) in deposits. As of December 31, 2018, loans to retail customers of the Bank and of CCF represented 7.3% of the Argentine financial private system market for personal loans, which ranked fifth out of 65 private financial institutions in Argentina. Based on information published by ANSES, as of September 2018, the Bank made 14.1% of all monthly social security payments to senior citizens (who collect their payments on a monthly basis). Additionally, we have a leading position as issuer of Mastercard credit cards with billing statements and the exclusiveon-site provider of financial services to Walmart Argentina customers, with a contract extended through August 2020, renewable at expiration subject to renegotiation with Walmart Argentina. |
·Corporate Customers. We are also a leading provider of specially tailored financial services and products to the corporate sector, with a particular focus on SMEs and middle-market companies. As of December 31, 2017, we had a 15.2% market share in leasing, ranking first out of 50 private banks in Argentina, according to our estimates based on Central Bank information. As of December 31, 2017, we had a 7.5%
| • | Corporate Customers. We are also a leading provider of specially tailored financial services and products to the corporate sector, with a particular focus on SMEs and middle-market companies. As of December 31, 2018, we had a 17.6% market share in leasing, ranking second out of 50 private banks in Argentina, according to our estimates based on Central Bank information. As of December 31, 2018, we had a 7.4% market share in factoring in terms of Argentine private banks. |
| • | Capital Markets.We have a leading position in Argentine capital markets, which we have developed as part of our funding strategy. In 2018, we had Ps.1.8 billion (approximately U.S.$ 47.6 million) in securitization and bond issuances for us and our subsidiaries and 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. |
Leading position in certain geographical regions in Argentina. being one of the most active players in the Cuyo region and also with a leading position in terms of Argentine financial market.our banking network
·Capital Markets.Mendoza: We have a leading position in Argentine capital markets, whichthe province of Mendoza, where we have developed as part of our funding strategy. In 2017, we had a 19% share in bank asset securitization291,000 customers and a 5.12%market share of loans and deposits amoing private banks of 19.4% and 11.0%, respectively. In terms of banking network we have 26 branches out of a total of 174 bank branches in the overall Argentine asset securitization market according to our own estimates based on Central Bankprovince and CNV information. In 2017, we had Ps.5.3 billion (approximately U.S.$ 283.9 million)7 collection centers.
San Luis: We have a leading position 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 expansionprovince of our capital base,San Luis, where we have reduced securitization232,000 customers and a market share of our originated assets,loans and intend to take advantagedeposits amoing private banks of our capital markets capabilities23.8% and expertise to serve corporate customers20.2%, respectively. In terms of banking network we have 23 branches out of a total of 48 bank branches in connection with capital markets transactions.the province and 14 collection centers.
Solid sources of funding
We have access to diversified, competitive and stable sources of funding. Our low-costlow cost demand deposit base comprises 55.3%39.8% of our funding base (33.0%(26.5% savings accounts and 18.7%8.6% checking accounts and 3.6%4.7% other accounts as of December 31, 2017).2018) while our franchise allowed us also to capture interest bearing deposits according to our treasury management liquidity needs.
We ocassionally 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%12.9% as of December 31, 20172018 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 thenon-financial public sector and limited term, currency and other mismatches in our assets and liabilities. We have high proportion of loans over total assets and we 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, and following the sudden changes in the macroeconomic key variables leading a drastic change in the monetary environment that derived, among other aspects, in an extraordinary increase in cash minimum reserve requirements -some of them allowed to be set up in Central Bank short term securities-, and sequential hikes in interest rates weakening economic activity and credit demand, 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 amulti-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 andmiddle-income individuals and to middle andlower-middle-income senior citizens. CCF and Tarjeta focus their products and services on the middle andlower-middle-income segments of the urban population. Ourmulti-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.
We consistently seek to leverage the strongcross-selling potential of ourmulti-brand andmulti-channel business model and our stable pool of overalmost two million customers.
Through ourmulti-brand andmulti-channel approach, we are able tocross-sell and create synergies across our segments. Bancassurance specifically allows us tocross-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 forcross-selling certain credit cards and loans through 141114 consumer finance points of sale (compared to 128141 consumer finance points of sale as of December 31, 2017). Wecross-sellnon-financialWe 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’ dedicated 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 340325 access points (compared to 326 access points as of December 31, 2017), including branches, bank branches fully dedicated to serve senior citizens, 1922 banking payment and sales and collection centers, 79 consumer finance, branches and access points within Walmart stores, Tarjeta’s 6135 consumer finance sales points and through other retailers, 7 MILA customer support offices, completing a network of 1,000 car dealer and 521526 ATMs, and 193217 self service terminals and 180 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 112114 branches and 1 collection center, and CCF has 26 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 5051 branches and 1721 collection centers. The Bank has approximately 281,000291,000 customers in Mendoza and approximately 227,000232,000 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 4115 sales and collection centers. 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. Ourlong-standing presence in Argentina’s financial sector has allowed us to establish stronglong-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 1617 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.
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 underutilized 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 continuesresumes its stabilization process.process lowering inflation and consequently, interest rates. 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.
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.
We believe we have the capabilities required to be successful, including, among others, a long-standing reputation; a strong franchise of 21.8 million active customers; an extensive and strategically located 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 at the beginning of 2017 and until the sudden economic backdrop, exemplifies our strengths. We are seeking to becomebecame one of the top 5 private market leaders in this segment, by, for example, forging alliances with real estate developers, offering customers a competitive value proposition and having an exclusivity agreement with Zona Prop, a popular online real estate website.
The “Superate” advertising campaign launched in 2017 and continued in 2018 and 2019, 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 customers to realize their goals.
The key components of our strategy are as follows:
Increase our market presence among attractive customers through an effective segmentation strategy and strengthened value proposition
We seek to increase revenues throughcross-selling enabled by big data and CRM:
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-incomelower-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 forcross-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 will 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 awell-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), renewable energy projects and medium and large construction companies.
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 quickdecision-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 andhigh-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.
We intend tomay selectively expand the bank’sBank’s network of branches,, emphasizing services for high net worth andupper-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 provinces 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 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 andcross-selling ratios.
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.
Continue capitalizing on synergies by developing new businesses to increase our share of wallet
Our two million customers provide a base from which to expand our share of wallet and increase customer loyalty. The Bancassurance business allows us tocross-sell historically profitable andlow-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 ofnon-financial products and services, including travel and home appliance financing and health services.
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 growing systematically above industry growth levels.
levels until the loan demand slowdown and the sudden economic 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 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 tocross-sell to retail and consumer customers and attract cash management deposits from corporate clients. We also intend to continue to accesslong-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 online and mobile banking, sales and collection centers, streamlining risk assessment and CRM technology. We also plan to continue working withworld-class business intelligence tools to increase sales productivity and to improve relationships with clients through better predictive sales actions and communications.
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. 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 increaselow-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 throughlow-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 the following servicessimple and disruptive technologies: Digital On Boarding; Mobile Corporate Banking; Face Biometricsmodular propositions for selected customer episodes. Those value propositions will seek to design an agile operating model for each relevant customer episode as a way of working for customer-centric change based on digital adaptable and the new Cordial Compañia Financiera Application (Digital Acquisition Process).
radically lower cost TI and Operations environment. As a counterpart, our funding, growth and efficiency targets will be benefited. Currently we are working with empowered and focused Agile teams.
Business SegmentsSegment Reporting
The following table sets forth the breakdown of our net revenue and net income by segment for the periods indicated.
|
| For the year ended December 31, 2017 |
| As of December 31, 2018 | |||||||||||||||||||||
Segment |
| Net Revenue |
| Percentage |
| Net Income |
| Percentage |
| Net Revenue | Percentage | Net Income | Percentage | ||||||||||||
|
| (in thousands of Pesos) |
| (in thousands of Pesos) | |||||||||||||||||||||
Retail Banking |
| 7,200,565 |
| 56.8 | % | 681,019 |
| 36.3 | % | 13,574,042 | 55.11 | % | (503,105 | ) | 22.44 | % | |||||||||
Corporate Banking |
| 1,660,577 |
| 13.1 | % | 538,216 |
| 28.7 | % | 5,676,646 | 23.05 | % | 1,177,834 | (52.53 | )% | ||||||||||
Treasury |
| 426,137 |
| 3.4 | % | 47,746 |
| 2.5 | % | 248,113 | 1.01 | % | (1,639,577 | ) | 73.13 | % | |||||||||
Consumer Financing |
| 2,320,345 |
| 18.3 | % | 179,440 |
| 9.6 | % | 3,684,310 | 14.96 | % | (1,460,638 | ) | 65.15 | % | |||||||||
Insurance |
| 469,671 |
| 3.7 | % | 205,614 |
| 11.0 | % | 878,436 | 3.57 | % | 200,469 | (8.94 | )% | ||||||||||
Asset Management & Other Services |
| 601,584 |
| 4.7 | % | 223,554 |
| 11.9 | % | ||||||||||||||||
Asset Management and Other Services | 569,154 | 2.30 | % | (17,054 | ) | 0.75 | % | ||||||||||||||||||
|
|
|
| ||||||||||||||||||||||
Total Allocated to Segments |
| 12,678,879 |
| 100.0 | % | 1,875,590 |
| 100.0 | % | 24,630,701 | 100.00 | % | (2,242,071 | ) | 100.00 | % | |||||||||
Adjustments(1) |
| 577,989 |
|
|
| 561,470 |
|
|
| ||||||||||||||||
Adjustments(1) | 1,167,431 | (814,578 | ) | ||||||||||||||||||||||
|
| ||||||||||||||||||||||||
Total Consolidated |
| 13,256,868 |
|
|
| 2,437,059 |
|
|
| 25,798,132 | (3,056,649 | ) | |||||||||||||
| (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. |
(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, 2017.2018.
|
| As of December 31, 2017 |
| As of December 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||
|
| Retail |
| Corporate |
| Bank |
| Consumer |
| Insurance |
| Asset |
| Adjustments(1) |
| Consolidated |
| Retail Banking | Corporate Banking | Bank Treasury | Consumer Finance | Insurance | Asset Management and Other Services | Adjustments(1) | Consolidated Total | ||||||||||||||||||||||||
|
| (in thousands of Pesos) |
| (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 |
| 4,706,116 | 325,248 | 28,505,898 | 61,414 | 3,135 | 582,102 | (496,360 | ) | 33,687,553 | |||||||||||||||||||||||
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 |
| ||||||||||||||||||||||||||||||||
Debt Securities at fair value through profit or loss | — | — | 14,941,290 | — | 100,041 | 70,784 | — | 15,112,115 | |||||||||||||||||||||||||||||||||||||||||
Loans and other financings | 30,785,552 | 38,850,543 | 2,824,590 | 6,411,427 | 459,404 | 602,207 | (2,725,259 | ) | 77,208,464 | ||||||||||||||||||||||||||||||||||||||||
Other assets |
| 379,155 |
| 10,893 |
| 244,148 |
| 522,328 |
| 111,323 |
| 285,235 |
| 1,907,715 |
| 3,460,797 |
| 1,141,320 | 80,182 | 5,663,252 | 1,735,186 | 372,487 | 630,880 | 6,102,557 | 15,725,864 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||
Total Assets |
| 24,482,004 |
| 30,463,039 |
| 30,372,273 |
| 7,484,934 |
| 533,031 |
| 603,693 |
| 32,304 |
| 93,971,278 |
| 36,632,988 | 39,255,973 | 51,935,030 | 8,208,027 | 935,067 | 1,885,973 | 2,880,938 | 141,733,996 | ||||||||||||||||||||||||
Includes elimination ofinter-segment 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.
Banking
Banking
Treasury
Finance
& Other
Services
Total
| As of December 31, 2017 | ||||||||||||||||||||||||||||||||
| Retail Banking | Corporate Banking | Bank Treasury | Consumer Finance | Insurance | Asset Management and Other Services | Adjustments(1) | Consolidated Total | |||||||||||||||||||||||||
| (in thousands of Pesos) | ||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Cash and due from banks | 4,132,699 | 384,037 | 11,769,085 | 107,691 | 4,447 | 352 | (13,387 | ) | 16,384,924 | |||||||||||||||||||||||
Debt Securities at fair value through profit or loss | — | — | 16,285,616 | 111,979 | — | — | 440,330 | 16,837,925 | ||||||||||||||||||||||||
Loans and other financings | 31,805,596 | 44,801,483 | 3,336,981 | 9,824,802 | 140,953 | 25,564 | (2,826,709 | ) | 87,108,670 | |||||||||||||||||||||||
Other assets | 623,355 | 17,877 | 7,741,867 | 2,113,635 | 750,829 | 283,211 | 3,367,857 | 14,898,631 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Assets | 36,561,650 | 45,203,397 | 39,133,549 | 12,158,107 | 896,229 | 309,127 | 527,761 | 135,230,150 | ||||||||||||||||||||||||
| (1) | Includes elimination ofinter-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,in 2018 and 2017.
|
| 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 |
|
| Active Customers | ||||||||
| As of December 31, | ||||||||
| 2018 | 2017 | |||||||
Retail Banking | 1,403,460 | 1,433,187 | ||||||
Corporate Banking | 4,934 | 4,873 | ||||||
Consumer Finance | 397,440 | 463,416 | ||||||
IOL | 16,994 | — | ||||||
MILA | 18,988 | — | ||||||
|
|
|
| |||||
Total | 1,841,816 | 1,901,476 | ||||||
|
|
|
| |||||
Retail Banking
The Bank offers its retail customers a wide range of banking products including personal loans, mortgage loans, short term advances, secured loans, payroll services throughPlan Sueldo, credit cards, debit cards, savings accounts, time deposits, and checking accounts, as well as financing services and investments such as mutual funds, insurance coverage, guarantees and benefits payments to senior citizens and pensioners, among others.
The Bank has focused on automatic channels that provide greater functionality inface-to-face and digital automatic platforms, with a view to expediting transactions 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 inEmprendedores & Pymes (Entrepreneurs &and 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 2018 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 high density of stores and achieve full coverage in commercial corridors where SMEs are established.
In 2017,
Additionally, we implemented substantial changes in some of our service centers, modernizing daily operations and meeting the sizeneeds of senior citizens. With the mortgage market in Argentina increased by 113%. We believe mortgages represent a greenfield opportunity. We are amongdevelopment and expansion of automatic solutions for queries and cash withdrawals that include biometric identification, 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, 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.
Aspaved the way for future generations 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.
senior citizen customers.
Our Retail Banking services are focused on the customer segments discussed below.
| • |
|
In order to enhance strategicsub-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%80% of the branches and over 91%90% 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. As regards lead generation, the Bank has a special sales force trained through the “Universidad PyME” with a fully developed commercial management model.
In 2018, we launched media campaigns (“Lo Grande de ser una Pyme”) as well as new products (such as the new occupational risk insurance).
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 stages of their development. In addition, we continue to develop new value propositions for other new sub-segments.
| • | 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. |
·The High Net Worth Customers. We offer our high net worthcustomers’ segment of Banco Supervielle continued to strengthen in 2018. we implemented significant chenges with respect to interaction and, assistance to customers. Based on the knowledge of the customers’ life cycle and their distinctive characteristics, the redesign of the commercial management model was promoted with focus on the penetration in High Net Worth customers exclusive services such as priority accessand the implementation of specific policies to our branchesobtain the greatest risk/benefit ratio in low income segments.This change of vision required revisiting the way of thinking and doing, adopting the good practices developed in other segments and improving the segment’s distinctive aspects.
In this context, focus was placed on the customers’ life cycle, with minimal waiting time, concierge services, exclusive back offices for conducting banking activities, dedicatedthe emphasis on the first stages with a view to quickly activating and digitalizing each customer, reducing maturities and promoting the redirectioning of transactions to automatic channels at an early stage. This resulted in the creation of new service representativesprotocols compatible with these actions, and training sessions were carried out at the call center, a remote investment centerdifferent structure levels and dedicated locations at our branches.
A new internal service agreements were executed to render lead generation scheme was developed that adds attractiveand assistance circuits more fluid and consistent, reduce response times and, therefore, enhance the customers’ satisfaction from the first contact.
In 2018 we launched of the Bank’s referral program, using homebanking as a primary means of communication. The program is based on significant incentives for the referring party and more benefits for prospective customersthe referred party, including product rebates, preferential rates and combines welcomesavings on credit card benefits, such as promoting early activation and exclusive benefits in
supermarkets, gas stations, and restaurants, in additionconsumptions, seeking additionally to interest-free financingfavor cross selling of the newly referred customers.
During 2018, new developments were implemented for the purchaseconsolidation of airline tickets.
The Bank continuedholdings and investments, so as 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 throughoutboost the year.
Taking into account the needs and requirements of customers, the face-to-face service model expanded to 60%growth of the branches, reaching 82% of the Retail Banking segment’s customers.Hig Net Worth customers segment.
·Senior Citizens. The Bank facilitates ANSES payments to more than 1 million beneficiaries per month, including retirees,
| • | Senior Citizens.The Bank facilitates ANSES payments to close to 1 million beneficiaries per month, including senior citizens and pensioners, |
In 2017,2018, 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.
We enhanced the service model enhanced throughCaja Rápida (cash (Cash dispenser with biometric identification) in its Service Centers, reaching a 100% coverage of the network and directing the necessary effort to communication and training of its handling to favor acceptance and acquaintance by senior citizens, with clear benefits in terms of waiting times and operation agility. Based on the good results obtained, we conducted pilot tests to make this equipment available at Service Center lobbies, allowing24-hour use, thus reducing the customers flow during bank hours.
In line with the efforts to improve our service centers.level, a new customers flow manager was implemented from which allow for a better management, control and study of transactions and customer segments, as well as referral to the most favorable transaction channel according to the transaction requested, streamlining daily transactions.
Ambitious objectives were maintained but special focus was placed on retention processes taking into account the economic situation, by providing benefits to retained higher value customers.
By the beginning of 2018, we reviewed credit policies of thePlan Sueldo sub segment which allowed better approval ratios of credit products, improving cross sell and activation ratios. With the strategy of being the first choice bank, by the end of the year the loyalty program was relaunched as the new Club Supervielle, with more and better benefits.
In line with the first choice bank and activation objectives, bymid-year, the new “journey of customers” was defined, improving communication and the proposal within the first 90 days after admission.
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, 2018, the Bank maintained almost 2.9 million savings accounts and more than 120,000 checking accounts. In 2018, the Bank serviced more than 832,000 product bundles for senior citizens, more than 419,000Plan Sueldo accounts and more almost 63,000 product bundles for high net worth customers.
During 2018 the Bank promoted access to banking services at all levels, promoting streamlined transactions and enhancing the use of automatic channels.In line with the development of strategic segments we evaluated the specific needs of customers were evaluated with a view to designing products and services that meet the requirements of eachsub-segment. In order to actively support the development of customers, their community and foster employment generation. In the senior citizens segment, the coverage and functionalities of the biometric network was enhanced so as to makeface-to-face service processes more efficient, thus achieving significant improvements in transactional times, a positive perception of the bank-customer relationship and a better experience for senior citizens.
In 2018 the programs Aeris, Aeris Empresas and Club Supervielle merged, giving rise to a new loyalty program with a new brand and visual identity of the public site, extending the benefits to the Bank’s general portfolio and making access options to tourism products and services more flexible through greater synergies with the suppliers. The next steps include the integration with Tienda Supervielle Productos and the development of a specific program aimed at the senior citizens.
Investments. With focus on the efficiency of operations, the Bank continued strengthening and developing autonomous channels for a comprehensive management of investments operations. Following the past year’s development of the Centro Integral de Inversión for a customized service, in 2018 the Bank started preparations for the merger of management platforms, to offer more efficient products and better investment alternatives to its customers, which we expect may lead to a greater penetration in terms of management of funds of current customers and an increase of lead generation of high net worth customers.
A high percentage of time deposits, mutual funds and purchase and sale of shares, bonds and currency was made through automatic channels, supported by communicational actions and the establishment of specific benefits. In addition, denominated time deposits in “unidad de valor adquisitivo” (“UVA”) an inflation adjusted unit that allows capital loans to be adjusted daily, were launched, with an attractive proposal to use automatic channels.
Insurance.The Bank has continued to grow in the insurance business. During 2018, the Bank launched products such the Comprehensive Commercial Insurance which completes the services offered mainly to entrepreneurs and SMEs, which service is fully processed by Supervielle Seguros. Digital development is the new paradigm for our insurance sales. To be available to customers, so that at any time they can purchase, give an opinion, simulate and compare through digital channels. Insurance policies for Protected Bag, Protected Technology, Protected Contents and ATM Robberies are available in Online Banking. The Banking segment worked hard on the incorporation of greater and more expanded offers in digital channels and in the continuous improvement of processes to ensure savings and a greater efficiency, promoting usability to guarantee the best customer experience.
Loans. The Bank offers personal loans, mortgage loans, car 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 sale through digital channels..
During 2018, in view of the widening of the market following the implementation of the UVA Mortgage Loans, a communicational and management strategy was launched to increase its market share. The Bank posted banners and mortgage calculators in one of the major real estate portals of Argentina and entered into agreements with brokers, large developers and realtors to strengthen generation.
With a view to generating a better customers experience, the bank engaged in a detailed study of the mortgage managementend-to-end process, which resulted in considerable benefits both for the Bank and the customers. Including a better understanding of the web and the operating flow and improvements in management performance. Also we could identify and automatize key process. The customers obtained a more fluid communication as well as real time visualization of the proceeding status, streamlined mortgage management and a significant reduction in times from the first contact to loan settlement.
These achievements had a significantly positive impact on the product’s performance during the first half of the year. However, as the product is highly dependent on the changes in the country’s economic situation, in the second half of 2018 the product’s performance remained well below expectations. Nevertheless, the Bank continued to focus on the increase of its market share.
Bymid-year, the pioneer “Bank Guarantee for Tenants” product started to be offered also in areas outside the Greater Buenos Aires area. The product was developed taking advantage of the change in customers’ preferences and needs, and relying on the management of its own mortgage nodes, represented by officers specialized in real estate products and by a wide network of brokers, which gave the product a national scope.
The Bank also restructured the car financing loans focusing mainly on pricing redefinition, a new initial cross selling model for borrowers, expansion of marketing channels through the incorporation of several car dealers and the commencement, by the end of the year, with the transactions for UVA loans.
Focusing on efficiency, the Bank redefined policies, the contract framework of transactions and macro processes with special emphasis on critical issues. By the end of the year, the sections related to the definition of credit policies applying to the product were under way.
Credit and Debit Cards. As of December 31, 2018, the Bank maintained approximately 778,000 Visa and MasterCard accounts. During 2018, traditional debit cards were replaced by chip debit cards for the segments more exposed to the skimming. The Bank thus managed to rank high in the system due to the introduction of chip debit cards.
In line with the digital transformation, strong focus was placed on the incorporation of contactless technology in Mastercard Platinum and Black cards. By late 2018, the International and Gold cards were added, thus completing the whole Mastercard portfolio, offering innovating products to meet the demand of customers and facilitate their daily transactions.
Still focusing on digital transformation, migration continued from paper to digital card statements, and automatic processes were developed for delivery of card statements by email.
Total deposits from the Retail Banking segment as of December 31, 2018 amounted to Ps.51.7 billion (U.S.$1.4 billion) Retail branch deposits and Senior Citizens deposits continued to represent a high portion of total deposits. In 2018, retail branch deposits plus Senior Citizen deposits represented 44.3% of total deposits compared to 53.8% in 2017.
Corporate Banking
The Bank, through its corporate banking segment, generally works with SMEs, middle-market companies and large corporates. The customer service model is based on regionalization. Services to SMEs and medium-large companies in the City of Buenos Aires and its vicinities are provided through regional branches located in the most densely populated areas, industrial areas and areas with commercial activity. The Bank believes that its proximity to its corporate banking customers gives it a competitive advantage.
As of December 31, 2018, the corporate banking segment had Ps.38.9 billion of outstanding loans and financial leases, and contributed almost 20% of our net revenues before adjustments.
The main financial and transactional products and services that the Bank’s 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 de Garantía Recíproca(SGR)-guaranteed loans, pledge loans, supplier payment services, check custody services, armored transportation services, collections services, corporate credit cards, pension services, deposit accounts (including time deposits and short-term deposits).
The following sets forth additional information on the main products and services offered by our corporate banking segment:
Leasing.The Bank’s leasing area meets the leasing needs of all commercial banking areas of the Bank. 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 caused a significant fall in the volume of contracts executed. As of December 31, 2018, we had a 17.6% market share in leasing in terms of private banks in Argentina.
Factoring (check discounting, invoices and public 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. The share of the factoring market of Argentine financial system as of December 31, 2018 was approximately 7.4%, according to the most recent publicly available information published by the Central Bank.
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 2018, the simplified exchange regulations prevailing in the previous two years for foreign trade continued, which has led to a more agile settlement process.
As regards the financing of foreign trade, the rising trend of 2017 continued during the first half of 2018. However, since the third quarter of 2018, the imports segment started to contract as a result of the first Peso devaluation. Over the end of the year a strong recovery was recorded in the exports business of the Bank’s customers.
By the end of October and with a view to promoting Argentine exports and the inflow of foreign currency, the Ministry of Production and Labor invited Banco Supervielle to take part in the Argentina Exporta Program oriented to prefinance sales abroad of Argentine SMEs. The program grants financing for up to U.S.$.200 thousand. As from November 2018, the Bank launched a lead generation campaign under this program, which will continue throughout 2019.
As to settlements and foreign trade transactions, in 2018 the Bank continued with the digitalization of its transactions and achieved an 80% paperwork reduction.
Following on this digital trend, theE-Comex channel continued to consolidate. Importer and/or exporter customers make inquiries on their ongoing transactions and manage payments and/or collections through Corporate Online Banking. The digital tool was updated during 2018 for the purposes of agility and simplicity.
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).
Cash Management 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, 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 thee-Factoring service with the electronic platform.
During 2018, the Bank continued with the investment process of previous years, improving the offer of collection and payment products, with a view to increasing transactional banking activities with customers.
Sociedad de Garantía Recíproca (Mutual Guarantee Agents or “SGRs”, per its initials in Spanish). In 2018, the Bank remained the market leader, operating with approximately 69% of the SGRs authorized in the country (24 out of 35 authorized SGRs and Guarantee Funds). The Bank is 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 supervises SGRs.
Banco Supervielle was also a leader in innovation for being the first private Bank to operate with the Digital Guarantee Certificate issued by Garantizar SGR and also for executing an agreement with this SGR to offer a Business Credit Card with guaranteed purchase limit.
Due to the its expertise and the sector’s recognition, Banco Supervielle was elected by the Ministry of Production to execute with the BICE the Agreement for receipt of guarantees issued by the Fondo de Garantía Argentina, thus becoming the first private Bank in the country to develop these operations basically oriented to loans for SMEs.
Together with some SGRs, financing facilities were developed for SMEs, members of the value chain, entrepreneurs and franchises.
Wines Division. During 2018, the Wines Division of Banco Supervielle continued to strenghthen 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 mainly on the export market. However, Banco Supervielle continued supporting all industry players, from leading grape producers to major wine estates as well as suppliers of wine manufacturing and bottling supplies.
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.
Customized Value Proposition
The proposals of the franchises and transportationsub-segments launched in 2017 consolidated in 2018. Moreover, in line with the Bank’s intent to become the Bank for SMEs, a value proposition was launched in November 2018 aimed at the health sector, in line with the positioning started in 2017. During 2019, Supervielle plans to continue launching special proposals for different sectors.
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 six month grace period on principal payments.
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 implementedsingle-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.
Health. In November, a new value proposition was presented, intended to cater for the needs of health and diagnostic centers, outpatient doctors’ offices, laboratories and pharmacies and to that end, focus groups were
held with sector companies and customers. The proposal is featured by promptness in loan granting and agreements with vendors. As regards to credit, requests for amounts less than Ps.10 million were answered within 24 hours and requests for amounts above Ps.10 million were answered within 72 hours.
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. The Bank worked together with an international consulting firm specialized in the sector and a multi-disciplinary team. The implementation of this project began in 2018 and is planning to extend throughout 2019. Oil and gas activities record a sustained growth. The most attractive oil and gas areas, the Neuquén and San Jorge gulf basins, are located in the Patagonia.
An important milestone was the opening in April 2018 of a new branch 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 newPlanes Sueldo of individuals with high purchasing power residing in the area.
According to estimates, the development of the Vaca Muerta oilfield has a significant potential for several value chains, including: services for extraction, operation, maintenance and transportation, to mention the main three.
Corporate Digital Banking
2018 was a turning point for Banco Supervielle’s Digital Banking due to the merging of the Corporate Digital Banking and the Individual Digital Banking areas. The most important milestones for corporates were the opening of two new operation channels, the New Corporate Mobile Banking and a new Corporate Digital Banking platform which will replace the current Corporate Home Banking.
In addition to the implementation of new technologies, a new form of work, Agile, was implemented, and the Corporate Digital Banking was the first Project of the Bank developed according to this methodology. It was implemented in 2018 and was gradually applied to all customers, entering a new construction and functionality migration stage.
The most relevant achievements include the new Business Online Banking, with a new design and technology, a menu with everything only 2 clicks away, a modern consolidated position, new paper-less self-management processes, a better help and search module, user surveys and health monitoring modules and Analytics.
Treasury
The Treasury segment 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 andnon-financial clients. Below is a description of the services offered under this segment:
Trading Desk
The Bank’s trading desks trade financial assets on a proprietary and third-party basis, sell financial products, and implement the Asset and Liability Management Committee (“ALCO”) decisions, within the board’s policies, regarding the Bank’s liquidity and financial risk management policies. The Bank’s trading operations include money market instruments, which include institutional investor deposits, public debt instruments, Central Bank debt notes, foreign exchange, stocks, futures, swaps and repos. Trades develop within the limits of a comprehensive risk map which sets limits on counterparty risk and on long and short positions for each asset class, depending on volatility, traders’ seniority level, and other factors. The risk map also determines stop-loss policies. Banco Supervielle managed to grow in volume in all products operated, including foreign currency, public and private securities, stocks and derivatives. The Bank managed to position itself as one of the benchmarks of the market among institutional investors in all types of operations.
Correspondent Banking
During 2018, the volume of foreign credit facilities increased, both as regards applications received and used, which resulted support by international banks regarding foreign trade and working capital facilities.
International entities offered short and medium term loans, with three year disbursements under the IDB program by the second half of the year.
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 entities in the Argentine capital market.
During 2018, the Bank acted as arranger and underwriter of securitizations for Ps.1,832 million, and domestic bonds for Ps.2,424 million, in both cases combining the Bank’s and third party’s transactions, accounting for a 4.23% market share.
Public Sector and Intermediaries
The Bank has maintained a presence in the Province of San Luis for more than 20 years. In 1996 the Bank acquired Banco de San Luis and was appointed as exclusive paying agent for the government of the Province of San Luis to provide financial agency and tax collection services to the Province and serve as payor bank for provincial government employees. This financial agent contract was renewed twice and was due to expire on 2021.
On January 17, 2017, the Province of San Luis notified the Bank of its decision to terminate, effective as of February 28, 2017, the Financial Agency Agreement. Since February 2017, the Bank has continued to provide Financial Services to the Provincial government of the Province of San Luis and its employees despite the termination of the Financial Agency Agreement in February 2017.
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 provide since the termination of the Financial Agency Agreement with the Province in February 2017.
In January 2019, the government of the Province of San Luis released the terms and conditions of the auction to be held by the Province for the new financial agency agreement. Proposals were presented on March 15, 2019. The award date has not been published yet. Banco Supervielle has acquired RFP documents and presented an offer.
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 of the current year which could result in the migration of approximately 2,450 customers from other institutions. 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.
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, 2018, the Bank’s exposure in the Province of San Luis was as follows:
Of the Bank’s approximately 236,000 customers in San Luis, it offers payroll services to about 30,000 employees that were covered by the services provided under the Financial Agency Agreement.
Additionally 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 Finance business of Grupo Supervielle is developed through its subsidiaries CCF and Tarjeta Automática S.A, Mila and Espacio Cordial de Servicios. Mila and Espacio Cordial were annexed to this segment in 2018.
Through CCF and Tarjeta Automática, the Bank offers credit card services and loans to the middle and lower-middle-income sectors. Product offerings also include consumer loans, credit cards and insurance products through an exclusive agreement with Walmart Argentina, as well as with other agreements with retailers such as Hiper Tehuelche and through Tarjeta Automática branch network. Moreover, through Espacio Cordial, Supervielle offersnon-financial products and services. Since the MILA acquisition, the new portfolio of used car loans and its respective results are recorded under Consumer Finance Segment.
Consumer Finance business focuses its operations on two key tenets:
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The Consumer Financing segment’s loan portfolio totaled approximately Ps.7.5 billion (U.S.$199.2 million) at December 31, 2018.
Results varied largely throughout 2018, with a first quarter in which CCF consolidated as one of the three main companies in the sector. During that period the CCF continued with its plan to increase the personal loan sector, plus a strategy oriented to increase the number of credit cards and the level of consumption and activity. To achieve this goal, new advertising dynamics, a strong BTL campaign (having the FIFA World Cup as core idea) and an improved global value proposition were developed.
However, in March 2018 CCF started to experience a portfolio deterioration as a result of the macroeconomic backdrop, which affected mainly the company’s target segments and increased the non performing portfolios. In order to mitigate the risk, as from the second half of March 2018, strong adjustments were introduced in credit policies, increasingcut-off points and restricting the borrowing capacity of customers and leads. During the second quarter of 2018 two additional negative effects were added: rising bank funding rate and a strong decrease in demand, which affected the profitability of the different channels.
In that scenario, in August 2018 a reorganization of the commercial department was carried out to face the new macroeconomic environment of Argentina. The restructuring included staff downsizing, the unification of channels and reduction of businesses with higher risk potential. Besides, the use of shared services was optimized and costs were subject to strict control.
The commercial strategy focused on the customer portfolio, strengthening the basic promotional dynamics and reducing those proposals that might lead its customers to over indebtedness.
Once this process was over, the CCF focused on the preparation of a strategic plan to be implemented in the last months of 2018 and during 2019, which is aimed at improving CCF position as benchmark in the consumer financing segment, through the controlled development of certain products.
In said plan the company’s main products were not discontinued but they were adapted to the new reality.
A breakdown follows of the main products offered by the segment:
Open Credit Card:it is a financial tool that may be used for purchases in the stores of merchants accepting MasterCard and for cash advances, within the limits determined by the entity, which may be obtained in the Permanent Promotion Booths located in Walmart stores, Hipertehuelche and Tarjeta Automática stores.
Retail Store Credit Card:these are credit cards issued by a retailer for purchases only in Pesos in that retailer’s stores. They are mainly intended to obtain customer loyalty and incremental sales. As of the date of this annual report, CCF operates this product only with Walmart stores.
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.
Personal Loans:fixed rate cash loans using the french amortization system.
Consumer Loans:Credit lines for the purchase of certain products, the transaction is completed upon delivery of the purchased products.
Insurance
Through Supervielle Seguros, Grupo Supervielle offers insurance products, primarily personal accidents insurance, protected bag insurance, life insurance and integral insurance policies for entrepreneurs 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 such as: high net, worth individuals (Identité), senior citizens, entrepreneurs and SMEs, customers of the consumer financing and medium and large companies segments.
Supervielle Seguros began issuing its policies in October 2014 starting with a fewnon-credit related insurance products, such as “protected bag” insurance and “personal accident” insurance.
By the end of year 2015, Supervielle Seguros began issuing credit-related policies. Supervielle Seguros’s business substantially grew since then, partly because of the growth of the loans and credit card portfolio balances and partly because of the migration of some of the portfolio previously booked in a third party insurance company.
In March 2016, the Central Bank issued a new resolution, effective as of September 1, 2016, which prohibits financial institutions from charging individuals any fee and/or charge associated with credit related insurance policies. This resolution also specifies that financial institutions must purchase life insurance and total and permanent disability insurance for debit balances for their clients. As a result, since September 1, 2016 the Bank and CCF assume these risks by self-insuring and no longer contract new credit related insurances.
In 2018, Supervielle Seguros began offering integral insurance policies for SMEs.
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.
In 2018, 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).
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 reported gross written premiums of Ps.325.3 million in the first quarter of 2018, Ps.316.9 million in the second quarter of 2018, Ps.304.3 million in the third quarter of 2018 and Ps.282.0 million in the fourth quarter of 2018.
The following table sets forth the breakdown of Supervielle Seguros’s gross written premiums per quarter as of December 31, 2018.
Gross written premiums by product
(in millions of Pesos)
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| 4th quarter 2018 | 3rd quarter 2018 | 2nd quarter 2018 | 1st quarter 2018 | 4th quarter 2017 | 4th quarter 2018 vs. 3rd quarter 2018 | 4th quarter 2018 vs. 4th quarter 2017 | ||||||||||||||||||||||
Life insurance and total permanent disability insurance for debit balances | 8.5 | 18.8 | 30.2 | 42.6 | 54.1 | -54.7 | % | -84.3 | % | |||||||||||||||||||
Personal Accident Insurance | 19.5 | 22.0 | 24.8 | 25.7 | 26.7 | -11.5 | % | -27.1 | % | |||||||||||||||||||
Protected Bag Insurance | 39.8 | 44.4 | 46.0 | 52.2 | 55.0 | -10.2 | % | -27.5 | % | |||||||||||||||||||
Broken Bones | 10.1 | 10.6 | 11.8 | 10.1 | 10.1 | -4.5 | % | 0.1 | % | |||||||||||||||||||
Others | 7.5 | 8.6 | 11.2 | 12.0 | 10.6 | -12.4 | % | -29.4 | % | |||||||||||||||||||
Home Insurance | 37.5 | 39.4 | 43.9 | 38.2 | 42.3 | -4.8 | % | -11.2 | % | |||||||||||||||||||
Technology Insurance | 12.1 | 13.6 | 14.5 | 14.7 | 16.4 | -11.1 | % | -26.0 | % | |||||||||||||||||||
ATM Insurance | 7.9 | 8.0 | 8.5 | 7.9 | 9.0 | -0.5 | % | -11.7 | % | |||||||||||||||||||
Mortgage Insurance | 26.7 | 19.9 | 2.5 | 2.1 | 4.1 | 33.8 | % | 547.5 | % | |||||||||||||||||||
Life Insurance | 112.3 | 119.0 | 123.5 | 119.8 | 123.1 | -5.6 | % | -8.8 | % | |||||||||||||||||||
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Total | 282.0 | 304.3 | 316.9 | 325.3 | 351.4 | -7.3 | % | -19.7 | % | |||||||||||||||||||
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 May 2018, Supervielle also offers products and services through InvertirOnline S.A.U. Since the MILA acquisition, the new portfolio of used car loans and its respective results are recorded under Consumer Finance segment. MILA portfolio outstanding at the moment of the acquisition and its respective results are recorded under Asset Management and Others segment.
SAM
SAM’s assets under management amounted to Ps.13.6 billion as of December 31, 2018.
As of December 31, 2018, SAM had approximately 6,800 customers.
The following graph sets forth the breakdown of SAM’s assets under management as of December 31, 2018.
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, 2018, SAM had U.S.361.0 million of assets under management.
The PREMIER family of funds consists of a Money Market Fund: (Short-Term Premier Rent in Pesos), three short-term Argentina fixed income funds in Pesos (Premier Renta Plus, Premier Renta Fija Ahorro, Premier Capital), five funds of fixed income and mixed Argentina in Pesos (Premier Renta Fija Crecimiento, Premier Commodities, Premier Inversión, Premier Balanceado and Premier Renta Mixta), two funds of Argentine Fixed Income in U.S. dollars (Premier Renta Mixta in U.S. dollars and Premier Performance), a Fund of Variable Income (Premier Renta Variable), and a Fund for specific investment object in assets issued by SMEs (Premier FCI Open SMEs).
Fixed 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 up of fixed income assets denominated in U.S. dollars issued by the Argentine government, provincial governments and companies.
The Bank places funds through theface-to-face channel of its branch network, centro integral de inversiones (call center) 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 July 2018, the centro Iintegral de inversiones of the Bank started operations related to mutual funds transactions.
In December 2018, premier mutual funds began to be marketed through the IOL platform under a mutual funds distributor agreement.
IOL
InvertirOnline.com (IOL) specializes in “Online Trading”, its mission being the “Democratization of Financial Services”, based on the following pillars: technology, innovation and scalability.
As part of Grupo Supervielle, IOL can leverage its growth and take advantage of the synergy of the different businesses of Grupo Supervielle.
IOL’s assets under management amounted to Ps.7.3 billion as of December 31, 2018.
As of December 31, 2018, IOL had approximately 16,994 customers.
Corporate Social Responsibility
Grupo Supervielle has become an important leader in the Argentine financial system with high potential exposure in its community activities. It social commitment has been growing in a sustained fashion and the strong regional presence of its main subsidiary, the Bank, allows it to take action in certain sectors where social investment is insignificant.
We have four strategic objectives for all actions taken:
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 andco-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) 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 2018, 20 programs were carried out, nine of which were in the City of Buenos Aires and Greater Buenos Aires, six in Mendoza, two in Córdoba, one in Mar del Plata, one in Tucumán and one in San Luis. Thirteen of these programs were related to childhood, five to education and two to senior citizens. Among the main activities, volunteers refurbished spaces, equipped rooms and carried out activities with children, youngsters and adults. All the twenty projects were carried out by employees of Banco Supervielle, CCF, Cordial Servicios and Supervielle Seguros.
Our Subsidiaries
Banco Supervielle S.A.
We own 97.03% of the share capital of the Bank and Sofital owns the remaining 2.87%. The Bank is a universal commercial bank and our largest subsidiary. When consolidated with CCF, the Bank accounted for 96.6% of our total assets as of December 31, 2018. 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, 2018, the Bank ranked ninth in terms of deposits, eighth in terms of total loans and ninth in terms of total assets among private banks in Argentina. As of such date, the Bank ranked fifth in terms of deposits and in terms of total assets among domestically-owned private banking groups. In 2018, 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 7.3% share among private banks as of December 31, 2018 and (ii) leasing services, with a market share estimated to be above 17.6% as of December 31, 2018.
As of December 31, 2018, the Bank on a consolidated basis had total assets of Ps.136.8 billion, a total loan portfolio of Ps.79.2 billion and total deposits of Ps.95.7 billion, and its shareholders’ equity totaled Ps.12.8 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, 2018, CCF had total assets of Ps.7.4 billion, net shareholders’ equity of Ps.498.6 million and a personal loan portfolio and credit card loan on balance of Ps.8.2 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.
Since 2000, through an agreement with Walmart Argentina, stores, Hipertehuelche and Tarjeta’s branches. CCF has had exclusive rights to promote and sell financial and credit products to Walmart Argentina customers nationwide, including Changomas stores. The Walmart Argentina agreement grants CCF access, on an exclusive basis, to a distribution channel that includes Walmart Argentina and Changomas stores located throughout Argentina and all future stores to be opened by Walmart Argentina during the term of the agreement. On July 6, 2010, CCF renewed the Walmart Argentina agreement through August 31, 2015 and in December 2014, CCF renewed the agreement again, through August 2020.
CCF specializes in specific credit products and financial consumer services. Its business model is based on offering financial products to mainly the middle andlower-middle-income sectors and is focused on two fundamental pillars:
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.
The multichannel concept requires that CCF be present countrywide, and it is currently settled in 22 provinces through 114 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 337,000 customers.
Tarjeta Branches: Through this channel, CCF offers financing to middle andlower-middle-income customers. This service has a strong presence in the Patagonia region and reaches approximately 43,000 customers.
“Tu Crédito Hipertehuelche”: Through this channel, CCF offers loans, credit card origination and insurance through an exclusive agreement with Hipertehuelche Supermarkets, reaching approximately 16,000 customers.
Due to the deterioration of the purchasing power of the consumer segment customers in 2018, CCF focused on improving and adapting the credit card’s value proposition to the new scheme. Growth drivers were as follows:
New business dynamics under the concept: “a new benefit every day”, focused on giving our customers access to basic needs products and reducing the offers to purchase electronic and other durable goods.
Renewed offer of distinctive products and promotions during key events or special dates such as “Black Friday”, “Discount Marathon” and Christmas.
Renewed business dynamics in Chango Mas, with an increase of cash backs and a proposal adapted to the segment.
Renewed Promotion dynamics with discounts by category and differential discounts.
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 15 stands at retail chains. The highest concentration of Tarjeta branches is in the Patagonia region.
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 fewnon-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 with the consolidation of itsnon-credit related insurance business, Supervielle Seguros plans to advance its products, adapt to the needs of its distribution channels and clients and evaluate how to incorporate the business into the credit-related businesses.
Supervielle Asset Management S.A.
Through SAM, we have become a player in the mutual funds market with the “Premier” funds family.
As of December 31, 2018, SAM offers 13 mutual funds services designed to meet customers’ particular investment objectives and risk profiles through its Premier funds family. As of December 31, 2018, SAM had U.S.361.0 million of assets under management. Based on data from the Argentine Association of Mutual Funds, we estimate that we have a market share of approximately 2.26% of the mutual fund industry in Argentina and that SAM is ranked 16 out of 46 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 financial and credit products in Walmart Argentina stores nationwide through August 2020.
Private Label 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 specific products.
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.
Insurance
Through Supervielle Seguros, Grupo Supervielle offers insurance products, primarily personal accidents insurance, protected bag insurance and life insurance. All insurance products are offered to all our customers. Supervielle Seguros offers credit related and others insurance to satisfy the needs of our customers as well.
In 2017, our insurance operations through Supervielle Seguros contributed Ps.469.7 million to our consolidated net revenues (3.7% of our net segments’ revenues) and Ps.205.6 million of net income (11.0% of our segments’ net income).
Supervielle Seguros began issuing its policies in October 2014 starting with a few non-credit related insurance products, such as “protected bag” insurance and “personal accident” insurance.
By the end of year 2015, Supervielle Seguros began issuing credit-related policies. Supervielle Seguros’s business substantially grew since then, partly because of the growth of the loans and credit card portfolio balances and partly because of the migration of some of the portfolio previously booked in a third party insurance company.
In March 2016, the Central Bank issued a new resolution, effective as of September 1, 2016, which prohibits financial institutions from charging individuals any fee and/or charge associated with credit related insurance policies. This resolution also specifies that financial institutions must purchase life insurance and total and permanent disability insurance for debit balances for their clients. As a result, since September 1, 2016 the Bank and CCF assume these risks by self-insuring and no longer contract new credit related insurances.
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, 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).
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.
Supervielle Seguros has experienced a trend of growth in gross written premiums, reporting Ps.182.0 million in the first quarter of 2017, Ps.188.8 million in the second quarter of 2017, Ps.186.7 million in the third quarter of 2017 and Ps. 232.1 million in the fourth quarter of 2017.
The following table sets forth the breakdown of Supervielle Seguros’s gross written premiums per quarter as of December 31, 2017.
Gross written premiums by product(in millions of Pesos)
|
|
|
|
|
|
|
|
|
|
|
| % 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 & Other Services
We also offer mutual fund services through SAM, and non financial services and products through Espacio Cordial.
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, SAM had U.S.$780.6 million of assets under management.
The PREMIER family of funds consists of a Fixed Time Deposit Fund (Money Market Premier Renta CP in Pesos), five fixed income funds (Premier Renta Plus, Premier Renta Fija Ahorro, Premier Capital, Premier Renta Fija Crecimiento and Premier Renta Mixta in U.S. dollars), a variable income fund (Premier Renta Variable), an Investment Fund in SME securities (Premier FCI Abierto PyMEs) and three Mixed Income Funds, that invest in agricultural commodities derivatives (Premier Commodities Agrarios) and in combined portfolios of negotiable securities in Pesos, U.S. dollars and futures contracts (Premier Inversión and Premier Balanceado).
Fixed 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 up of fixed income assets denominated in U.S. dollars issued by the Argentine government, provincial governments and companies.
The placement of these products is made by the Bank primarily through its commercial channels, by SAM and by brokerage firms. In December 2014, SAM began to offer its fund 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 related to insurance, tourism, health care plans and/or services and other goods and services provided for in its corporateby-laws.
As a result of the restructuring conducted in August 2018, Cordial Servicios became part of the consumer financing sector of Grupo Supervielle.
During 2018, Espacio Cordial continued operating and growing in the direct and indirect channels already developed. Regarding the open channel, it continued growing through sales points located at service centers of the Bank throughout the country, trading mainly home appliances, health plans, prepaid services and tourism with new products and group tours for senior citizens.
As regards indirect channels, the telephone channel continued to be used for the sale of prepaid health services and catalog sales of home and electronic appliances.
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 and developing new products related to flights, hotels, trains, travel assistance and experiences such as the FIFA World Cup 2018. In November 2018, Tienda Supervielle Viajes became a part of the rewards program of Banco Supervielle, as the main supplier of flights and hotels. In the services category, the sale of health plans continued through a strong online strategy in the social media and developing digital self-management products.
During 2018, we sold 65,000 home appliances were sold and 100,000 service plans through our cross selling business.
The goal of Cordial Servicios for 2019 is to increase the income in its 78 sales points and the indirect sales channels already developed. As regards insurance and services categories, new products are being developed for the face to face and online channels, and for alliances with certain strategic partners. As regards Tourism, the B2B channel will begin to be developed, with the corporate sale to Banco Supervielle. As regards Tienda Supervielle, the travel section will expand to new customers through our brand, and the product category will expand to sections such as apparel, supermarket, cars, among other, and will be integrated to Club Supervielle.
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 2018, MILA originated car financing Loans for a total of Ps.713.6 million from 6,948 transactions.
In 2018 a total of 772,477 new cars (167,406 of which were financed through car loans) and 1,565,045 used cars (98,807 of which were financed through car loans loans) were sold in Argentina.
Throughout 2018 year, MILA operated with five insurance companies, offering a wide array of products, and generated an income that represents about 20% of the total income of the Company.
The goal for 2019 is to expand the placement of transactions, and therefore an increase of the sales force of MILA in different regions of the country to achieve a greater capillarity to its network. However, commercial actions will be strengthened to increase penetration in the car dealers channel (increased supply through the launching of loans with UVA adjustment).
InvertirOnline.com
InvertirOnLine.com is a technological company in the financial sector, which was created by the end of 2000 as a company that could seize the growth opportunity of thee-trading segment in a region where both the financial sector and the new technologies were lagging as compared to other more developed regions. The company’s team work understood that the globalization process lies on three pillars: “democratization of information”, through video cable networks, satellites, cell phones, Internet and the access to information in general, “democratization of technology”, due to computers and Internet, and “democratization of financial services” whereby everyone may have access to various financial services such as the stock exchanges.
Nowadays InvertirOnline.com specializes in “Online Trading”, its mission being the “Democratization of Financial Services”, based on the following pillars: technology, innovation and scalability. Some of its competitive advantages are:
| 1. | More than 15 years of experience in the market |
| 2. | Created and designed as a 100% online broker |
| 3. | Wide array of services through a |
| 4. | “1 to N” scalability |
| 5. | Proprietary technology. Knowhow of |
| 6. | It is the most visited Investment and Finance website of Argentina |
| 7. | Education platform to
|
| 8. |
|
Pursuant to Provision No. 2.392 of the Argentine Securities Commission, dated September 22, 2014, InvertirOnline S.A. was registered as a(non-distributor) Broker-Dealer “Agente de Liquidación y Compensación Propio” under number No. 273. Besides, pursuant to Provision No. 2.926 of said body, dated November 24, 2015, the Company was registered as Mutual Funds Distributor (Agente de Colocación y Distribución Integral de Fondos Comunes de Inversión) under No. 1.
As part of Grupo Supervielle, the company can leverage its growth and take advantage of the synergy of the different businesses of the Bank.
The 2019 projects include the development of products aimed both at sophisticated users, such as financial products operated in ROFEX, and at users who are not acquainted with financial products, such as primary and secondary offer of LECAPs, US dollar Treasury Bills, purchase and sale of foreign exchange, among other. Besides, early in 2019 it started to offer access from the argentine account to the main markets in the USA, such as NYSE Arca, NASDAQ, CBOE Edge, CBOE BATS, with a wide offer of products.
Supervielle Broker 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 the share capital and 100% directly and indirectly. As of the date of this report, the company requires the authorization of the Argentine Superintendency of Insurance in order to start operations.
Sofital S.A.F. e I.I.
Sofital S.A.F. e I.I. is a sociedad anónima whose main activity consists of holding participations in other companies.
As of the date of this annual report, Sofital holds 2.8659% 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.
Anin-kind capital contribution by Mr. Julio Patricio Supervielle of 7,672,412non-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 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.7.3 million and Sofital S.A. a credit of Ps.0.3 million.
On April 29, 2016, we and the Bank made capital contributions to CCF for a total amount of Ps.52.1 million.
On May 31 and June 3, 2016, we made capital contributions to the Bank for Ps.4.3 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.344.0 million with an issue premium of Ps.3.8 billion.
On May 31 and June 16, 2016, we made capital contributions to CCF for Ps.27.4 million. On October 24, 2016, the shareholders of CCF approved such contributions for a total amount of Ps.572.7 million under the terms established in the respective agreements for the irrevocable capital contribution, to increase the capital stock in the amount of Ps.59.0 million increasing it from Ps.137.1 million to Ps.196.0 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.177.7 million. On March 9, 2017, the shareholders of CCF approved such contributions and increase the capital stock in the amount of Ps.34.3 million, from Ps.185.5 million to Ps.219.8 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 164.9 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.4.0 million and Ps.76.9 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.205.8 million, Ps.23.5 million and Ps.6.0 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’s shareholders approved 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 capital contributions to CCF for the amounts of Ps.19.0 million and Ps.361.0 million, respectively. On January 24, 2018, the shareholders of CCF capitalized the contributions received on July 24, 2017, December 13, 2017 and January 16, 2018, and increased the capital stock in the amount of Ps.56.751 million with a paid in capital of Ps.973.243.
On March, 19, 2018, Grupo Supervielle, the Bank and CCF committed capital contributions to Tarjeta for the amounts of Ps.262.5 million, Ps.30.0 million and Ps.7.5 million, respectively.
On March 14, 2018 and April 18, 2018, Grupo Supervielle committed capital contributions to the Bank for the amounts of Ps.500 million and Ps.361 million, respectively. Such contributions of Ps.861 million were capitalized by a shareholders’ meeting of the Bank held on April 19, 2018.
On May 2, 2018, Grupo Supervielle acquired Micro Lending S.A. and on May 24, 2018 Grupo Supervielle acquired InvertirOnline S.A. and InvertirOnline.com Argentina S.A.
On August 21, 2018, the shareholders’ meeting of MILA approved a capitalization of a credit granted by Grupo Supervielle on June 28, 2018 for the amount of Ps.58.0 million.
On November 01, 2018, Grupo Supervielle committed a capital contribution to MILA for an amount of Ps.100.0 million. Such capital contribution was approved and capitalized by the shareholders of MILA held on November 12, 2018.
On November 21, 2018, the shareholders of the Bank approved the capitalization of capital contribution made by Grupo Supervielle for an amount of Ps.1 billion. This capitalization was concurred by the Argentine Central Bank on January 17, 2019, in compliance with Communication “A” 6304 of such regulator.
On December 6, 2018, Grupo Supervielle committed a capital contribution for an amount of Ps.200 million to Micro Lending S.A.U.. Such contribution was approved and capitalized by the shareholders of MILA held on December 17, 2018.
On December 17, 2018, InvertirOnline S.A. restituted to Grupo Supervielle a dormant capital contribution of Ps.267,000.
On December 21, 2018, “Supervielle Broker de Seguros S.A.” was created, with a 95% share interest of Grupo Supervielle. Company’s main commercial purpose is to carry out the intermediation activity, promoting the conclusion of life insurance, weatlh and pension insurance contracts, advising insured and insurable persons.
On February 11, 2019 the Bank committed a capital contribution to CCF for an amount of Ps.950.0 million, whereas Grupo Supervielle committed a capital contribution of Ps.50 million. On February 27, 2019, the shareholders of CCF approved the capitalization of such capital contributions. Such capital contribution is subject to the concurrence by the Argentine Central Bank, as set forth by Communication A 6304 of said regulator.
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, the City of Buenos Aires had a GDP per capita in 2005 of approximately U.S.$40,000 and the INDEC currently estimates a population of approximately 2.9 million (approximately 7.2% of Argentina’s overall population). As of December 31, 2018, the unemployment rate in the City of Buenos Aires increased to 6.9% from 5.9% as of December 31, 2017. In terms of the banking sector, there are 853 bank branches (out of a total of 4,605 bank branches in Argentina) in the City of Buenos Aires.
Province of Buenos Aires. The Province of Buenos Aires, which includes the Greater Buenos Aires metropolitan area, is an agricultural center focused primarily on the production of soy, wheat, corn and other agricultural products. Based on the most recent publicly available information released by region, the Province of Buenos Aires had a GDP per capita in 2005 of approximately Ps.12,000 and the INDEC currently estimates a population of approximately 15.6 million (approximately 38.9% of Argentina’s overall population). As of December 31, 2018, the unemployment rate in the Province of Buenos Aires increased to 11.4% from 9.2% as of December 31, 2017. 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 1,507 bank branches (out of a total of 4,605) bank branches in Argentina) in the Province of Buenos Aires.
Mendoza. The Province of Mendoza is located in the Cuyo region and is the center of the wine industry in Argentina. Based on the most recent publicly available information released by region, Mendoza had a GDP per capita in 2005 of approximately Ps.13,000 and the INDEC currently estimates a population of approximately 1.7 million (approximately 4.3% of Argentina’s overall population). As of December 31, 2018, the unemployment rate in Mendoza increased to 5.9% from 2.7% as of December 31, 2017. In terms of the banking sector, there are 174 bank branches (out of a total of 4,605 bank branches in Argentina) in Mendoza.
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 the INDEC currently
estimates a population of approximately 0.4 million (approximately 1.1% of Argentina’s overall population). As of December 31, 2018, the unemployment rate in the Province of San Luis increased to 2.8% from 1.2% as of December 31, 2017. In terms of the banking sector, there are 48 bank branches (out of a total of 4,605 bank branches in Argentina) in the Province of San Luis.
Distribution Network
Our infrastructure supports ourmulti-channel distribution strategy with a strategic national footprint through 325 access points, which include 182 bank branches, 78 of these bank branches are fully dedicated to serve senior citizens, 22 banking payment and collection centers, 79 CCF sales points located in Walmart supermarkets, 35 consumer financing branches of Tarjeta and other points of sale, 7 Mila’s customer support offices, completing a network of 1,000 car dealer and 526 ATMs, 217self-service terminals and 180 Cash Dispensers with biometric identification..
As of December 31, 2018, 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 (in original currency not adjusted for inflation) by the number of branches at the end of such period, was Ps.393.0 million, compared to Ps.300.8 million as of December 31, 2017. 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, 2018, the loan portfolio to branches ratio of (i) Banco Macro S.A. was Ps.379.2 million, (ii) Banco de Galicia y Buenos Aires S.A. was Ps.739.4 million and (iii) BBVA Banco Francés S.A. was Ps.711.1 million. The loan portfolio to branches ratio as of December 31, 2017 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. According to publicly available information provided by the Central Bank, as of December 31, 2018, the loan portfolio to branches ratio for all Argentine private banks was Ps.477.2 million. All the above figures are expressed in original currency and not adjusted for inflation.
The following table and map show the geographical distribution of branches, senior citizens dedicated branches and sales and collection centers, except otherwise indicated:
Distribution Network | ||||||||
| As of December 31, 2018 | As of the date of this annual report | |||||||
Banco Supervielle S.A. Branches | 182 | 182 | ||||||
Banco Supervielle S.A. Sales and Collection Centers | 22 | 22 | ||||||
Tarjeta Automática S.A. Branches | 20 | 20 | ||||||
Tarjeta Automática S.A. Sales and Collection Centers | 15 | 15 | ||||||
Cordial Compañía Financiera Sales Points | 79 | 79 | ||||||
Micro Lending S.A.U. | 7 | 7 | ||||||
ATMs | 526 | 526 | ||||||
Self-service Terminals | 217 | 217 | ||||||
“Caja Rapida” - Cash Dispensers with biometric identification. | 177 | 180 | ||||||
Deposits
The following tables compare the composition of the Bank’s (on a consolidated basis) total funding with those of all Argentine private banks’ in each case as of December 31, 2018:
| Year ended December 31, 2018 | ||||||||||||||||
| Liabilities and Shareholders equity | Banco Supervielle | Private Banks | ||||||||||||||
| (in millions of Pesos) | % | (in millions of Pesos) | % | |||||||||||||
Deposits | 95,666 | 69.7 | 2,275,944 | 70.6 | ||||||||||||
Other Liabilities | 41,520 | 30.3 | 947,391 | 29.4 | ||||||||||||
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Total | 137,186 | 100 | 3,223,335 | 100 | ||||||||||||
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| Year ended December 31, 2018 | ||||||||||||||||
| Deposits Breakdown | Banco Supervielle | Private Banks | ||||||||||||||
| (in millions of Pesos) | % | (in millions of Pesos) | % | |||||||||||||
Checking accounts | 6,682 | 7.0 | 292,833 | 12.9 | ||||||||||||
Saving Accounts | 47,346 | 49.5 | 1,052,735 | 46.3 | ||||||||||||
Time deposits | 28,798 | 30.1 | 728,689 | 32.0 | ||||||||||||
Other deposits | 12,840 | 13.4 | 165,993 | 8.9 | ||||||||||||
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Total | 95,666 | 100 | 2,240,250 | 100 | ||||||||||||
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Due to the importance of the franchise of our deposit network, retail plus senior citizens deposits continued to account for a significant portion of total deposits. As of December 31, 2018, retail plus senior citizens deposits represented 44% of total deposits, compared to 54% as of December 31, 2017.
Loan Portfolio – General Overview
Each loan category in our loan portfolio faces different risks. We have established underwriting policies, standards and pricing mechanisms designed to mitigate the risks posed by each loan category. As of December 31, 2018, we had a loan portfolio of Ps.80.2 billion (equivalent to U.S.$2.1 billion converted to U.S. dollars at the reference exchange rate as of December 31, 2018).
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 own 96.8% of the share capital of the Bank and Sofital owns 3.1%. The Bank is a universal commercial bank and our largest subsidiary. When consolidated with CCF, the Bank accounted for 98.2% 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. 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, the Bank ranked ninth in terms of deposits, eighth in terms of total loans and ninth 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, 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 system as of December 31, 2017 and (ii) leasing services, with a market share estimated to be above 15.2% as of December 31, 2017.
As of December 31, 2017, the Bank on a consolidated basis had total assets of Ps.92.4 billion, a total loan portfolio (including the securitized loan portfolio) of Ps.60.3 billion and total deposits of Ps.60.8 billion, and its shareholders’ equity totaled Ps.10.0 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.
Since 2000, through an agreement with Walmart Argentina, CCF has had exclusive rights to promote and sell financial and credit products to Walmart Argentina customers nationwide, including Changomas stores. The Walmart Argentina agreement grants CCF access, on an exclusive basis, to a distribution channel that includes 108 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 extension 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.
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:
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.
The concept of multi-channel banking requires CCF to have a presence everywhere in Argentina, including each of the 23 provinces, which it does through 116 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.
· 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 and reaches approximately 54,000 customers.
· “Tu Crédito Hipertehuelche”: Through this channel, CCF offers loans, credit card origination and insurance through an exclusive agreement with Hipertehuelche Supermarkets, reaching approximately 20,000 customers.
To secure its market presence and to maximize customer 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). 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 with the consolidation of its non-credit related insurance business, Supervielle Seguros plans to advance its products, adapt to the needs of its distribution channels and clients and evaluate how to incorporate the business into the credit-related businesses.
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 mutual funds based on relative strengths compared to other mutual 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.
As of December 31, 2017, SAM managed 11 mutual funds and had U.S.$780.6 million of funds under management. Based on data from the Argentine Association of Mutual Funds, we estimate that we have a market share of approximately 2.63% of the mutual fund industry in Argentina and that SAM is ranked 13 out of 46 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 plans and services.
Sofital S.A.F. e I.I.
Sofital S.A.F. e I.I. is a sociedad anónima whose main activity consists of holding participations in other companies.
As of the date of this annual report, Sofital holds 3.1% of the capital stock of the Bank and 5.0% of the capital stock of SAM.
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, the City of Buenos Aires had a GDP per capita in 2005 of approximately U.S.$40,000 and a population of approximately 2.9 million (approximately 7.2% of Argentina’s overall population). As of December 31, 2017, the unemployment rate in the City of Buenos Aires increased to 5.9% from 5.7% as of December 31, 2016. In terms of the banking sector, there are 843 bank branches (out of a total of 4,497 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, the Province of Buenos Aires had a GDP per capita in 2005 of approximately Ps.12,000 and a population of approximately 15.6 million (approximately 38.9% of Argentina’s overall population). As of December 31, 2017, the unemployment rate in the Province of Buenos Aires decreased to 8.4% from 8.5% as of December 31, 2016. 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 1,449 bank branches (out of a total of 4,497) 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, Mendoza had a GDP per capita in 2005 of approximately Ps.13,000 and a population of approximately 1.7 million (approximately 4.3% of Argentina’s overall population). As of December 31, 2017, the unemployment rate in Mendoza decreased to 2.7% from 3.3% as of December 31, 2016. In terms of the banking sector, there are 173 bank branches (out of a total of 4,497 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, the unemployment rate in the Province of San Luis decreased to 1.2% from 3.6% as of December 31, 2016. In terms of the banking sector, there are 51 bank branches (out of a total of 4,497 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 340 access points (compared to 326 access points as of December 31, 2017), which include 180 bank branches (compared to 179 bank branches as of December 31, 2017), 78 of these bank branches are fully dedicated to serve senior citizens, 19 banking payment and collection centers, 80 CCF sales points located in Walmart supermarkets (compared to 67 sales points in Walmart supermarkets as of December 31, 2017), 61 consumer financing branches of Tarjeta and other points of sale and 521 ATMs and 193 self-service terminals.
As of December 31, 2017, 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, compared to Ps.191.5 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 million.
The following table and map show the geographical distribution of branches, senior citizens dedicated branches and sales and collection centers, except otherwise indicated:
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 deposits with those of all Argentine private banks’ in each case as of December 31, 2017:
|
| 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 |
|
Due to the importance of the franchise of our deposit network, retail plus senior citizens deposits continued to account for a significant portion of total deposits. As of December 31, 2017, retail plus senior citizens deposits represented 54% of total deposits, compared to 60% as of December 31, 2016.
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, we had a loan portfolio (including the securitized loan portfolio) of Ps.60.3 billion (equivalent to U.S.$3.2 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).
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.
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
| 1. | Promissory notes (checking and invoice discounts and warrants) |
3. Foreign trade loans
| 2. | Receivables from financial leases |
4. Mortgage
| 3. | Foreign trade loans |
5. Corporate unsecured
| 4. | Mortgage loans |
6. Overdrafts
| 5. | Corporate unsecured loans |
7. Automobile and other secured loans
| 6. | Corporate credit cards |
8. Personal loans and credit card loans (from the Retail Banking segment)
| 7. | Overdrafts |
9. Personal
| 8. | Automobile and other secured loans |
| 9. | Personal loans and credit card loans (from the Retail Banking segment) |
| 10. | 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 ornon-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.5.0 million to Ps.40.0Ps.200.0 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 aloan-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.
Foreign trade loans
Foreign trade loans are granted to finance exports and imports throughpre-financing and financing loans for exports, international factoring and letters of credit for imports.
In the case ofpre-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 grantpre-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 forpre-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.100 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.100 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 maximum180-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
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 aloan-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 Retail Banking segment)
Our Retail 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 —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 2018 was Ps.35,645. The average term of our personal and consumer loans is 18as of December 2018 was 23 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.
With regard to risk appetite, the Credit Risk Management is the process that leads to the identification, measurement or evaluation, mitigation and monitoring orfollow-up of the risk, as considered in the entire credit cycle, since its origin until collection, recovery or loss, and in case ofnon-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.
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 payrroll 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. |
·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 ornon-performing loans. |
| • |
|
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 tonon-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.
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 managementdecision-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 acase-by-case basis. There are nopre-approved lines of credit, except for individuals who may obtain apre-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;
·detecting market alerts, customer behavior in the market and the financial system, lawsuits, etc.;
·proposing action plans;
·involving the Corporate ForumCommittee and the Small Enterprises Forum;Committee;
·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 | Credit Approval Limit (in millions of Pesos) | |||||||||||
|
|
|
| Unsecured |
| Secured | Unsecured | Secured | ||||||||
House Limit (Senior Committee + Board of Director’s Chairman) | House Limit (Senior Committee + Board of Director’s Chairman) |
| Total | House Limit (Senior Committee + Board of Director’s Chairman) | Total Maximum Approval Limit | |||||||||||
Credit Approval Committee Corporate Banking |
| Senior Committee (Credit Manager + Commercial Coordinator Manager + CEO + Credit Coordinators + One Member of the Board of Directors) |
| 300 |
| 300 | 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 | Coordinating Officers Committee (Credit + Corporate Banking) | 80 | 140 | ||||||||
| Regional Committee (Credit Manager or Credit Officers + Commercial Manager) |
| 40 |
| 70 | 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 + Commercial Manager) | 25 | 35 | |||||||
| Small Businesses (Retail Credit Manager or Credit Supervisors) |
| 25 |
| 35 | Small Businesses (Retail Credit Manager or Credit Supervisors) | 25 | 35 | ||||||||
| Retail Automatic credit analysis process |
| 1.5 |
| — | Retail Automatic credit analysis process | 1.5 | — | ||||||||
| Retail Manual credit analysis process |
| — |
| 10 | |||||||||||
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 thecut-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 7th past due days in order to warn the customers. After this period, the collection of the overdue credit is handled by athird-party collection agency. After 90 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.
In the case of corporate customers, payment defaults are analyzed on acase-by-case basis, taking into consideration the size of the loan and the number of days in arrears, among other factors. However, generally, past due credits of corporate customers enter the collection process after 90 days. For financial leasing customers, the collection process begins after a credit is past due by 60 days. The Recovery Department may engage inextra-judicial settlement negotiations and approve payment proposals by debtors of amounts up to Ps.1 million.
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 March 2018, changes were implemented to income ratiosthe origination and line assignment) with digitalized documentation controls performedcross-sales policies to limit the credit offer to those segments more exposed to the uncertainties caused by the underwriting team. This process also features different parameters for determining exposure and maximum risk per applicant, including point of sale, channel, product, incorporation process, risk level, among others.
macroeconomic situation. In addition, each branch is categorized by risk level based on its portfolio’sthe model of internal behavior trends per score range. A cut off by level is determined accordingly. These classifications arescoring used in cross sales activities was improved and updated, and validated regularlyan improved model is being developed for the evaluation of leads and customers without the required length of bank-customer relationship.
Models for income inference provided by credit bureaus were added to ensure their accuracy.the existing processes, thus improving the repayment capacity assessment and limiting customer indebtedness.
CCFTaking into account the increase of thenon-performing portfolio ratio during 2018, a thorough review was conducted and Tarjeta periodically perform a risk analysis of their entire respective customer bases, evaluating payment behaviorchanges were implemented in strategies and exposure level, and using this informationcollection teams so as to offer betteradequate assistance to nonperforming customers. Statistical tools were incorporated to set collection management priorities, introducing data enrichment processes and improving collection agency assignment and control tools.
As a result of all those changes and adjustments in credit options for existing services and new products and services.
Collection efforts are managed internally at thecollection processes, indicators of 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.non-performing portfolios were stabilized during the second half of 2018.
Information Technology and Operations
During 2017,2018, 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 technological capabilitiescapacity.
The area’s strategic planning was updated, with a three-year scope, based on the improvement opportunities and guidelines associatedfollowing lines: business strategic plans (initiatives executed by IT in line with the Bank’s strategy;strategies); the evolution of current technological capacities arising from improvement opportunities; and definingthe definition and executingexecution of IT specific strategic plans, which correspond to technological strategic plans that 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 intoin five programs: cash management, digital banking, service model, senior citizens, commercial platform and efficiency. Within these programs, the following programs: Cash Management, Digital Banking, Senior Citizens Banking, Commercial Platformprojects were concluded: new functionalities for collection, direct debit and Business Intelligence. During 2017,securities in custody for companies; renewal of the Bank fully implementedwebsite with a new use experience accessing from any appliance, improving visibility and the redesignoffer of Individual Homebanking, Corporate Homebankingproducts and Supervielle Mobile customer experience. The Bank also fully adaptedbenefits offered by the biometric identification systemBank; the implementation of the online sale of account and credit card packages for individuals with digital experience, either through the sales force or self-management; migration of all corporate customers to the provisionsnew platform, with an improved use experience and functionality; implementation of ANSES Resolution No. 648. A Wi-Fi connectivity system was installeda new solution for queue management in many Service Centers,service centers and installation of cash dispensers to improve the Comprehensive Customer Platform was optimizedservice to senior citizens.
As regards the evolution of IT capacities to guarantee an efficient operation model and the positioning of the area as enabler of Online Banking, the advances in channel architecture, commercial olatform and integration are worth mentioning, as well as processesimprovements in Project management and solution-building model through the adoption of agile and modern software technologies.
In line with specific IT projects, the reengineering of services offered by the integration layer, improvements in the core applications processing scheme and the advances to improve employees’ productivity (betterWi-Fi connection and renewal of desktops for notebooks, datacenter improvements (virtualization of low platform servers, data base migration, monitoring) and the adoption of cloud platforms.
However, a great advance was made in connection with the information security strategy, such as improvements in the cybersecurity infrastructure and a project to improve monitoring and electronic fraud prevention.
Centralized Operations
At the beginning of 2018, the operations area of the Bank started a transformation process related to its work and service methodology through the implementation of the LEAN philosophy as pilot test in one of its teams.
A dedicated space was prepared, the “LEAN Room”, where training and team meetings are carried out. 22 employees from retail and corporate areas were trained in the LEAN philosophy and tools. The most significant processes of the pilot area were evaluated to identify problems, waste and improvement opportunities.
Work-cells were designed, each in charge of one person, management indicators and visual panels were generated, and training plans on polyfunctionality were established to achieve the expected efficiency.
An initiative originated during the kaizen (continuous improvement) meetings was implemented, which consists in improving the 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 atby reducing the Service Center level and other aspectstime of our business.response in cases of dispute of charges for local purchases made with debit cards.
Projects for the evolution of current capacities focused on the Bank’s strategy and the improvements resulting from the analysis of the operating model maturity, with a view to ensuring an efficient operating model and to positioning the IT area as Digital Bank enabler.
Centralized OperationsCCF
In 2017, important measures were adopted in furtherance of the Bank’s continued efforts to improve operating efficiency 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.
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 2017,2018, projects were developed and implemented to continue offering an agile, simple and cordial service, emphasizing statements via email, launching a phase two of the mobile application for consultation of credit card status, and making improvements in interactive voice response via phonechat, movements preview in order to provide a better customer experience and expand self-management.
Digital Transformation
CCF’s initiatives forDuring 2018 Banco Supervielle created the shortTransformation Area, which includes the following areas: Digital Channels and medium term include projects relatingTransformation, Innovation, Customer Experience and Processes, Strategic Projects, Planning, Commercial Productivity and Data. Most recently on April 8, 2019, changes to technological infrastructure, especially, improvementsthis area were announced. For further information about these changes please see “Item 4.A.—Recent Developments”.
Transformation includes the use of new work methodologies, new technologies and a strong cultural change within the Bank. To meet the current needs new agile technologies are adopted, where readiness to increase perimeter securitychange and updatesa prompt delivery of value are a competitive advantage. This results in more collaborative and autonomous work teams, with shorter and more efficient turnaround times.
In the call center platform. At the same time, there is a plan to support the business in the implementation of “Embozado en Tienda” (to produce the physical credit card plastic on the spot); the development ofdigital channel areas, a new origination model,home banking for corporates was implemented, by building 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 evolution has given risemigrating functionalities to a digital revolution which has had a profound impact in the financial system. Changes in customer preferences could result in profound changes in the banking industry in the future. Our 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).
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,level with the aim of creating the bank of tomorrow today. During 2017, therefore, Banco Supervielle’s Digital Innovation Team workedsimplifying and accelerating process times and promoting self-management in the following services and disruptive technologies:digital channel.
Digital On Boarding: Customers are accustomedAccess to accessingonline business was unified to the individuals mobile app, the Bank thus becoming part of the group of Banks offering digital services from a mobile app. New modules were introduced for authorizations, balances and movements, face biometrics to satisfy their needsaccess the application and desireother services, in addition to the analytic results module.
Through an evolutive process, improvements were introduced in check image capture to accelerate adoption and usability of the checks application, a consistentmobile app that enables check deposits through images.
The Bank is the first bank in Argentina that has been certified by GS1 Internacional (Certification on Electronic Document Exchange) for electronic data exchange. Through the iFactus channel customers may receive invoices in other standard formats, have access to new health and analytics monitors and to debt information, and collect payments using the payment button.
Face biometrics was implemented to access individuals and businesses mobile apps, in line with security parameters and control monitoring.
In order to improve the customer experience, the new Supervielle.com.ar website was created, following the concept of a modern customer experience in their use. With thisline with the best international practices, friendly in mind, we worked onterms of use and maintenance, which facilitates access to information related to the Bank financial services both to customers and leads, with a view to attracting new customers in the platform. This new and modern UI represents a step towards an enhanced image and experience in all the bank’s digital assets.
Improvements were made to facilitate access to information of financial products, in implementations within the online individuals banking such as a new access design, foreign currency exchange withnon-residents, online resetting of digital password through SMS, a new referral program for high income customers, unification of Club Supervielle loyalty program and making UVA fixed term deposits.
In line with the growth of UVA Mortgage Loans the www.hipotecarios.supervielle.com.ar website was launched, where those customers interested in these loans may make consultations, simulate instalments and prequalify in three simple steps, and digitally submit the required documents.
As regards digital onboarding, a platform in Argentinais under way to purchaseallow the digital acquisition of financial products. WithTo that end a redesignedpilot was used as a model to redefine the experience and simplifiedwork on the design of a new tool during 2019, which will simplify the registration process starting from registration,for new customers, with anend-to-end vision.
The customer experience management prioritizes the platform will allow userscustomer experience in every initiative and interaction. The aim is to becomeconsolidate the capacity to improve projects and processes across the organization. It also enables the unification of methodologies such as design thinking and the implementation on business solutions based on customer journeys.
In 2018, the active listening of customers was extended both toface-to-face and digital interactions, and relational studies were introduced to achieve an integral net promoter standard. Through continuous improvement actions the average NPS of the branches was improved, and the good levels obtained in only two steps and have immediate access to tailor-made products and services.
Mobile Corporate Banking: In pursuit of offering innovative digital technologies to our corporate customers, in 2018 we launched the Corporate Mobile application. This application supplements 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 advances2017 were maintained in the financial system should not be detrimentalservice centers. As regards business development the mortgage loan product was transformed, based on experience levers, achieving an excellent level of recommendation.
The processes management is in charge of the design of processes, measurement of operational performance and internal rules. Its mission is to execute the plans to achieve an efficient and dynamic operational model in line with business requirements. Together with the business and technology areas, these teams participated in more than 30 initiatives and several continuous improvement requirements. During 2018, the objective was process digitalization, with the focus on the Bank, products such as mortgage and pledge loans and tactic actions to improve efficiency.
During 2018, the data management developed the data governance model for the Bank. Some of its security. Ourmost important results include the definition of functional architecture, with specific governance areas, such as users, chief data officer, technology, and other, the determination of Policies and Fora for data governance and the design of the functional model development roadmap.
During the second half of 2018, the Governance model was implemented and a large set of data was entrusted to the chief data officer, defining the KPIs to determine the quality of governance data.
The Digital Innovation team, together with other areas, designed the first smart digital contracts based on Blockchain technology, which offer greater speed, flexibility and security when hiring services. Thus, the Bank is dedicatedthe first entity to providing customersdevelop solutions based on this technology, which has led to a paradigmatic change with the elimination of intermediaries and the decentralization of management.
With the social media and shared security in full blossom, the digital innovation team is also trying to offer a simpler and more secure access both to their financialcustomers and leads, including face and voice biometrics and remote document capture.
Digital Innovation Developments
In 2018, the Central Bank’s policy to promote innovation and entrepreneurship continued.
In May 2018 the Central Bank provided for the creation of a Uniform Virtual Code (“CVU”) which enables the identification and traceability of transfers from sight accounts when at least one of those accounts belongs to a payment services company. The objective of the CVU is to facilitate inter-operability among sight accounts and payment 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.its format is compatible with the Uniform Banking Code (“CBU”).
New Cordial Compañia Financiera Application (Digital Acquisition Process): We released a new version of the Mobile application for Walmart and Carta Automática customers, adding additional digital services,The Central Bank initiatives continue, such as the acquisitionFinancial Innovation Program (PIF) and Financial Innovation Desks, a public-private work space formed by experts from the Central Bank, Fintech companies, banks, entrepreneurs and public and private entities, which aim is to develop tools and solutions to increase financial inclusion and payment infrastructure, technologies and cross cutting systems, alternative credit and savings channels and solutions through the use of new products.blockchain technology.
Within this context, the Bank and a group of seven local capital banks participated in arfintech capitalization rounds and invested in investment, payment, insurance and cybersecurity companies. In 2018, Grupo Supervielle also launched an initiative to work in collaboration with fintech and insurtech companies through investment vehicles, with the objective of entering into associations with exponential companies that generate yields for the fund and synergies with certain group’s strategic areas. The aim is to create incremental business opportunities for the companies and the portfolio’s businesses.
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, 2018, 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 (13 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. As ofownership. Of December 31, 2017,2018, 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, 2017,2018, the number of financial companies was 14, five of which were controlled by Argentine entities and nine of which were controlled by foreign entities, and only one credit union remained.
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, 2017,2018, as presented in the following tables:tables (figures are expressed in original currency and not adjusted for inflation).:
|
| As of December 31, 2017 |
| ||||||||||
|
| Total Assets |
| As of December 31, 2018 | |||||||||
|
| (in millions of Pesos) |
| Share of Total (%) |
| Total Assets | |||||||
| (in millions of Pesos) | Share of Total (%) | ||||||||||||
Banco de Galicia y Buenos Aires S.A.U. | 511,338.2 | 15.86 | % | ||||||||||
Banco Santander Río S.A. |
| 332,926.8 |
| 16.1 | % | 495,272.6 | 15.36 | % | |||||
Banco de Galicia y Buenos Aires S.A. |
| 299,710.8 |
| 14.5 | % | ||||||||
Banco Macro S.A.(1) |
| 225,514.8 |
| 10.9 | % | ||||||||
BBVA Banco Francés S.A. |
| 221,165.6 |
| 10.7 | % | 354,667.4 | 11.00 | % | |||||
Banco Macro S.A. | 344,597.6 | 10.69 | % | ||||||||||
HSBC Bank Argentina S.A. |
| 126,371.1 |
| 6.1 | % | 224,827.60 | 6.97 | % | |||||
ICBC S.A. |
| 109,628.0 |
| 5.3 | % | 184,180.40 | 5.71 | % | |||||
Credicoop Cooperativo Limitado |
| 103,839.4 |
| 5.0 | % | 161,677.00 | 5.02 | % | |||||
Banco Patagonia S.A. |
| 93,718.0 |
| 4.5 | % | 151,354.10 | 4.70 | % | |||||
Banco Supervielle SA |
| 88,808.8 |
| 4.3 | % | ||||||||
Citibank N.A. |
| 69,785.2 |
| 3.4 | % | ||||||||
Banco Supervielle S.A. | 133,176.90 | 4.13 | % | ||||||||||
Citibank, N.A. | 103,183.90 | 3.20 | % | ||||||||||
Banco Hipotecario S.A. |
| 58,974.8 |
| 2.8 | % | 78,189.60 | 2.43 | % | |||||
Nuevo Santa Fe |
| 49,222.0 |
| 2.4 | % | 73,497.60 | 2.28 | % | |||||
Itau Argentina |
| 45,215.7 |
| 2.2 | % | 63,856.40 | 1.98 | % | |||||
Comafi |
| 29,526.4 |
| 1.4 | % | 48,865.40 | 1.52 | % | |||||
Banco de San Juan S.A. |
| 27,686.0 |
| 1.3 | % | 39,245.50 | 1.22 | % | |||||
Others |
| 190,447.7 |
| 9.2 | % | 255,496.30 | 7.93 | % | |||||
| |||||||||||||
Total Private Banks |
| 2,072,541.1 |
|
|
| 3,223,426.50 | |||||||
| |||||||||||||
Source: Central Bank | |||||||||||||
|
| As of December 31, 2017 |
| ||||||||||
|
| Total Loans |
| As of December 31, 2018 | |||||||||
|
| (in millions of Pesos) |
| Share of Total (%) |
| Total Loans | |||||||
| (in millions of Pesos) | Share of Total (%) | ||||||||||||
Banco de Galicia y Buenos Aires S.A.U. | 235,738.0 | 16.9 | % | ||||||||||
Banco Santander Río S.A. |
| 166,220.7 |
| 15.5 | % | 202,183.4 | 14.5 | % | |||||
Banco de Galicia y Buenos Aires S.A. |
| 158,817.4 |
| 14.8 | % | ||||||||
Banco Macro S.A.(1) |
| 132,952.4 |
| 12.4 | % | ||||||||
Banco Macro S.A. | 178,253.4 | 12.7 | % | ||||||||||
BBVA Banco Francés S.A. |
| 123,705.6 |
| 11.5 | % | 176,854.5 | 12.6 | % | |||||
HSBC Bank Argentina S.A. |
| 65,921.2 |
| 6.2 | % | 83,652.30 | 6.0 | % | |||||
ICBC S.A. |
| 60,661.0 |
| 5.7 | % | 79,819.80 | 5.7 | % | |||||
Banco Patagonia S.A. |
| 56,337.7 |
| 5.3 | % | 78,272.70 | 5.6 | % | |||||
Banco Supervielle SA |
| 50,776.8 |
| 4.7 | % | ||||||||
Banco Supervielle S.A. | 68,182.10 | 4.9 | % | ||||||||||
Credicoop Cooperativo Limitado |
| 46,379.3 |
| 4.3 | % | 44,569.60 | 3.2 | % | |||||
Banco Hipotecario S.A. |
| 31,909.0 |
| 3.0 | % | 37,763.20 | 2.7 | % | |||||
Itau Argentina | 32,346.60 | 2.3 | % | ||||||||||
Nuevo Santa Fe |
| 27,526.8 |
| 2.6 | % | 30,081.60 | 2.2 | % | |||||
Citibank N.A. |
| 26,457.1 |
| 2.5 | % | ||||||||
Itau Argentina |
| 22,895.6 |
| 2.1 | % | ||||||||
Banco Comafi S.A. |
| 16,486.1 |
| 1.5 | % | ||||||||
Citibank, N.A. | 29,367.80 | 2.1 | % | ||||||||||
Comafi | 22,402.50 | 1.6 | % | ||||||||||
Nuevo Banco de entre Rios S.A. |
| 11,853.4 |
| 1.1 | % | 13,594.50 | 1.0 | % | |||||
Otros |
| 72,909.7 |
| 6.8 | % | 84,991.70 | 6.1 | % | |||||
| |||||||||||||
Total Private Banks |
| 1,071,809.8 |
|
|
| 1,398,073.70 | |||||||
| |||||||||||||
Source: Central Bank
| As of December 31, 2018 | ||||||||
| Total Deposits | ||||||||
| (in millions of Pesos) | Share of total (%) | |||||||
Banco Santander Río S.A. | 381,797.80 | 16.8 | % | |||||
Banco de Galicia y Buenos Aires S.A.U. | 361,445.80 | 15.9 | % | |||||
BBVA Banco Francés S.A. | 259,763.30 | 11.4 | % | |||||
Banco Macro S.A. | 237511.6 | 10.4 | % | |||||
HSBC Bank Argentina S.A. | 163,633.50 | 7.2 | % | |||||
Credicoop Cooperativo Limitado | 134,641.00 | 5.9 | % | |||||
ICBC S.A. | 117,291.40 | 5.2 | % | |||||
Banco Patagonia S.A. | 108,183.80 | 4.8 | % | |||||
Banco Supervielle S.A. | 94,025.10 | 4.1 | % | |||||
Nuevo Santa Fe | 59,557.80 | 2.6 | % | |||||
Citibank N.A. | 56,932.90 | 2.5 | % | |||||
Itau Argentina | 43,570.90 | 1.9 | % | |||||
Comafi | 34,972.10 | 1.5 | % | |||||
Banco Hipotecario S.A. | 30,402.00 | 1.3 | % | |||||
Nuevo Banco de entre Rios S.A. | 26,902.90 | 1.2 | % | |||||
Otros | 165,060.40 | 7.3 | % | |||||
|
| |||||||
Total Private Banks | 2,275,692.30 | |||||||
|
| |||||||
|
| 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) |
|
| (2) | Includes 32 private banks with assets below Ps.32 billion, as of December 31, 2018. |
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, 2017,2018, as presented in the following table:table (figures are expressed in original currency and not adjusted for inflation):
|
| As of December 31, 2017 |
| ||||||||||
|
| Personal Loans |
| As of December 31, 2018 | |||||||||
|
| (in millions of Pesos) |
| Share of total (%) |
| Personal Loans | |||||||
Banco Macro S.A.(1) |
| 47,376.7 |
| 22.4 | % | ||||||||
| (in millions of Pesos) | Share of total (%) | ||||||||||||
Banco Macro S.A.(1) | 56,412.70 | 22.0 | % | ||||||||||
Banco Santander Río S.A. |
| 29,382.2 |
| 13.9 | % | 29,600.70 | 11.6 | % | |||||
Banco de Galicia y Buenos Aires S.A.(2) |
| 22,288.7 |
| 10.5 | % | ||||||||
Banco de Galicia y Buenos Aires S.A.U. | 25,311.70 | 9.9 | % | ||||||||||
BBVA Banco Francés S.A. |
| 16,318.5 |
| 7.7 | % | 22,197.90 | 8.7 | % | |||||
Banco Supervielle SA(3)4) |
| 14,579.4 |
| 6.9 | % | ||||||||
Banco Supervielle S.A.(2) | 18,724.46 | 7.3 | % | ||||||||||
Nuevo Banco de Santa Fe |
| 9,686.9 |
| 4.6 | % | 13,100.30 | 5.1 | % | |||||
Banco Patagonia S.A. |
| 8,731.1 |
| 4.1 | % | 9,829.30 | 3.8 | % | |||||
HSBC Bank Argentina S.A. |
| 7,087.3 |
| 3.4 | % | 7,743.00 | 3.0 | % | |||||
Banco Hipotecario S.A. |
| 6,262.2 |
| 3.0 | % | 7,413.20 | 2.9 | % | |||||
ICBC S.A. |
| 5,907.1 |
| 2.8 | % | 6,853.00 | 2.7 | % | |||||
Nuevo Banco de Entre Rios |
| 5,493.2 |
| 2.6 | % | 6,764.50 | 2.6 | % | |||||
Others |
| 38,316.8 |
| 18.1 | % | 52,055.04 | 20.3 | % | |||||
| |||||||||||||
Financial Private System |
| 211,430.2 |
|
|
| 256,005.80 | |||||||
| |||||||||||||
Source: Central Bank.
| (1) |
|
| (2) | 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, 2017:2018 (figures are expressed in original currency and not adjusted for inflation):
|
| 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 |
|
|
|
| As of December 31, 2018 | ||||||||
| Leasing | ||||||||
| (in millions of Pesos) | Share of total (%) | |||||||
Banco Comafi S.A. | 3,944.60 | 20.7 | % | |||||
Banco Supervielle S.A. | 3,345.70 | 17.6 | % | |||||
BBVA Banco Francés S.A. | 2,330.90 | 12.2 | % | |||||
Banco de Galicia y Buenos Aires S.A.U. | 2,344.70 | 12.3 | % | |||||
HSBC Bank Argentina S.A. | 1,518.00 | 8.0 | % | |||||
| As of December 31, 2018 | ||||||||
| Leasing | ||||||||
| (in millions of Pesos) | Share of total (%) | |||||||
Banco Patagonia S.A. | 984.1 | 5.2 | % | |||||
Credicoop Cooperativo Limitado | 837 | 4.4 | % | |||||
ICBC S.A. | 817.2 | 4.3 | % | |||||
Banco Santander Río S.A. | 807.2 | 4.2 | % | |||||
Citibank, N.A. | 553.4 | 2.9 | % | |||||
Others | 1.562.50 | 8.2 | % | |||||
|
| |||||||
Total Private Banks | 19,045.30 | |||||||
|
| |||||||
Source: Central Bank
| (1) |
|
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, 20172018 as presented in the following table:
|
|
|
| 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 | % |
| As of December 31, 2018 | ||||
| MasterCard active accounts with billing statement | ||||
| 1 | Banco de Galicia y Buenos Aires S.A | 9.2% | ||
| 2 | Banco Supervielle S.A.(1) | 8.6% | ||
| 3 | BBVA Banco Francés S.A. | 7.4% | ||
| 4 | Banco Macro S.A. | 6.5% | ||
| 5 | Banco Patagonia S.A | 5.9% | ||
| 6 | HSBC Bank Argentina S.A. | 5.2% | ||
| 7 | Industrial and Commercial Bank of China (Argentina) S.A. | 3.6% | ||
| 8 | Banco Itaú Argentina S.A | 2.2% | ||
| 9 | Banco Columbia S.A. | 2.1% | ||
| 10 | Banco Comafi S.A. | 1.2% |
Source: First Data Cono Sur S.R.L.
| (1) |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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%5.2% as of December 31, 2017.2018.
The graph below shows a comparison of the Bank’s loan portfolio CAGR 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 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 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 Shopping and (2) those that are subject to Central Bank oversight such as Compañía Financiera Argentina and BST CrediLogros.
Banco Columbia.
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 operate 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 such as Nevada and Credimas.
competitors.
With respect to 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 operate
MILA is a financial company focused on car financing solutions that had been providing products in the Patagonia region where Hipertehuelche operates,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 Santander, ICBC, BBVA, MG Group and HSBC and (2) those that are competitors onlyfinancial
institutions owned by car manufacturers such as Renault Credit, Fiat Credito and Peugeot Finance. MILA’s main product is car loan with respectpledge that helps to maintain a low risk level portfolio. Currently MILA is rank as one of the types oftop three players in the new car financing market with 3.6% market share and had achieved the second position in the used car financing market with 7.9% market share (source ACARA February 2019). Regarding its distribution channel, MILA sells its products offered.through out 1700 active dealers that allows the company to have presence in the whole country.
Mutual Funds
With respect to the mutual fund market, based on third party sources we estimate our market share is 2.63%2.26% and that SAM is ranked thirteenthsixteenth out of 43 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
With respect to the IOL operations, according to BYMA, our equity trading volume market share is 2.87% and IOL is ranked 9 out of 211 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.
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 ornon-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 ofnon-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 supervised Argentine financial institutions on a consolidated basis. Such institutions must file periodic consolidated financial statements that reflect the operations of headquarters, 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 as habitual financial intermediaries 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 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 extent 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 andover-the-counter 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, as the case may be. However, even when commercial banks’ interests do not reach such percentages, they are not allowed to operate such companies if (i) such interest allows them to control a majority of votes at a shareholders’ or Board of Directors’ meeting, or (ii) the Central Bank does not authorize the acquisition.
Furthermore, in respect of supplementary services, pursuant to Communication “A” 5700, as amended by Communication “A” 6241 and “A” 6342 issued on May 16 and October 13, 2017, respectively, commercial banks are authorized to operate local or foreign companies that have one or two of the exclusive corporate purposes listed in section 2.2 of Communication “A” 5700, 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. If the corporate purposes of such companies include two of the corporate purposes listed in section 2.2 of Communication “A” 5700, the authorization of the Central Bank is required.
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 and Central Bank regulations, financial institutions are required to maintain a Legal Reserve to be funded with no more than 20% and no less than 10% of their yearly income. This reserve can only be used during periods in which a financial institution has incurred losses and has exhausted all other reserves. If a financial institution does not comply with the required legal reserve, it is not allowed to pay dividends to its shareholders. For further information, please see “Item 5. Operating and Financial Review and Prospects—Prospects–Item 5.A Operating Results.”
Non-liquid Assets
Since February 2004,non-liquid assets (computed on the basis of their closing balance at the end of each month, and net of those assets that are deducted to compute the regulatory capital) plus the financings granted to a financial institution’s related parties (computed on the basis of the highest balance during each month for each customer) cannot exceed 100% of the Argentine regulatory capital of the financial institution, except for certain particular cases in which it may exceed up to 150%.
Non-liquid assets consist of miscellaneous assets and receivables, bank property and equipment, assets securing obligations, except for 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.
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 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) | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands of Pesos, except percentages and ratios) | ||||||||||||
Calculation of excess capital: | ||||||||||||
Allocated to assets at risk | 6,090,341 | 4,710,391 | 3,178,270 | |||||||||
Allocated to Bank premises and equipment, intangible assets and equity investment assets | 370,233 | 191,549 | 172,154 | |||||||||
Market risk | 301,724 | 121,155 | 45,385 | |||||||||
Interest rate risk | — | — | — | |||||||||
Public sector and securities in investment account | 96,882 | 131,109 | 78,472 | |||||||||
Operational risk | 1,486,516 | 1,016,501 | 713,227 | |||||||||
|
|
|
|
|
| |||||||
Required minimum capital under Central Bank regulations | 8,345,696 | 6,170,705 | 4,187,508 | |||||||||
Basic net worth | 11,847,865 | 9,903,099 | 5,706,639 | |||||||||
Complementary net worth | 1,163,939 | 913,256 | 778,885 | |||||||||
Deductions | (867,798 | ) | (386,192 | ) | (338,671 | ) | ||||||
Total capital under Central Bank regulations | 12,144,006 | 10,430,163 | 6,146,853 | |||||||||
|
|
|
|
|
| |||||||
Excess capital | 3,798,310 | 4,259,458 | 1,959,345 | |||||||||
|
|
|
|
|
| |||||||
Selected capital and liquidity ratios: | ||||||||||||
Regulatory capital/risk weighted assets(1) | 11.90 | % | 13.9 | % | 12.5 | % | ||||||
Average shareholders’ equity as a percentage of average total assets | 9.9 | % | 10.5 | % | 11.2 | % | ||||||
Total liabilities as a multiple of total shareholders’ equity | 9.4 | x | 8.2 | x | 7.8 | x | ||||||
Cash as a percentage of total deposits | 35.1 | % | 18.2 | % | 22.6 | % | ||||||
Liquid assets as a percentage of total deposits | 47.4 | % | 42.4 | % | 26.6 | % | ||||||
Tier 1 Capital / Risk weighted assets | 10.8 | % | 12.6 | % | 10.9 | % | ||||||
| (1) | Risk Weighted Assets includes operational risk weighted assets, market risk weighted assets, and credit risk weighted assets. Operational risk weighted assets and market risk weighted assets are calculated by multiplying their respective required minimum capital under Central Bank regulations by 12.5. Credit Risk Weighted Assets is calculated by applying the respective credit risk weights to our assets, following Central Bank regulations. |
| (2) | Nominal values without inflation adjustment. |
As of December 31, 2017,2018, Banco Supervielle’s Tier 1 Capital ratio on a consolidated basis with CCF was 12.6%10.8%, compared to 10.9%12.6% at December 31, 2016.2017 and 10.3% at September 30, 2018. Including the Ps.4.3 billion funds from the follow-on equity offering proceedsPs.927 million retained at the holding company Grupo Supervielle, which are available for furthergrowth, and Ps.1 billion of capital injections in its subsidiaries,contribution received by the Bank (which was approved by the Central Bank as regulatory capital on January 24, 2019), the consolidated proforma TIER1pro-forma Tier 1 Capital ratio as of December 31, 20172018 stood at 18.41%12.9%. Supervielle’s Tier1 ratio coincides with CET1 ratio.
As of December 31, 2017,2018, the Bank’s total capital ratio on a consolidated basis with CCF was 13.9%11.9% compared to 12.5% as of13.9% at December 31, 2016.2017 and 11.6% at September 30, 2018. Including the fundsPs.927 million retained at the holding company (Grupo Supervielle) level after the follow-on equity offering of Grupo Supervielle, which are available for furthergrowth, and Ps.1 billion of capital injections into its subsidiaries,contribution received by the Bank in November 2018 but approved by the Central Bank to be considered regulatory capital on January 24 2019, the consolidatedpro-forma total capital ratio as of December 31, 2017 was 19.6%2018 stood at 14.0%.
The capital composition to be considered in order to determine compliance with minimum capital requirements is the financial institution’s RPC (Communication “A” 5580,, as amended).
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 |
| (*) |
|
|
(*) 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:
·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) |
|
·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,
| (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. 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, (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.
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.
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 acourt-ordered auction sale; (i)(h) goodwill; (j) organization and development costs; (k)(i) 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, and (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) the issuance of credit or debit cards as provided by Communication “A” 5700 (75% deductible as 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)accomplished; (m) 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 thenon-financial public sector” surpass the authorized limit and/or are not settled within the terms established therein; (n) income from sales relating to securitization transactions, as applicable, pursuant to the public sector, when certain conditions are met; (q) earningsprovisions of Sections 3.1.4., 3.1.5.2. and 3.1.9., and from portfolio sales relatedor assignments with recourse. This deduction can be applied as long as the credit risk still persists and to securitizations under certain circumstances; (r)the extent in which the capital requirement for the underlying exposures or the sold or assigned portfolio with recourse is maintained; (o) 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; (p) 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 and meet the regulatory criteria established in section 8.3.2 of Communication “A” 5580 (as amended and supplemented), and share premiums resulting from instruments included in CAn1. Furthermore, in the case of consolidated entities, it includes instruments issued by subsidiaries subject to consolidated supervision and belonging to third parties, pursuant to applicable regulatory requirements.
Moreover, debt instruments included under CAn1 must comply with the following requirements:
·Must be totally subscribed and paid in full.
· SubordinatedMust 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.
·
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 5five years as from the issuance date, the financial entity can buy back the debt instruments if: (i) it has the previousprior authorization of the Superintendency, (b)(ii) the entity does not create any expectations regarding the exercise of the purchase option, and (c)(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.
·
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. time, and at its sole discretion, which shall not be considered as a default 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.
The includedpayment of dividends/interest coupons shall not have periodic adjustments becausebe carried out through the noting of distributable entries, in the terms of the financial entity’s credit risk.regulations on “Results Distribution” (Section III of the Central Bank’s regulations).
·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 makere-capitalization difficult.
Instruments considered liabilities must absorb losses once apre-established triggering event takes place. The instruments must do so through their conversion into common shares and a mechanism assigning losses to the instrument. Tier 2 capital consists of (i) certain debt instruments of financial entities not included in Tier 1 capital and which meet the regulatory criteria established in section 8.3.3 of Communication “A” 5580 (as amended and supplemented), (ii) share premium from instruments included in Tier 2 capital, and (iii) loan loss provisions on the loan portfolio of debtors classified as being in a “normal situation” pursuant to Central Bank regulations 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 (as amended and supplemented) issued by the Central Bank, 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 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.
·
They should not have been bought with direct or indirect financing from the financial entity.
Additionally, instruments included in Tier 2 capital and 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���losses–either through a release from debt or its conversion into ordinary capital—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 regularization 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 5.B Liquidity and Capital Resources—Financings—Bank —– Foreign currency-denominated Subordinated 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 COn1 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:
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:
·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 (as amended and supplemented) establishes minimum thresholds regarding capital integration: (i) for 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 regulations by 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.
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:
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| b) |
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d) An internal process of controls, tests and audits, with the objective to guarantee that the general risk management process is exhaustive.
| 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;D EVE – 15 % x bNW)]
Where:
EC: economic capital
MC: minimum capital requirements
D 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)
Requirements Applicable to Dividend Distribution
The Central Bank imposed restrictions on the payment of dividends, limiting the ability of financial institutions to distribute dividends without its prior consent.
By means of Communication “A” 6464, the Central Bank amended and restated its regulations regarding dividend distributions by financial institutions. Pursuant to such regulations, dividend distributions shall be admitted as long as none of the following circumstances apply:
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| 2) |
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| 3) |
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| 4) |
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| 5) |
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| 6) | if the financial institution did not comply with the applicable Additional Capital Margins (as defined below). |
6) if the financial institution did not comply with the applicable Additional Capital Margins (as defined below).
Financial institutions that comply with all of theabove-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 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.”
In addition, for financial institutions that are branches of foreign financial institutions, the Superintendency will consider the liquidity and solvency of their headquarters and the markets in which they operate.
Pursuant to Communication “A” 5580, the minimum regulatory capital has to account for the requirement of counterparty risk capital for securitizations for every ongoing transaction at the time of determination.
Capital Conservation Buffer
Central Bank’s Communication “A” 5689, as amended by Communication “A” 6324, dated January 8, 2015, set forth5827 of the Central Bank establishes 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 andmaintain 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 amount shall also be deducted from the distributable amount. In April 2016, the Central Bank issued Communication “A” 5940, which amended provisions of 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” 5694 of the Central Bank also established 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 establish a capitalconservation 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 thenon-compliance risk.
Financial entities consideredD-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 orG-SIBs- | D-SIBs and G-SIBs Financial Entities | Minimum coefficient of capital conservation – as percentage of | ||
4.5 – 5.13 | 4.5 – 5.38 | 100 | ||
> 5.13 – 5.75 | > 5.38 – 6.25 | 80 | ||
> 5.75 – 6.38 | > 6.25 – 7.13 | 60 | ||
> 6.38 – 7.0 | > 7.13 – 8 | 40 | ||
> 7 | > 8 | 0 | ||
Currently, the minimum limits required by the regulations are:
COn1/RWA: 4.5%
NWb/RWA: 6.0%
RPC/RWA: 8.0%
COn1 must be used in the first place to satisfy the minimum capital requirement of 4.5% of RWA. Subsequently, and in the event the total does not have enough Additional Tier 1 (CAn1) or Tier 2 Capital (NWc), 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.
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”) must be calculated by dividing 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:
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 “DvP”+ (DVP + RCD+RCD + INC(fractioning)) x 12.5
significant holding in other companies) * 12,50
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 inover-the-counter (“OTC”) transactions.
“INC(fractioning)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.”
“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.
“Major Exposure to Credit Risk” regulations
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 publicnon-financial sector denominated and funded in Pesos, including securitized exposures |
| 0 | ||
To the publicnon-financial sector arising from financing granted to social security beneficiaries or public employees (with discount code) |
| 0 | ||
To the publicnon-financial sector and the Central Bank. Other |
| 0 | ||
To other sovereign states or their central banks and other foreign publicnon-financial sector institutions |
| 0 | ||
To the Bank for International Settlements, the IMF, the European Central Bank and the European Community |
| 0 | ||
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 African Development Bank (AFDB), the European Investment Fund (EIF), the Nordic Investment Bank (NIB), the Caribbean Development Bank (CBD), the Islamic Development Bank (IDB) and the European Council Development Bank (ECDB) |
| 0 | ||
Other |
| 20 | ||
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 |
| 0 | ||
Exposure to foreign financial institutions |
| 0 | ||
Exposure to local and foreign companies and other |
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entities, insurance companies, brokerage houses and other companies considerednon-financial private sector entities pursuant to the provisions of Section 1 of the regulations governing the “Financing of thenon-financial public sector” | 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- andMedium-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 |
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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 | ||
On the amount exceeding 75% of the appraised value of such real property |
| 100 | ||
Primary mortgages andmortgages 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 |
| 50 | ||
On the remaining portion of the |
| 100 | ||
Delinquent loans over 90 days | ||||
Weighting varies according to the loan and specific provisions Created | 50-150 | |||
Interests in companies |
| 150 | ||
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Exposures to central counterparty entities (CCP) |
| 0 | ||
Other assets and / or items off the |
| 100 |
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 | |||
Excluded items include: (a) securities granted for the benefit of the Central Bank for direct obligations; (b) deductible assets pursuant to RPC regulations; and (c) financings and securities granted by branches or local subsidiaries of foreign financial entities by order and on account of their headquarters of foreign branches or the foreign controlling entity, to the extent: (i) the foreign entity has an investment grade rating, (ii) the foreign entity is subject to regulations that entail consolidated fiscalization, (iii) in the case of finance operations, they shall be repaid by the local branch or subsidiary exclusively with funds received from the aforementioned foreign intermediaries; and (iv) in the case of guarantees granted locally, they are in turn guaranteed by their foreign branch headquarters or the foreign controlling entity and foreclosure on such guaranty may be carried out immediately and at the sole requirement of the local entity.
Credit Risk Regulation – Large Exposures
General Overview
Communication “A” 6599 of the Central Bank, as amended and restated by Communication “A” 6620, effective as of January 1, 2019, abrogated credit risk fractioning regulations (except for the provisions related to the non-financial public sector), and replaced the 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 thenon-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:
Intraday interbank exposures;
Exposures of financial entities with qualifying central counterparties, as defined by the Central Bank regulations on minimum capital;
Exposures with the Central Bank; and
Exposures with the Argentinenon-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” 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%.
Minimun 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.
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 these minimum capital requirements. 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 inon- andoff-balance sheet recorded positions as a result of adverse changes in market prices. The market risk minimum capital requirement will be the arithmetic sum of the minimum capital requirement for interest rate, stock, exchange rate and options risks. 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.
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 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” 5867,5889, 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 inover-the-counter 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: 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 anynon-convertible preferred shares. This capital requirement is calculated by adding two separately calculated requirements: first, the specific risk involved in each instrument, either a short or a long position, and second, the general market risk —– related to the effect of interest rate changes on the portfolio —– a set off of the long and short positions held in different instruments will be allowed.
Minimum capital requirement for positions in stock. The capital requirement for the risk of holding equity positions in the trading portfolio applies to both long and short positions in ordinary shares, convertible debt securities that function like shares and any call or put options for shares, as well as any other instrument with a market behavior similar to that of shares, excludingnon-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 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” 5889 if the entity only purchases options —– provided that the market value of all the options in its portfolio does not exceed 5% of the entity’s RPC for the previous month —,–, or if its positions in sold options are hedged by long positions in options pursuant to exactly the same contractual terms. In all other cases, the entity must use the alternative (“delta plus”) method, also contemplated in the regulation.
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 ofnon-compliance with capital requirements by an existing financial institution, Central Bank Communication “A” 6091, as amended, provides the following:
non-compliance reported by the institutions: the institution must meet the required capital no later than the end of the second month after becomingnon-compliant or submit a restructuring plan within 30 calendar days following the last day of the month in which suchnon-compliance occurred. In addition,non-compliance 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, thenon-compliance will be deemed to be final, and the procedure described in item (i) confirm will apply. Furthermore, pursuant to Communication “A” 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.(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.(ii) 5867,5889, as amended, 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 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 business days, it must submit a regularization and reorganization plan within the following five business days and may become subject to an administrative proceeding initiated by the Superintendency.
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.
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
| 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) |
|
| c) |
|
Pursuant to Communication “A” 5282, as amended by, among others, Communications “A” 6091 and “A” 6638 the minimum capital requirements regarding OR are equal to 15% of the annual average positive gross income of the last 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. |
· Croa: the capital requirement for operational risk.15%.
· 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) |
|
| (ii) |
|
| (iii) |
|
(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”).
| (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 (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).
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 72 business hour term as from their deposit.
The liabilities subject to these requirements are computed on the basis of the effective principal amount of the transactions, including differences in rates (either negative or positive), excluding interest accrued, past due, or to become due on the aforementioned liabilities, provided they were not credited to the account of, or made available to, third parties, and, in the case of fixed term deposit of UVA and UVIs, 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 liabilities at the end 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.month. 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); 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 entities which assets are 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 Group “A”. The following fees arise from Communication “A” 6616 dated December 20, 2018, its effectiveness will depend on the group to which the financial entity belongs, being February 2, 2019 for Group “A” andG- 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 ofnon-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 | 35 | 23 | 14 | 23 | ||||||||||||
(ii) From 30 days to 59 days | 25 | 17 | 10 | 17 | ||||||||||||
(iii) From 60 days to 89 days | 7 | 11 | 5 | 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 | ||||||||||||
| Rate % | ||||||||||||||||
| Group A and G-SIB | Group B | |||||||||||||||
Item | Pesos | Foreign Currency | Pesos | Foreign Currency | ||||||||||||
6 - Liabilities owed due to foreign facilities (not including those instrumented by term deposits, unless they are made by residents abroad linked to the entity pursuant to Section 2 of the rules on “Large Exposures to Credit Risk”, nor the acquisition of debt securities, to which they must apply the requirements provided in the previous point) | ||||||||||||||||
(i) Up to 29 days | 23 | 23 | ||||||||||||||
(ii) From 30 days to 59 days | 17 | 17 | ||||||||||||||
(iii) From 60 days to 89 days | 11 | 11 | ||||||||||||||
(iv) From 90 days to 179 days | 5 | 5 | ||||||||||||||
(v) From 180 days to 365 days | 2 | 2 | ||||||||||||||
(vi) More than 365 days | 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 | 32 | 15 | 13 | 15 | ||||||||||||
8 - Special deposits related to inflows of funds. Decree 616/2005 | 100 | 100 | ||||||||||||||
9 - Time deposits in nominative,non-transferable Peso-denominated certificates, belonging to public sector holders, with the right to demand early withdrawal in less than 30 days from its setting up | 35 | 14 | ||||||||||||||
10 - Deposits and term investments —including savings accounts and securities (including Notes)— in UVIs and UVAs, according their outsanding 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 | 0 | — | 0 | — | ||||||||||||
11- Labor Work Fund for Construction Industry Workers, denominated in UVA | 7 | 7 | ||||||||||||||
15-Deposits and fixed term investments created in the name of minors for funds they receive freely | 0 | — | 0 | — | ||||||||||||
In the case of transactions in Peso, will depend on the category under whichPesos, when the jurisdiction of the main office where the transaction takes place, according to what is established in Central Bank’s regulations regarding “Categorization of locations for financial entities”, belongs to the categories II to VI, the rates foreseen for demand deposits will be reduced by 2 percentage points and for term placements by 1 percentage point up to a minimum of zero (including point 11). In both cases, it does not include the impositions in securities.
Entities included in Group “A” and branches or subsidiaries ofG-SIB not included in that group, may integrate the period and daily requirement in Pesos with “National Treasury Bonds in Pesos at fixed rate November 2020” in up to:
| a) | 5 points of the rates described in points 1, 2 (in Pesos), 3, sections (i) and (ii) of point 5 (in Pesos) and points 7 (in Pesos) and 9. |
| b) | 2 points of the rate described in section (iii) of point 5 (in Pesos). |
Financial entities included in Group “A” and branches or subsidiaries ofG-SIB not included in that group may integrate the period and daily requirement in Pesos with LELIQ and/or NOBAC up to 13 percentage points of the rate provided in section (i) of point 5 (in Pesos) and 9, in up to 10 percentage points of the rates provided by points 1, 2 (in pesos) and 3 and section (ii) of point 5 (in Pesos) and point 7 (in Pesos).
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 inSub-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 thenon-financial private sector in Pesos in the entity of financing to MiPyMEs in the same currency; |
| 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. | tonon-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. |
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 tonon-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. |
|
| 2. |
|
| 3. |
|
Checking accounts maintained bynon-bank Minimum cashsub-account 60, authorized in the Registration and Settlement Central for Public Debt and Financial Trusts – CRYL (“Central de Registro y Liquidación de Pasivos Públicos y Fideicomisos Financieros– CRYL”) for public securities and securities issued by the Central Bank at their market value. These eligible items are subject to review by the Central Bank and may be changed in the future. Compliance with the minimum cash reserve requirement will be measured on the basis of the monthly average of the daily balances of eligible items maintained during the month 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.4. Checking accounts maintained by non-bank financial institutions with commercial banks for the purpose of meeting the minimum reserve requirement.5. 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. 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.
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, 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.
Any deficiencies in meeting the required minimum cash reserve and the daily minimum reserve in Pesos or securities or debt instruments for monetary regulation are subject to a penalty equal to twice the private banks’ Buenos Aires Deposits of Large Amount Rate (“BADLAR”) rate for deposits in Pesos for the last business day of the month.
Any deficiencies in meeting the required minimum cash reserve and the daily minimum reserve in foreign currency or securities or debt instruments for monetary regulation are subject to a penalty equal to twice the private banks’ BADLAR rate for deposits in U.S. dollars or twice the30-day U.S. dollar LIBOR rate for the last business day of the month (whichever is higher).
LELIQ global daily position
Minimum cash requirements may decrease:Pursuant to Communication “A” 6661 of the Central Bank, the LELIQ global daily position of the banks shall not exceed the larger sum between:
1. according to1) the participation in total financing toRPC of the non-financial private sector in pesosbank in the micro, smallimmediately preceding month; and medium-sized enterprise (“MiPyMES”);
2. based on cash withdrawals made through ATMs2) 100% of the entity;
3. depending on the accreditations made by the National Social Security Administration (ANSES) for the payment of social security benefits;
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 implementationmonthly average of the Consumer Promotion Programtotal deposits in Pesos, excluding the financial sector’s 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 defectnotes in Pesos issued until February 8, 2019 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.current month
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 stress test scenario with a 30 day horizon. 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”), 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.
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 10 calendar days from the date of any such change.
In addition to the LCR, there are other parameters that are used as systematic tools of control. These policies contain specific information regarding cash flows, balance structure and available underlying assets free of charge. These parameters, along with the LCR, offer basic information to evaluate the liquidity risk. The included parameters are:
·gaps in contractual terms;
·funding concentration;
·available assets free of restrictions;
·LCR for relevant currency; and
·market-related monitoring tools.
Additionally, Communication “A” 6209, as amended, sets forth that financial institutions must have an adequate stock of high-quality liquid assets (“HQLA”) free of any restrictions which can be immediately converted into cash in order to cover their liquidity needs during a period of 30 days in case of a stress scenario. Also, financial institutions must carry out their own stress tests so as to determine the liquidity level they should maintain in other scenarios, considering a period higher than 30 calendar days.
The LCR must be equal to or greater than 1 (that is to say, the stock of HQLA must not be lower than the total net cash outlays) in the absence of a financial stress scenario. If this is not the case, the LCR may fall below 1.
The Central Bank describes how to categorize a stress scenario, taking into account the following: the partial loss of retail deposits; the partial loss of wholesalenon-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 withnon-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:
Period | Ratio | |||
January 2016 to December 2016 |
| 0.70 | ||
January 2017 to December 2017 |
| 0.80 | ||
January 2018 to December 2018 |
| 0.90 | ||
As of January 2019 |
| 1.00 | ||
The LCR calculation must be made on a permanent and 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, 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 andoff-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.
The NSFR is defined as the quotient between the available amount of stable funding (MDFE) and the required amount of stable funding (MRFE):
NSFR: MDFE / MRFE
Where:
MDFE: is part of the capital and liabilities of the financial entity that are expected to be available for a period of one year; and it 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 this period, which is a function of the liquidity and residual term of the entity’s assets and of itsoff-balance sheet commitments; and it is calculated taking into account the general characteristics of the liquidity risk profile of the assets and of theoff-balance-sheet exposures of the financial institution.
The NSFR must at all times be greater than or equal to one. The Superintendency may require the entity to adopt stricter standards in order to reflect its funding risk profile, also taking into account for that purpose the evaluation that has been made of compliance with the rules on “Guidelines for risk management in financial institutions” in terms of liquidity by the entity.
Entities must observe the NSFR at all times and report it to the Superintendency quarterly through the information regime established for this purpose.
Credit Risk RegulationLeverage Ratio
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:
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Transactions with the financial sector of the country |
| Lender |
| Rated 1, 2 or 3 |
| Rated 4 or 5 |
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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
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 limit to lending rates applicablethe leverage ratio 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 regulations 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 conducted at a regulated rate, any non-compliance identified until December 31, 2015 will be addressed pursuantlinked 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; |
| • | 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 rules in effect ascompensatory interest rate that the issuer charges for the financing 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 excessoutstanding debt of the applicable maximum lending rate.
credit cards.
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 (as amended and supplemented by several regulations, including but not limited to Communication “A” 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.
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 financial users. In this regard, beginning on April 1, 2016, financial services customers who make electronic transfers will not be charged fees or commissions. Clients that do not meet such category (such as certain companies) that make transfers of funds of up to Ps.250,000 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) every day of the year.
On March 21, 2016, the Central Bank issued Communication “A” 5928, pursuant to which all savings accounts will be free, including the use of the corresponding debit card. In this regard, all existing and new savings accounts will now be free of charge. Saving accounts will not face minimum amount requirements or any charge related to their creation, maintenance or renewal. In addition, pursuant to such regulation, commissions could be increased up to 20%, but clients must be notified of such increase 60 days in advance. Furthermore, as of September 1, 2016, caps on commissions will be eliminated, but financial institutions will have to notify their customers regarding the commissions that other financial entities will be charging.
Lastly, throughThrough Communication “A” 6212, effective as of April 1, 2017, the Central Bank issued a scheme to gradually reduce, on an annual basis, credit card and debit card sales commissions. In this regard, 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 forover-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 Institutions subject to this regime are those operating as financial agents of the national, provincial, City of Buenos Aires and/or municipal governments and/or those whose participation in the deposits of thenon-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.
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 thenon-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 thenon-financial private sector deposit in Pesos for the previous calendarsix-month period, will be required to extend credit facilities equivalent to at least 14% of thenon-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 thenon-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 totalnon-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 tonon-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- ormedium-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 earlypre-payment is accepted, only debtors will be entitled to suchpre-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 thenon-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 totalnon-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 thenon-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 totalnon-financial private sector deposits in Pesos:
Months of 2018 | Percentage | |||
January |
| 16.50 | % | |
February |
| 15.00 | % | |
March |
| 13.50 | % | |
April |
| 12.00 | % | |
May |
| 10.50 | % | |
June |
| 9.00 | % | |
July |
| 7.50 | % | |
August |
| 6.00 | % | |
September |
| 4.50 | % | |
October |
| 3.00 | % | |
November |
| 1.50 | % | |
December |
| 0.00 | % | |
For financial entities whose totalnon-financial private sector deposits in Pesos is less than 0.25%, the applicable percentage to apply will be derived from the table below:
Months of 2018 | Percentage | |||
January |
| 9.17 | % | |
February |
| 8.33 | % | |
March |
| 7.50 | % | |
April |
| 6.66 | % | |
May |
| 5.83 | % | |
June |
| 5.00 | % | |
July |
| 4.17 | % | |
August |
| 3.33 | % | |
September |
| 2.50 | % | |
October |
| 1.66 | % | |
November |
| 0.83 | % | |
December |
| 0.00 | % | |
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,May 7, 2019, the value of UVI and UVA are 22.6733.47 and 22.49,35.80, respectively.
Both units are amended based on the indices published by the INDEC and the Central Bank on their websites.
Foreign Exchange System
During the first quarter of 2002, the Argentine government established certain foreign exchange 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 rates 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 ofmid-December 2015, there have been significant changes to the legal framework applicable to the foreign exchange market aiming at granting greater flexibility to foreign exchange transactions.
These changes, initially contemplated under Communication “A” 5850, Communication “A” 5899 and Communication “A” 5955, among others, allowed those entities authorized to operate in the exchange market to engage in foreign currency arbitrage 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, and for the repatriation bynon-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.
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:
pre-financing 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; financing to producers, processors or goods collectors, provided that: 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; 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 thata. 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. 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;b. 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;c. 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;i. ii.
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;
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. |
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);
| 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; |
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;
| 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; |
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;
| 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; |
i. inter-financing loans (any inter-financing loans granted with such resources must be identified);
| g. | financing for commercial and commercial portfolio clients of credits for consumption or housing -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; |
j. Central Bank bills denominated in dollars;
| 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; |
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
| 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; |
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.
| j. | inter-financing loans; |
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).
| 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 ofnon-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 tregulations 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. |
The lending capacity shall be determined for each foreign currency raised, 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 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 OECD members’ governments with a sovereign debt rating not below “AA,”“AA” certificates of time deposits in foreign institutions (rated not less than “AA”), and correspondents’ debit and credit balances. 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 business days. 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 aforementioned entities are allowed to manage their foreign currency positions, both in terms of the composition of their assets and the possibility of entering and exiting their holdings in the country, with their consequent impact on reserves.
In addition, the aforementioned Communication provided that the entities authorized to operate in foreign exchange may also carry out arbitrage and foreign exchange transactions, to the extent that the counterparty is a branch or agency abroad of local official banks, a foreign financial entity wholly or majority owned by foreign states, a foreign financial or exchange entity that is not incorporated in countries or territories pursuant to the Recommendations of the Financial Action Task Force, or a foreign company dedicated to the purchase and sale 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.
Foreign Currency Net Global Position
All assets, liabilities, commitments and other instruments and operations from financial intermediation in foreign currency and or linked to the variations of the exchange rate are included in the net global position, including cash and term transactions and other derivatives agreements foreignlinked to those concepts and to those which contemplate the variations of the exchange rate, the items that correspond to compute in the General Exchange Position, deposits in that currency, deposits in accounts maintained with the Central Bank, gold positions, monetary regulation instrumentsCentral Bank notes in foreign currency, subordinated debt in foreign currency, and debt securities issued in foreign currency.
It also includescurrency the term transactions carried out within a framework agreement regarding local markets authorized by the CNV with the settlement by difference mode, without delivery of the underlying asset traded. 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.
currency.The value of the position in foreign currencies other than Dollars shall be expressed in that currency, at the respective exchange rate published by the Central Bank.
Deductible assets for determining RPC and any included items recorded by the financial entity in its foreign branches are excluded from the ratio.
Two ratios are considered in the Foreign Currency Net Global Position:
Negative Foreign Currency Net Global Position
Pursuant to Communication “A” 6128,6529, as of January 1, 2017June 21, 2018 this position cannot exceed 25%30% 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 thisThis daily position (monthly average of the daily balance converted to Pesos at the reference exchange rate) cannot exceed 25%5% of the lesser of the RPC or the entity’s own liquid assets whichever is less (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.
As of June 18, 2018 the Central Bank allows that the Positive Foreign Currency Net Global Positionmay reach up to 30% of the RCP or the entity’s own liquid assets whichever is less, while the Total excess over the general limit originates only as a result of:
a) increase in the position in US Treasury bills in US dollars with respect to those held as of June 15, 2018, and / or
b) position in National Treasury bills in US dollars as of June 15, 2018, maintained as excess admitted to the current limit as of that date.
Excesses to such position will be subject to a charge equivalent to 1.5 times the average nominal interest rate of the Lebac in Pesosshortest term LELIQs (Central Bank bills). The charges not entered in time and form will be subject to an interest equivalent to the rate that arises from adding 50% to the rate applicable to those excesses.
In addition to the aforementioned charges, the sanctions established in Section 41 of the Financial Institutions Act may be applied (including, attention call, warning, fines, temporary or permanent disqualification for the use of the bank current account, temporary or permanent disqualification to act as promoters, founders, directors, administrators, members of the supervisory boards, trustees, liquidators, managers, auditors, partners or shareholders, and revocation of the authorization to operate).
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 OperationsSub-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
·Other assets
The calculation of such assets will be effected according to themonth-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 regulations 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 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.5Ps.7.9 million to micro-credit institutions and commercial loans of up to Ps.5Ps.7.9 million with or without guarantees. All other loans are considered commercial loans. Consumer or housing loans in excess
of Ps.5Ps.7.9 million, 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 sixsub-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, commercial loans are classified as follows:
Classification | Criteria | ||
Normal Situation | Borrowers for whom there is no doubt as to their ability to comply with their payment obligations. | ||
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. | ||
Classification | Criteria | ||
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) A borrower that has defaulted on its payment obligations under a loan for more than 180 calendar days according to the corresponding report provided by the Central Bank, which includes: (1) financial institutions liquidated by the Central Bank, (2) residual entities created as a result of the privatization of public financial institutions, or in the privatization or dissolution process, (3) financial institutions whose licenses have been revoked by the Central Bank and find themselves subject to judicial liquidation or bankruptcy proceedings and (4) trusts in which SEDESA is a beneficiary; or (b) certain kinds of foreign borrowers (including banks or other financial institutions that are not subject to the supervision of the Central Bank or similar authority of the country in which they are incorporated) that are not classified as “investment grade” by any of the rating agencies approved by the Central Bank. | ||
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, 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. | ||
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 | Borrowers who are highly unlikely to honor their financial obligations under the loan. | ||
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 Guarantees | Without Preferred Guarantees | ||||||
“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 | % | ||||
The Superintendency may require additional provisioning if it determines that the current level is inadequate.
Financial institutions are entitled to record allowances for loan losses in amounts larger than those required by the Argentine Banking GAAP. In such cases and despite the existence of certain exceptions, recording a larger allowance for a commercial loan, to the extent the recorded allowance amount falls into the next credit portfolio category set forth by Argentine Banking GAAP, shall automatically result in the corresponding debtor being recategorized accordingly.
Minimum Frequency for Classification Review
Financial institutions are required to develop procedures for the analysis of credit facilities assuring an appropriate evaluation of a debtor’s financial situation and a periodic revision of such situation taking into consideration objective and subjective conditions of all the risks taken. The procedures established have to be detailed in a manual
called “Manual of Procedures for Classification and Allowances” which must be made available for the Superintendency to review at any time. 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) greater than the lesser of 1% and Ps.19.8 million of the financial entity’s RPC for the prior month, and Ps.4.0 million, and (y) lesser than 5% of the financial entity’s RPC for the prior month. At the end of the second quarter, the full review under points (i) and (ii) should cover no less than 50% of the financial institution’s commercial loan portfolio and, if less, it shall be completed by incorporating customers (in descending order) whose total indebtedness is less than the limits described in (ii)(x) of the preceding sentence.
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” and grants 10% or more of the debtor’s total financing in the financial system. Onlyone-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 credi 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.450,000 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.1,000,000, 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 this 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
Law No. 24,485 passed on April 12, 1995, as amended, created a Deposit Insurance System, or “SSGD”, which is mandatory for bank deposits, and delegated the responsibility for organizing and implementing the system to the Central Bank. The SSGD is a supplemental protection to the privilege granted to depositors by means of Section 49 of the FIL, as mentioned above.
The SSGD has been implemented through the establishment of a Deposit Guarantee Fund, or “FGD”, managed by a private-sector corporation called 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. 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.
The SSGD covers deposits made by 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. Pursuant to Communication “A” 5943,6654, the Central Bank set the guarantee amount for these deposits as of MayMarch 1, 20162019 at Ps.450,000.
Ps.1,000,000.
Effective payment on this guaranty will be made within 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 theagreed-upon interest rate is higher than the reference interest rates periodically released by the Central Bank for time deposits and demand deposit account balances and available amounts from overdue deposits or closed accounts.
Pursuant to Communication “A” 5710, every financial institution is required to contribute to the FGD a monthly amount of 0.06% 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 privatenon-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.
Capital Markets
Commercial banks are authorized to subscribe forbuy and sell shares and debtany type of 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, 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 toghether with two directors in case of exceptional circumstances prevent the assemblies from taking place;
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, in the judgment of the Central Bank adopted by members representing the majority of the Board of Directors, with impaired solvency or liquidity or in any of the other circumstances listed in Section 44 of the FIL, must (upon request from the Central Bank and in order to avoid the revocation of its license) prepare aplan de regularización y saneamiento, or a restructuring plan. The plan must be submitted to the Central Bank on a specified date, not later than 30 calendar days after the date on which a request to that effect is made by the Central Bank. Upon the institution’s failure 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.
Furthermore, the 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 30 days if the liquidity or solvency thereof are adversely affected. Such term could be renewed for up to 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.
If per the Central Bank’s criteria a financial institution is undergoing a situation which, under the FIL, would authorize the Central Bank to revoke its license to operate as such, the Central Bank may, before considering such revocation, order a plan of 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 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
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Revocation of the License to Operate as a Financial Institution
The Central Bank may revoke the license to operate as a financial institution in case a restructuring plan fails or is not deemed feasible, or local laws and regulations are violated, or the solvency or liquidity of the financial institution is affected, or significant changes occur in the institution’s condition since the original authorization was granted, or if any decision 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.
Liquidation of Financial Institutions
As provided in the FIL, the Central Bank must notify 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 is sufficient assurance that the corporate authorities are capable of carrying out such liquidation properly.
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 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 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) 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).
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 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 for those banks benefiting 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.
Anti-Money Laundering Regulation
Anti-Money Laundering/Combating the Financing of Terrorism (“AML/CFT”)
The concept of money laundering is generally used to denote transactions intended to introduce criminal proceeds into the institutional system and thus to transform profits from illegal activities into assets of a seemingly legitimate origin.
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 Argentine Congress passed Law No. 25,246, as amended, including by Laws No. 26,087; 26,119; 26,268, 26,683, 26,734, 26,831the Argentine Capital Markets Law and 26,860 (the “Anti-Money“Anti-Money Laundering Law”), which defines money laundering as a type of crime. In addition, the law, which supersedes several sections of the Argentine criminal code established severe penalties for anyone participating in any such criminal activity and created the UIF, establishing an administrative criminal system. Following the enactment of Law No. 27, 26027,260 and its complementary Decree No. 895/2016, the UIF is now 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 theAnti-Money Laundering Law is to prevent 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 certaininformation-gathering duties to diverse private sector entities such as banks, stockbrokers, brokerage houses and insurance companies.
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 of certain provisions regarding the provisions of the AML/CFT regime set forth by theAnti-Money Laundering and Combating Financing of Terrorism Laws, as amended and supplemented by other rules and regulations, including regulations issued by the UIF, the Central Bank, the CNV and other regulatory entities. Investors are advised to consult their own legal counsel and to read theAnti-Money Laundering and Combating Financing of Terrorism Laws and its statutory regulations. The UIF is 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 defines money laundering as a crime committed by any person who exchanges, transfers, manages, sells, levies, disguises or in any other way commercializes goods obtained through a crime, with the possible consequence that the original assets or the substitute thereof appear to come from a lawful source, provided that their value exceeds Ps.300,000, whether such amount results from one or more related transactions. The penalties established are the following:
(i) imprisonment for three (3) to ten (10) years and fines of two (2) to ten (10) times the amount of the transaction;
(ii) the penalty provided in section (i) shall be increased by one third of the maximum and a half of the minimum, when (a) the person carries out the act on a regular basis or as a member of an association or gang organized with the aim of continuously committing acts of a similar nature, and (b) the person is a governmental officer who carries out the act in the course of his duties;
(iii) if the value of the assets does not exceed Ps.300,000, the penalty shall be imprisonment for six (6) months to three (3) years.
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.
Section 306 of the Argentine Criminal Code (as amended by Law No. 26,734) defines terrorism financing as a crime committed by any person who, directly or indirectly, collects or provides property or money, with the intention that they be used, or knowing that they will be used, in whole 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. The penalty is imprisonment for five to fifteen years and fines from two to ten times the amount of the transaction.
In line with internationally accepted practices, theAnti-Money Laundering 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 ofinformation-capturing functions.
According to theAnti-Money Laundering Law, the following persons, among others, are subject 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 sale 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 theAnti-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 practices of the field involved, as well as to the experience and competence 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 theAnti-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 applicableanti-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, both the Central Bank and the CNV are considered “Specific Control Organs.” In such capacity, they must cooperate with the UIF in the evaluation of the compliance with the anti—anti–money laundering proceedings by the legally bound reporting parties subject to their control. In that respect, they are entitled to supervise, monitor and inspect such entities, and if necessary, to implement certain corrective measures and actions.
Resolution 121/2011 issued by the UIF, as amended (“Resolution 121”), was applicable to financial entities subject to the FIL, 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 to prevent money laundering and terrorism financing; (b) to appoint a member 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, within the maximum 150 calendar day period, entities covered by Resolution 121 and Resolution 229 had to report any money laundering suspicious activity to the UIF within 30 calendar days as of 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 outlining the mechanisms in place to comply 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.
In August 2016, 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 that 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 guidelines of Decree No. 918/2012 described below, the UIF’s Resolution No. 29/2013 regulated (i) the method of reporting suspicious transactions of terrorism financing and the persons obligated to do so and (ii) the administrative freezing of assets 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.
On January 11, 2017, the UIF published Resolution No. 4/17 (“Resolution 4/17”), which allows the legally bound reporting parties detailed in subsections 1, 4 and 5 of section 20 of Law No. 25,246, as amended (i.e., financial entities subject to the FIL, brokers and brokerage firms, companies managing common investment funds, agents of theover-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), to apply special due diligence identification measures to foreign and national investors (which must comply with the requirements established by Resolution 4/17 to qualify) to Argentina whenat-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.
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.
The Central Bank and the CNV must also comply withanti-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, among other resolutions, Resolutions No. 1/2012 and No 92/2012, which, among other things, sets forth the Central Bank’s obligation to evaluate theanti-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 subject 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 ananti-money laundering committee, formed by a member of the Board of Directors, the officer responsible for AML/CFT matters (Oficial de Cumplimiento) and anupper-level officer for financial intermediation and foreign exchange matters (i.e., with sufficient experience and knowledge on such matters anddecision-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 of the operations carried out 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 data 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 rules 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 involve domains, jurisdictions, territories or associated states that are considered “cooperators 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 severalsmall-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 destination of funds used in operations, for which the legally bound reporting party does not have an explanation.
Furthermore, pursuant to Communication “A” 5738 (as amended and supplemented, including, without limitation, by Communication “A” 6060)6060 and Communication “A” 6399) of the Central Bank, Argentine financial institutions must comply with certain additional “know your customer policies.” In this sense, pursuant to such Communication, under no circumstance may new commercial relationships be initiated if the “know your customer policies” and the risk management legal standards have not been complied with. In addition, in respect of 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 described 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 clients in accordance with theabove-mentioned additional “know your customer policies” implemented.
The CNV Rules include a specific chapter regarding “Prevention 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 report under theAnti-Money Laundering Law, and therefore must comply with all the laws and regulations in force in connection withanti-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 theabove-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 theinter-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 of Law No. 27,260 and its supplemental Decree No. 895/2016, the UIF was granted the right to provide 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 president of the UIF as long as there is reasonable, precise and serious evidence of the commission of any of the crimes contemplated under theAnti-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 theAnti-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 121121/2011 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 terrorist financing, such as the process of customer due diligence, training programs, operations monitoring, reporting of suspicious operations andnon-compliance normative, among others.
Resolution No. 30 provides that financial entities, such as us, are required 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, reporting to the UIF the operations it considers suspicious of Money Laundering / Financing of Terrorism within 15 calendar days, as of the date on which the entity qualifies the transaction as suspicious. Likewise, the reporting date may 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 229229/2014 and amends the Resolution No. 140/2012 regarding publicly offered financial trusts, their trustees, trustors and individuals or legal entities directly or indirectly related 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.
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.
In August 2018, by means of Resolution 97/2018, the UIF approved the regulation for the Central Bank’s collaboration duty with the UIF, in order to adapt it to the new parameters established in resolution 30/2017 for supervisory procedures of financial and exchange entities.
In November 2018, the UIF issued Resolution 134/2018, which updates the list of persons that should be considered “politically exposed” (PEP) in Argentina, taking into account the functions in which they perform or have performed, as well as its relationship of closeness or affinity with third parties who perform or have performed in such functions.
On December 26, 2018, the UIF issued resolution 154/2018 modifying the existing supervision procedures, for new designs that are adapted and according to the international standards promoted by the FATF, which must be applied on compliance with risk-based approach. As a result, the UIF approved its “Risk Based Supervision Procedure of the Financial Information Unit”, repealing the provisions of Annexes II, III and IV of Resolution 104/2010, article 7 and the provisions of the Annexes V and VI of Resolution 165/2011 and of Annex III of Resolution 229/2014.
Finally, on December 28, 2018, by means of Resolution 156/2018, the amended and restated texts of Resolutions 30/2017, Resolution 21 and Resolution 28/2018, according to the terms of Decree 891/2017 of Good Practices with regard to Simplification. By virtue of Resolution 156/18, the measures, procedures and controls that the reporting parties listed in those resolutions must adopt andre-apply to manage the risk of being used by third parties with criminal purposes of money laundering and financing of the terrorism. It is also established that those reporting parties must establish a chronogram of digitization of the bundles ofpre-existing clients, taking into account the risk they present.
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, atwww.minhacienda.gob.ar, the Argentine Ministry of Public Finance, atwww.minfinanzas.gob.ar, the UIF, atwww.uif.gov.ar, the CNV, atwww.cnv.gob.ar, or the Central Bank, at www.bcra.gob.ar.www.bcra.gob.ar. The information found on such websites is not a part of this annual report.
| Item 4.C |
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 incorporation |
business | ||
Banco Supervielle S.A. | Argentina |
| ||
Cordial Compañía Financiera S.A. | Argentina |
| ||
|
| |||
|
| |||
Tarjeta Automática S.A. | Argentina |
Pesos Ya | ||
| Argentina | Supervielle Seguros | ||
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 | IOL | ||
InvertirOnline.com Argentina S.A.U. | Argentina | IOL | ||
Supervielle Broker de Seguros S.A. | 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 citizenscitizens 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.b 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 onInterest-earning Assets and Interest Paid onInterest-bearing Liabilities
The average balances of ourinterest-earning assets andinterest-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.
The following tables show average balances, interest amounts and nominal rates for ourinterest-earning assets andinterest-bearing liabilities for the years ended December 31, 2017, 20162018 and 2015.2017.
|
| 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, |
| ||||||||||||||||||||||||||||||||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| Year ended December 31, | |||||||||||||||||||||||||||||||||||
|
| Average Balance |
| Interest Earned/ |
| Average Nominal |
| Average Balance |
| Interest Earned/ |
| Average Nominal |
| Average Balance |
| Interest Earned/ |
| Average Nominal |
| 2018 | 2017 | ||||||||||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
| Average Balance | Interest Earned/(Paid) | Average Nominal Rate | Average Balance | Interest Earned/(Paid) | Average Nominal Rate | ||||||||||||||||||||||||||||||||||||||
| (in thousands of Pesos) | |||||||||||||||||||||||||||||||||||||||||||
ASSETS | |||||||||||||||||||||||||||||||||||||||||||
Interest-Earning Assets | |||||||||||||||||||||||||||||||||||||||||||
Investment Portfolio | |||||||||||||||||||||||||||||||||||||||||||
Government and Corporate Securities | 8,260,093 | 2,696,221 | 32.6 | % | 5,216,557 | 1,127,874 | 21.6 | % | |||||||||||||||||||||||||||||||||||
Pesos |
| 56,308,640 |
|
|
|
|
| 36,438,058 |
|
|
|
|
| 25,143,950 |
|
|
|
|
| 4,575,024 | 1,104,017 | 24.1 | % | 2,027,395 | 433,401 | 21.4 | % | ||||||||||||||||
Dollars |
| 13,290,502 |
|
|
|
|
| 5,029,035 |
|
|
|
|
| 1,817,214 |
|
|
|
|
| 3,685,069 | 1,592,204 | 43.2 | % | 3,189,162 | 694,473 | 21.8 | % | ||||||||||||||||
Total |
| 69,599,142 |
|
|
|
|
| 41,467,093 |
|
|
|
|
| 26,961,165 |
|
|
|
|
| ||||||||||||||||||||||||
Securities Issued by the Central Bank | 14,950,311 | 6,176,053 | 41.3 | % | 11,481,607 | 2,838,802 | 24.7 | % | |||||||||||||||||||||||||||||||||||
Pesos | 14,950,311 | 6,176,053 | 41.3 | % | 11,481,607 | 2,838,802 | 24.7 | % | |||||||||||||||||||||||||||||||||||
Dollars | — | — | 0.0 | % | — | — | 0.0 | % | |||||||||||||||||||||||||||||||||||
Total Investment Portfolio | 23,210,404 | 8,872,274 | 38.2 | % | 16,698,164 | 3,966,676 | 23.8 | % | |||||||||||||||||||||||||||||||||||
Pesos | 19,525,335 | 7,280,070 | 37.3 | % | 13,509,002 | 3,272,203 | 24.2 | % | |||||||||||||||||||||||||||||||||||
Dollars | 3,685,069 | 1,592,204 | 43.2 | % | 3,189,162 | 694,473 | 21.8 | % | |||||||||||||||||||||||||||||||||||
Loans | |||||||||||||||||||||||||||||||||||||||||||
Loans to the Financial Sector | 911,408 | 247,055 | 27.1 | % | 613,363 | 38,258 | 6.2 | % | |||||||||||||||||||||||||||||||||||
Pesos | 910,539 | 247,054 | 27.1 | % | 588,155 | 37,710 | 6.4 | % | |||||||||||||||||||||||||||||||||||
Dollars | 869 | 1 | 0.1 | % | 25,208 | 548 | 2.2 | % | |||||||||||||||||||||||||||||||||||
Overdrafts | 6,845,401 | 3,250,648 | 47.5 | % | 5,898,525 | 1,886,213 | 32.0 | % | |||||||||||||||||||||||||||||||||||
Pesos | 6,845,007 | 3,250,648 | 47.5 | % | 5,898,410 | 1,886,213 | 32.0 | % | |||||||||||||||||||||||||||||||||||
Dollars | 394 | — | 0.0 | % | 115 | — | 0.0 | % | |||||||||||||||||||||||||||||||||||
Promissory notes | 10,994,328 | 4,077,348 | 37.1 | % | 11,592,015 | 2,448,911 | 21.1 | % | |||||||||||||||||||||||||||||||||||
Pesos | 10,110,748 | 4,032,594 | 39.9 | % | 11,191,725 | 2,436,494 | 21.8 | % | |||||||||||||||||||||||||||||||||||
Dollars | 883,580 | 44,754 | 5.1 | % | 400,290 | 12,417 | 3.1 | % | |||||||||||||||||||||||||||||||||||
Mortgage loans | 4,817,047 | 1,968,843 | 40.9 | % | 808,083 | 171,077 | 21.2 | % | |||||||||||||||||||||||||||||||||||
Pesos | 4,817,047 | 1,968,843 | 40.9 | % | 808,083 | 171,077 | 21.2 | % | |||||||||||||||||||||||||||||||||||
Dollars | — | — | 0.0 | % | — | — | 0.0 | % | |||||||||||||||||||||||||||||||||||
Automobile and Other Secured Loans | 1,964,008 | 492,218 | 25.1 | % | 285,550 | 49,185 | 17.2 | % | |||||||||||||||||||||||||||||||||||
Pesos | 1,964,008 | 492,218 | 25.1 | % | 285,550 | 49,185 | 17.2 | % | |||||||||||||||||||||||||||||||||||
Dollars | — | — | 0.0 | % | — | — | 0.0 | % | |||||||||||||||||||||||||||||||||||
Personal Loans | 25,581,143 | 10,928,385 | 42.7 | % | 25,987,481 | 10,757,018 | 41.4 | % | |||||||||||||||||||||||||||||||||||
Pesos | 25,581,143 | 10,928,385 | 42.7 | % | 25,987,481 | 10,757,018 | 41.4 | % | |||||||||||||||||||||||||||||||||||
Dollars | — | — | 0.0 | % | — | — | 0.0 | % | |||||||||||||||||||||||||||||||||||
Corporate Unsecured Loans | 8,971,718 | 3,018,809 | 33.6 | % | 7,307,059 | 1,989,510 | 27.2 | % | |||||||||||||||||||||||||||||||||||
Pesos | 8,971,718 | 3,018,809 | 33.6 | % | 7,307,059 | 1,989,102 | 27.2 | % | |||||||||||||||||||||||||||||||||||
Dollars | — | — | 0.0 | % | — | 408 | 0.0 | % | |||||||||||||||||||||||||||||||||||
Credit Card Loans | 11,053,433 | 3,412,689 | 30.9 | % | 11,244,456 | 3,285,212 | 29.2 | % | |||||||||||||||||||||||||||||||||||
Pesos | 10,695,923 | 3,412,636 | 31.9 | % | 10,808,496 | 3,285,110 | 30.4 | % | |||||||||||||||||||||||||||||||||||
Dollars | 357,510 | 53 | 0.0 | % | 435,960 | 102 | 0.0 | % | |||||||||||||||||||||||||||||||||||
Receivables from Financial Leases | 4,096,279 | 921,149 | 22.5 | % | 3,539,773 | 742,115 | 21.0 | % | |||||||||||||||||||||||||||||||||||
Pesos | 3,039,890 | 833,279 | 27.4 | % | 3,194,969 | 710,661 | 22.2 | % | |||||||||||||||||||||||||||||||||||
Dollars | 1,056,389 | 87,870 | 8.3 | % | 344,804 | 31,454 | 9.1 | % | |||||||||||||||||||||||||||||||||||
Total Loans excl. Foreign trade and U.S.$.loans | 75,234,766 | 28,317,144 | 37.6 | % | 67,276,303 | 21,367,499 | 31.8 | % | |||||||||||||||||||||||||||||||||||
Pesos | 72,936,023 | 28,184,466 | 38.6 | % | 66,069,927 | 21,322,570 | 32.3 | % | |||||||||||||||||||||||||||||||||||
Dollars | 2,298,743 | 132,678 | 5.8 | % | 1,206,376 | 44,929 | 3.7 | % | |||||||||||||||||||||||||||||||||||
Foreign Trade Loans and U.S.$.loans | 21,514,371 | 1,169,104 | 5.4 | % | 13,049,814 | 584,527 | 4.5 | % | |||||||||||||||||||||||||||||||||||
Pesos | — | — | 0.0 | % | — | — | 0.0 | % | |||||||||||||||||||||||||||||||||||
Dollars | 21,514,371 | 1,169,104 | 5.4 | % | 13,049,814 | 584,527 | 4.5 | % | |||||||||||||||||||||||||||||||||||
Total Loans | 96,749,137 | 29,486,248 | 30.5 | % | 80,326,118 | 21,952,026 | 27.3 | % | |||||||||||||||||||||||||||||||||||
| Year ended December 31, | ||||||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||||||
| Average Balance | Interest Earned/(Paid) | Average Nominal Rate | Average Balance | Interest Earned/(Paid) | Average Nominal Rate | |||||||||||||||||||
| (in thousands of Pesos) | ||||||||||||||||||||||||
Pesos | 72,936,023 | 28,184,466 | 38.6 | % | 66,069,927 | 21,322,570 | 32.3 | % | ||||||||||||||||
Dollars | 23,813,114 | 1,301,782 | 5.5 | % | 14,256,191 | 629,456 | 4.4 | % | ||||||||||||||||
Repo transactions | 163,920 | 50,931 | 31.1 | % | — | — | 0.0 | % | ||||||||||||||||
Pesos | 163,920 | 47,720 | 29.1 | % | — | — | 0.0 | % | ||||||||||||||||
Dollars | — | 3,211 | 0.0 | % | — | — | 0.0 | % | ||||||||||||||||
TotalInterest-Earning Assets | 120,123,460 | 38,409,453 | 32.0 | % | 97,024,282 | 25,918,702 | 26.7 | % | ||||||||||||||||
Pesos | 92,625,278 | 35,512,256 | 38.3 | % | 79,578,929 | 24,594,773 | 30.9 | % | ||||||||||||||||
Dollars | 27,498,182 | 2,897,197 | 10.5 | % | 17,445,353 | 1,323,929 | 7.6 | % | ||||||||||||||||
Non Interest-Earning Assets | ||||||||||||||||||||||||
Cash and due from banks | 27,620,580 | 19,626,950 | ||||||||||||||||||||||
Pesos | 15,019,635 | 11,498,829 | ||||||||||||||||||||||
Dollars | 12,600,945 | 8,128,121 | ||||||||||||||||||||||
Unlisted equity investments | — | 2,856 | ||||||||||||||||||||||
Pesos | — | 2,856 | ||||||||||||||||||||||
Dollars | — | — | ||||||||||||||||||||||
Premises and equipment and miscellaneous and intangible assets and unallocated items | 3,755,094 | 2,645,563 | ||||||||||||||||||||||
Pesos | 3,755,094 | 2,645,563 | ||||||||||||||||||||||
Dollars | — | — | ||||||||||||||||||||||
Allowance for loan losses | (5,363,116 | ) | (4,270,594 | ) | ||||||||||||||||||||
Pesos | (5,076,534 | ) | (4,116,581 | ) | ||||||||||||||||||||
Dollars | (286,582 | ) | (154,013 | ) | ||||||||||||||||||||
Other assets | 9,343,163 | 11,490,390 | ||||||||||||||||||||||
Pesos | 8,291,813 | 10,264,250 | ||||||||||||||||||||||
Dollars | 1,051,350 | 1,226,140 | ||||||||||||||||||||||
Total Non Interest-Earning Assets | 35,355,722 | 29,495,164 | ||||||||||||||||||||||
Pesos | 21,990,009 | 20,294,916 | ||||||||||||||||||||||
Dollars | 13,365,713 | 9,200,248 | ||||||||||||||||||||||
Total Assets | 155,479,182 | 126,519,446 | ||||||||||||||||||||||
Pesos | 114,615,287 | 99,873,845 | ||||||||||||||||||||||
Dollars | 40,863,895 | 26,645,601 | ||||||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||
Interest-Bearing Liabilities | ||||||||||||||||||||||||
Time Deposits | 28,046,710 | 6,495,145 | 23.2 | % | 25,117,980 | 3,761,294 | 15.0 | % | ||||||||||||||||
Pesos | 23,581,660 | 6,439,969 | 27.3 | % | 22,721,982 | 3,747,864 | 16.5 | % | ||||||||||||||||
Dollars | 4,465,050 | 55,176 | 1.2 | % | 2,395,998 | 13,430 | 0.6 | % | ||||||||||||||||
Borrowings from Other Financial Institutions and Unsub Negotiable Obligations | 24,117,675 | 5,482,644 | 22.7 | % | 16,209,828 | 3,148,650 | 19.4 | % | ||||||||||||||||
Pesos | 17,523,298 | 5,226,658 | 29.8 | % | 14,940,874 | 3,109,633 | 20.8 | % | ||||||||||||||||
Dollars | 6,594,377 | 255,986 | 3.9 | % | 1,268,954 | 39,017 | 3.1 | % | ||||||||||||||||
Subordinated Loans and Negotiable Obligations | 1,363,196 | 86,809 | 6.4 | % | 2,384,695 | 211,436 | 8.9 | % | ||||||||||||||||
Pesos | — | — | 0.0 | % | — | — | 0.0 | % | ||||||||||||||||
Dollars | 1,363,196 | 86,809 | 6.4 | % | 2,384,695 | 211,436 | 8.9 | % | ||||||||||||||||
TotalInterest-Bearing Liabilities | 53,527,582 | 12,064,598 | 22.5 | % | 43,712,502 | 7,121,380 | 16.3 | % | ||||||||||||||||
Pesos | 41,104,958 | 11,666,627 | 28.4 | % | 37,662,856 | 6,857,497 | 18.2 | % | ||||||||||||||||
Dollars | 12,422,624 | 397,971 | 3.2 | % | 6,049,646 | 263,883 | 4.4 | % | ||||||||||||||||
Low andNon-Interest Bearing Deposits | ||||||||||||||||||||||||
Savings Accounts | 25,694,934 | 41,303 | 0.2 | % | 23,212,489 | 6,026 | 0.0 | % | ||||||||||||||||
| Year ended December 31, | ||||||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||||||
| Average Balance | Interest Earned/(Paid) | Average Nominal Rate | Average Balance | Interest Earned/(Paid) | Average Nominal Rate | |||||||||||||||||||
| (in thousands of Pesos) | ||||||||||||||||||||||||
Pesos | 14,282,003 | 38,278 | 0.3 | % | 16,255,353 | 4,200 | 0.0 | % | ||||||||||||||||
Dollars | 11,412,931 | 3,025 | 0.0 | % | 6,957,136 | 1,826 | 0.0 | % | ||||||||||||||||
Special Checking Accounts | 22,123,994 | 5,087,949 | 23.0 | % | 9,111,677 | 1,011,062 | 11.1 | % | ||||||||||||||||
Pesos | 16,894,587 | 5,067,303 | 30.0 | % | 7,483,676 | 1,005,378 | 13.4 | % | ||||||||||||||||
Dollars | 5,229,407 | 20,646 | 0.4 | % | 1,628,001 | 5,684 | 0.3 | % | ||||||||||||||||
Checking Accounts | 19,293,418 | 17,636,472 | ||||||||||||||||||||||
Pesos | 11,254,264 | 12,139,339 | ||||||||||||||||||||||
Dollars | 8,039,154 | 5,497,133 | ||||||||||||||||||||||
Other Liabilities | 15,408,480 | 16,677,213 | ||||||||||||||||||||||
Pesos | 13,811,849 | 13,009,251 | ||||||||||||||||||||||
Dollars | 1,596,631 | 3,667,962 | ||||||||||||||||||||||
Non-Controlling Interest Result | 280,131 | (45,444 | ) | |||||||||||||||||||||
Pesos | 280,131 | (45,444 | ) | |||||||||||||||||||||
Dollars | — | — | ||||||||||||||||||||||
Stockholders’ equity | 19,150,644 | 16,214,538 | ||||||||||||||||||||||
Pesos | 19,150,644 | 16,214,538 | ||||||||||||||||||||||
Dollars | — | — | ||||||||||||||||||||||
Total Low andNon-Interest Bearing Deposits | 101,951,601 | 82,806,944 | ||||||||||||||||||||||
Pesos | 75,673,478 | 65,056,712 | ||||||||||||||||||||||
Dollars | 26,278,123 | 17,750,232 | ||||||||||||||||||||||
Total Liabilities and Stockholders’ equity | 155,479,182 | 126,519,446 | ||||||||||||||||||||||
Pesos | 116,778,435 | 102,719,568 | ||||||||||||||||||||||
Dollars | 38,700,747 | 23,799,878 | ||||||||||||||||||||||
As stated above under “Presentation of Financial and Other Information”, we have prepared our audited consolidated financial statements for 2018 and 2017 under IFRS. Data for past years has been prepared under prior accounting framework, which is not comparable with data prepared under IFRS.
| Year ended December 31, 2016 | ||||||||||||
| Average Balance | Interest Earned/ (Paid) | Average Nominal Rate | ||||||||||
ASSETS | ||||||||||||
Interest-earning assets | ||||||||||||
Investment portfolio | ||||||||||||
Government and corporate securities | ||||||||||||
Pesos | 165,383 | 33,260 | 20.1 | % | ||||||||
Dollars | 597,712 | 145,409 | 24.3 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 763,096 | 178,669 | 23.4 | % | ||||||||
|
|
|
|
|
| |||||||
Participation in our securitization trusts | ||||||||||||
Pesos | 1,277,081 | 362,241 | 28.4 | % | ||||||||
Dollars | — | — | 0.0 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 1,277,081 | 362,241 | 28.4 | % | ||||||||
|
|
|
|
|
| |||||||
Securities issued by the Central Bank | ||||||||||||
Pesos | 1,846,240 | 673,993 | 36.5 | % | ||||||||
Dollars | 106,696 | 49,838 | 46.7 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 1,952,936 | 723,831 | 37.1 | % | ||||||||
|
|
|
|
|
| |||||||
Total Investment Portfolio | ||||||||||||
Pesos | 3,288,704 | 1,069,494 | 32.5 | % | ||||||||
Dollars | 704,408 | 195,247 | 27.7 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 3,993,113 | 1,264,742 | 31.7 | % | ||||||||
|
|
|
|
|
| |||||||
(1) Includes senior and subordinated bonds and participation certificates.
(2) Consists of unsecured checks and accounts receivable deriving from factoring transactions.
| Year ended December 31, 2016 | ||||||||||||
| Average Balance | Interest Earned/ (Paid) | Average Nominal Rate | ||||||||||
Loans and financings: | ||||||||||||
Promissory notes | ||||||||||||
Pesos | 3,811,989 | 1,086,442 | 28.5 | % | ||||||||
Dollars | 25,772 | 882 | 3.4 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 3,837,761 | 1,087,324 | 28.3 | % | ||||||||
|
|
|
|
|
| |||||||
Overdrafts | ||||||||||||
Pesos | 2,509,796 | 996,571 | 39.7 | % | ||||||||
|
| |||||||||||
Dollars | — | 0.0 | % | |||||||||
|
|
|
|
|
| |||||||
Total | 2,509,796 | 996,571 | 39.7 | % | ||||||||
|
|
|
|
|
| |||||||
Loans to the financial sector | ||||||||||||
Pesos | 240,611 | 73,754 | 30.7 | % | ||||||||
Dollars | — | — | 0.0 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 240,611 | 73,754 | 30.7 | % | ||||||||
|
|
|
|
|
| |||||||
Mortgage loans | ||||||||||||
Pesos | 40,766 | 8,999 | 22.1 | % | ||||||||
Dollars | — | — | 0.0 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 40,766 | 8,999 | 22.1 | % | ||||||||
|
|
|
|
|
| |||||||
Automobile and other secured loans | ||||||||||||
Pesos | 78,980 | 17,271 | 21.9 | % | ||||||||
Dollars | — | — | 0.0 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 78,980 | 17,271 | 21.9 | % | ||||||||
|
|
|
|
|
| |||||||
Corporate unsecured loans | ||||||||||||
Pesos | 2,418,252 | 819,097 | 33.9 | % | ||||||||
Dollars | — | — | 0.0 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 2,418,252 | 819,097 | 33.9 | % | ||||||||
|
|
|
|
|
| |||||||
Personal loans | ||||||||||||
Pesos | 7,884,433 | 3,631,979 | 46.1 | % | ||||||||
Dollars | — | — | 0.0 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 7,884,433 | 3,631,979 | 46.1 | % | ||||||||
|
|
|
|
|
| |||||||
Credit Card Loans | ||||||||||||
Pesos | 5,399,079 | 1,733,539 | 32.1 | % | ||||||||
Dollars | 145,684 | 67 | 0.0 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 5,544,763 | 1,733,606 | 31.3 | % | ||||||||
|
|
|
|
|
| |||||||
Receivables from financial leases | ||||||||||||
Pesos | 1,310,083 | 359,116 | 27.4 | % | ||||||||
Dollars | 7,606 | 471 | 6.2 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 1,317,689 | 359,587 | 27.3 | % | ||||||||
|
|
|
|
|
| |||||||
Total Loans excl. Foreign trade and U.S.$.loans | ||||||||||||
Pesos | 23,693,989 | 8,726,768 | 36.8 | % | ||||||||
Dollars | 179,062 | 1,420 | 0.8 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 23,873,051 | 8,728,188 | 36.6 | % | ||||||||
|
|
|
|
|
| |||||||
Foreign Trade Loans and U.S.$.loans | ||||||||||||
Pesos | — | — | 0.0 | % | ||||||||
Dollars | 2,375,825 | 130,047 | 5.5 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 2,375,825 | 130,047 | 5.5 | % | ||||||||
|
|
|
|
|
| |||||||
Total Loans | ||||||||||||
Pesos | 23,693,989 | 8,726,768 | 36.8 | % | ||||||||
Dollars | 2,554,887 | 131,467 | 5.1 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 26,248,876 | 8,858,235 | 33.7 | % | ||||||||
|
|
|
|
|
| |||||||
Other receivables from financial transactions | ||||||||||||
Pesos | 692,438 | 218,755 | 31.6 | % | ||||||||
Dollars | 1,625 | 187 | 11.5 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 694,063 | 218,942 | 31.5 | % | ||||||||
|
|
|
|
|
| |||||||
Totalinterest-earning assets | ||||||||||||
Pesos | 27,675,131 | 10,015,018 | 36.2 | % | ||||||||
Dollars | 3,260,920 | 326,901 | 10.0 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 30,936,051 | 10,341,919 | 33.4 | % | ||||||||
|
|
|
|
|
| |||||||
(3) Includes overnight deposit and unlisted corporate bonds.
| Year ended December 31, 2016 | ||||||||||||
| Average Balance | Interest Earned/ (Paid) | Average Nominal Rate | ||||||||||
Noninterest-earning assets | ||||||||||||
Cash and due from banks | ||||||||||||
Pesos | 4,804,565 | |||||||||||
Dollars | 2,149,089 | |||||||||||
|
| |||||||||||
Total | 6,953,654 | |||||||||||
|
| |||||||||||
Unlisted equity Investments | ||||||||||||
Pesos | 7,806 | |||||||||||
Dollars | 1 | |||||||||||
|
| |||||||||||
Total | 7,807 | |||||||||||
|
| |||||||||||
Premises and equipment and miscellaneous and intangible assets and unallocated items | ||||||||||||
Pesos | 1,022,713 | |||||||||||
Dollars | — | |||||||||||
|
| |||||||||||
Total | 1,022,713 | |||||||||||
|
| |||||||||||
Allowance for loan losses | ||||||||||||
Pesos | (705,117 | ) | ||||||||||
Dollars | (30,459 | ) | ||||||||||
|
| |||||||||||
Total | (735,576 | ) | ||||||||||
|
| |||||||||||
Other assets | ||||||||||||
Pesos | 2,929,059 | |||||||||||
Dollars | 353,385 | |||||||||||
|
| |||||||||||
Total | 3,282,444 | |||||||||||
|
| |||||||||||
Total noninterest-earning assets | ||||||||||||
Pesos | 8,059,026 | |||||||||||
Dollars | 2,472,016 | |||||||||||
|
| |||||||||||
Total | 10,531,042 | |||||||||||
|
| |||||||||||
Total Assets | ||||||||||||
Pesos | 35,734,156 | |||||||||||
Dollars | 5,732,937 | |||||||||||
|
| |||||||||||
Total | 41,467,093 | |||||||||||
|
| |||||||||||
LIABILITIES | ||||||||||||
Interest-bearing liabilities | ||||||||||||
Special checking accounts | ||||||||||||
Pesos | — | — | 0.0 | % | ||||||||
Dollars | — | — | 0.0 | % | ||||||||
|
|
|
|
|
| |||||||
Total | — | — | 0.0 | % | ||||||||
|
|
|
|
|
| |||||||
Time deposits | ||||||||||||
Pesos | 11,646,092 | 3,071,579 | 26.4 | % | ||||||||
Dollars | 806,650 | 10,282 | 1.3 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 12,452,742 | 3,081,861 | 24.7 | % | ||||||||
|
|
|
|
|
| |||||||
Borrowings from other financial institutions and unsubordinated negotiable obligations | ||||||||||||
Pesos | 2,332,394 | 734,321 | 31.5 | % | ||||||||
Dollars | 217,832 | 7,390 | 3.4 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 2,550,226 | 741,711 | 29.1 | % | ||||||||
|
|
|
|
|
| |||||||
Subordinated Loans and negotiable obligations | ||||||||||||
Pesos | — | — | 0.0 | % | ||||||||
Dollars | 1,285,162 | 128,027 | 10.0 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 1,285,162 | 128,027 | 10.0 | % | ||||||||
|
|
|
|
|
| |||||||
Totalinterest-bearing liabilities | ||||||||||||
Pesos | 13,973,486 | 3,805,899 | 27.2 | % | ||||||||
Dollars | 2,309,644 | 145,699 | 6.3 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 16,288,130 | 3,951,598 | 24.3 | % | ||||||||
|
|
|
|
|
| |||||||
Low andnon-interest bearing liabilities and stockholders’ equity | ||||||||||||
Savings accounts | ||||||||||||
Pesos | 6,192,384 | 740 | 0.1 | % | ||||||||
Dollars | 1,238,934 | 3,899 | 0.1 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 7,431,318 | 4,639 | 0.1 | % | ||||||||
|
|
|
|
|
| |||||||
Demand deposits | ||||||||||||
Pesos | 6,541,618 | |||||||||||
Dollars | 601,764 | |||||||||||
|
| |||||||||||
Total | 7,143,382 | |||||||||||
|
| |||||||||||
| Year ended December 31, 2016 | ||||||||||||
| Average Balance | Interest Earned/ (Paid) | Average Nominal Rate | ||||||||||
Special checking accounts | ||||||||||||
Pesos | 1,749,023 | |||||||||||
Dollars | — | |||||||||||
Total | 1,749,023 | |||||||||||
Other liabilities | ||||||||||||
Pesos | 4,618,267 | |||||||||||
Dollars | 878,693 | |||||||||||
Total | 5,496,961 | |||||||||||
Non-controlling interest result | ||||||||||||
Pesos | 120,803 | |||||||||||
Dollars | — | |||||||||||
Total | 120,803 | |||||||||||
Stockholders’ equity | ||||||||||||
Pesos | 4,986,499 | |||||||||||
Dollars | — | |||||||||||
Total | 4,986,499 | |||||||||||
Total low andnon-interest- Bearing Deposits | ||||||||||||
Pesos | 22,459,572 | |||||||||||
Dollars | 2,719,391 | |||||||||||
Total | 25,178,963 | |||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Pesos | 36,438,058 | |||||||||||
Dollars | 5,029,035 | |||||||||||
Total | 41,467,093 | |||||||||||
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 ofinterest-earning assets andinterest-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, 20172018 compared to the year ended December 31, 2016 and for the year ended December 31, 2016 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 averageinterest-earning assets and averageinterest-bearing liabilities. We have allocated variances caused by changes in both volume and rate to volume.
|
| 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 |
| ||||||||||
|
| 2017/2016 |
| 2016/2015 |
| ||||||||
|
| Increase (Decrease) Due to Changes in |
| Increase (Decrease) Due to Changes in |
| ||||||||
|
| Volume |
| Rate |
| Net Change |
| Volume |
| Rate |
| Net Change |
|
Receivables from financial leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 114,948 |
| (33,253 | ) | 81,695 |
| 130,449 |
| 21,370 |
| 151,820 |
|
Dollars |
| 13,483 |
| 86 |
| 13,569 |
| 288 |
| 68 |
| 356 |
|
Total |
| 128,430 |
| (33,167 | ) | 95,264 |
| 130,737 |
| 21,438 |
| 152,176 |
|
Total Loans excl. Foreign Trade and U$S loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 3,932,119 |
| (445,929 | ) | 3,486,190 |
| 2,498,981 |
| 541,315 |
| 3,040,296 |
|
Dollars |
| 16,449 |
| 4,602 |
| 21,051 |
| 630 |
| (224 | ) | 406 |
|
Total |
| 3,948,568 |
| (441,327 | ) | 3,507,241 |
| 2,499,611 |
| 541,091 |
| 3,040,702 |
|
Foreign Trade Loans and U$S Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| — |
| — |
| — |
| — |
| — |
| — |
|
Dollars |
| 242,255 |
| (11,190 | ) | 231,065 |
| 94,696 |
| (7,624 | ) | 87,072 |
|
Total |
| 242,255 |
| (11,190 | ) | 231,065 |
| 94,696 |
| (7,624 | ) | 87,072 |
|
Total Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 3,932,119 |
| (445,929 | ) | 3,486,190 |
| 2,498,981 |
| 541,315 |
| 3,040,296 |
|
Dollars |
| 259,317 |
| (7,201 | ) | 252,116 |
| 93,107 |
| (5,629 | ) | 87,478 |
|
Total |
| 4,191,437 |
| (453,130 | ) | 3,738,306 |
| 2,592,088 |
| 535,686 |
| 3,127,774 |
|
Other receivables from financial transactions(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 226,720 |
| (53,542 | ) | 173,178 |
| 168,287 |
| 15,304 |
| 183,591 |
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 5,044,306 |
| (906,246 | ) | 4,138,060 |
| 3,022,461 |
| 716,285 |
| 3,738,747 |
|
Dollars |
| 544,543 |
| (50,061 | ) | 494,482 |
| 206,917 |
| (61,853 | ) | 145,064 |
|
Total |
| 5,588,849 |
| (956,307 | ) | 4,632,542 |
| 3,229,378 |
| 654,433 |
| 3,883,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
Special checking accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 633,945 |
| — |
| 633,945 |
| — |
| — |
| — |
|
Dollars |
| 3,751 |
| — |
| 3,751 |
| — |
| — |
| — |
|
Total |
| 637,696 |
| — |
| 637,696 |
| — |
| — |
| — |
|
Time deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 168,673 |
| (940,576 | ) | (771,903 | ) | 711,072 |
| 138,566 |
| 849,638 |
|
Dollars |
| 3,280 |
| (5,180 | ) | (1,900 | ) | 5,981 |
| 1,494 |
| 7,475 |
|
Total |
| 171,953 |
| (945,756 | ) | (773,803 | ) | 717,052 |
| 140,060 |
| 857,113 |
|
Borrowings from other financial institutions and unsubordinated negotiable obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
Total |
| 1,262,946 |
| (144,559 | ) | 1,118,387 |
| 255,854 |
| 62,181 |
| 318,035 |
|
Subordinated Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| — |
| — |
| — |
| — |
| — |
| — |
|
Dollars |
| 3,294 |
| (3,084 | ) | 210 |
| 48,323 |
| (1,578 | ) | 46,745 |
|
Total |
| 3,294 |
| (3,084 | ) | 210 |
| 48,323 |
| (1,578 | ) | 46,745 |
|
Total interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 1,987,972 |
| (1,024,497 | ) | 963,475 |
| 952,501 |
| 210,775 |
| 1,163,276 |
|
Dollars |
| 80,639 |
| (61,623 | ) | 19,016 |
| 66,254 |
| (7,638 | ) | 58,616 |
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 800 |
| (2,130 | ) | (1,330 | ) | 992 |
| (1,649 | ) | (657 | ) |
Dollars |
| 768 |
| (375 | ) | 393 |
| 569 |
| (103 | ) | 466 |
|
Total |
| 1,568 |
| (2,505 | ) | (937 | ) | 1,561 |
| (1,752 | ) | (191 | ) |
| Year ended December 31, | ||||||||||||
| 2018/2017 | ||||||||||||
| Increase (Decrease) Due to Changes in | ||||||||||||
| Volume | Rate | Net Change | ||||||||||
| (in thousands of Pesos) | ||||||||||||
ASSETS | ||||||||||||
Interest-Earning Assets | ||||||||||||
Investment Portfolio | ||||||||||||
Government and Corporate Securities | 829,045 | 739,303 | 1,568,348 | |||||||||
Pesos | 614,779 | 55,838 | 670,617 | |||||||||
Dollars | 214,266 | 683,465 | 897,731 | |||||||||
Securities Issued by the Central Bank | 1,432,940 | 1,904,311 | 3,337,251 | |||||||||
Pesos | 1,432,940 | 1,904,311 | 3,337,251 | |||||||||
Dollars | — | — | — | |||||||||
Total Investment Portfolio | 2,457,471 | 2,448,127 | 4,905,598 | |||||||||
Pesos | 2,243,205 | 1,764,662 | 4,007,867 | |||||||||
Dollars | 214,266 | 683,465 | 897,731 | |||||||||
| Year ended December 31, | ||||||||||||
| 2018/2017 | ||||||||||||
| Increase (Decrease) Due to Changes in | ||||||||||||
| Volume | Rate | Net Change | ||||||||||
| (in thousands of Pesos) | ||||||||||||
Loans | ||||||||||||
Loans to the Financial Sector | 87,444 | 121,354 | 208,798 | |||||||||
Pesos | 87,472 | 121,873 | 209,345 | |||||||||
Dollars | (28 | ) | (519 | ) | (547 | ) | ||||||
Overdrafts | 449,533 | 914,902 | 1,364,435 | |||||||||
Pesos | 449,533 | 914,902 | 1,364,435 | |||||||||
Dollars | — | — | — | |||||||||
Promissory Notes | (406,660 | ) | 2,035,098 | 1,628,438 | ||||||||
Pesos | (431,139 | ) | 2,027,240 | 1,596,101 | ||||||||
Dollars | 24,479 | 7,858 | 32,337 | |||||||||
Mortgage loans | 1,638,560 | 159,206 | 1,797,766 | |||||||||
Pesos | 1,638,560 | 159,206 | 1,797,766 | |||||||||
Dollars | — | — | — | |||||||||
Automobile and Other Secured Loans | 420,654 | 22,379 | 443,033 | |||||||||
Pesos | 420,654 | 22,379 | 443,033 | |||||||||
Dollars | — | — | — | |||||||||
Personal Loans | (173,589 | ) | 344,956 | 171,367 | ||||||||
Pesos | (173,589 | ) | 344,956 | 171,367 | ||||||||
Dollars | — | — | — | |||||||||
Corporate Unsecured Loans | 560,125 | 469,582 | 1,029,707 | |||||||||
Pesos | 560,125 | 469,582 | 1,029,707 | |||||||||
Dollars | — | — | — | |||||||||
Credit Card Loans | (35,930 | ) | 163,406 | 127,476 | ||||||||
Pesos | (35,918 | ) | 163,443 | 127,525 | ||||||||
Dollars | (12 | ) | (37 | ) | (49 | ) | ||||||
Receivables from Financial Leases | 16,680 | 162,353 | 179,033 | |||||||||
Pesos | (42,509 | ) | 165,127 | 122,618 | ||||||||
Dollars | 59,189 | (2,774 | ) | 56,415 | ||||||||
Total Loans excl. Foreign trade and U.S.$.loans | 2,716,296 | 4,233,351 | 6,949,647 | |||||||||
Pesos | 2,653,247 | 4,208,650 | 6,861,897 | |||||||||
Dollars | 63,049 | 24,701 | 87,750 | |||||||||
Foreign Trade Loans and U.S.$.loans | 459,969 | 124,607 | 584,576 | |||||||||
Pesos | — | — | — | |||||||||
Dollars | 459,969 | 124,607 | 584,576 | |||||||||
Total Loans | 3,175,692 | 4,358,532 | 7,534,224 | |||||||||
Pesos | 2,653,247 | 4,208,650 | 6,861,897 | |||||||||
Dollars | 522,445 | 149,882 | 672,327 | |||||||||
Other Receivables from Financial Transaction | — | — | — | |||||||||
Pesos | — | — | — | |||||||||
Dollars | — | — | — | |||||||||
Repo transactions | 47,720 | — | 47,720 | |||||||||
Pesos | 47,720 | — | 47,720 | |||||||||
Dollars | — | — | — | |||||||||
TotalInterest-Earning Assets | 6,061,093 | 6,429,658 | 12,490,751 | |||||||||
Pesos | 5,001,931 | 5,915,552 | 10,917,483 | |||||||||
Dollars | 1,059,162 | 514,106 | 1,573,268 | |||||||||
LIABILITIES | ||||||||||||
Interest-Bearing Liabilities | ||||||||||||
Time Deposits | 260,339 | 2,473,512 | 2,733,851 | |||||||||
Pesos | 234,771 | 2,457,334 | 2,692,105 | |||||||||
Dollars | 25,568 | 16,178 | 41,746 | |||||||||
Borrowings from Other Financial Institutions and Unsub Negotiable Obligations | 976,984 | 1,357,009 | 2,333,993 | |||||||||
Pesos | 770,257 | 1,346,767 | 2,117,024 | |||||||||
Dollars | 206,727 | 10,242 | 216,969 | |||||||||
| Year ended December 31, | ||||||||||||
| 2018/2017 | ||||||||||||
| Increase (Decrease) Due to Changes in | ||||||||||||
| Volume | Rate | Net Change | ||||||||||
| (in thousands of Pesos) | ||||||||||||
Subordinated Loans and Negotiable Obligations | (65,050 | ) | (59,577 | ) | (124,627 | ) | ||||||
Pesos | — | — | — | |||||||||
Dollars | (65,050 | ) | (59,577 | ) | (124,627 | ) | ||||||
TotalInterest-Bearing Liabilities | 1,181,120 | 3,762,098 | 4,943,218 | |||||||||
Pesos | 976,955 | 3,832,174 | 4,809,129 | |||||||||
Dollars | 204,165 | (70,076 | ) | 134,089 | ||||||||
Low andNon-Interest Bearing Deposits | ||||||||||||
Savings Accounts | (4,108 | ) | 39,385 | 35,277 | ||||||||
Pesos | (5,289 | ) | 39,367 | 34,078 | ||||||||
Dollars | 1,181 | 18 | 1,199 | |||||||||
Special Checking Accounts | 2,836,895 | 1,239,992 | 4,076,887 | |||||||||
Pesos | 2,822,676 | 1,239,249 | 4,061,925 | |||||||||
Dollars | 14,219 | 743 | 14,962 | |||||||||
As stated above under “Presentation of Financial and Other Information”, we have prepared our audited consolidated financial statements for 2018 and 2017 under IFRS. Data for past years has been prepared under prior accounting framework, which is not comparable with data prepared under IFRS.
| Year ended December 31, | ||||||||||||
| 2017/2016 | ||||||||||||
| Increase (Decrease) Due to Changes in | ||||||||||||
| Volume | Rate | Net Change | ||||||||||
| (in thousands of Pesos) | ||||||||||||
ASSETS | ||||||||||||
Investment portfolio | ||||||||||||
Government and corporate securities | ||||||||||||
Pesos | 38,281 | 9,596 | 47,877 | |||||||||
Dollars | 291,144 | 1,007 | 292,152 | |||||||||
|
|
|
|
|
| |||||||
Total | 329,425 | 10,603 | 340,029 | |||||||||
|
|
|
|
|
| |||||||
Participation in our securitization trusts | ||||||||||||
Pesos | (83,523 | ) | (130,091 | ) | (213,614 | ) | ||||||
Dollars | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | (83,523 | ) | (130,091 | ) | (213,614 | ) | ||||||
|
|
|
|
|
| |||||||
Securities issued by the Central Bank | ||||||||||||
Pesos | 857,663 | (213,234 | ) | 644,429 | ||||||||
Dollars | — | (49,838 | ) | (49,838 | ) | |||||||
|
|
|
|
|
| |||||||
Total | 857,663 | (263,072 | ) | 594,591 | ||||||||
|
|
|
|
|
| |||||||
Total Investment Portflolio | ||||||||||||
Pesos | 754,320 | (275,628 | ) | 478,692 | ||||||||
Dollars | 265,128 | (22,814 | ) | 242,314 | ||||||||
|
|
|
|
|
| |||||||
Total | 1,019,447 | (298,442 | ) | 721,005 | ||||||||
|
|
|
|
|
| |||||||
Loans and financings: | ||||||||||||
Promissory notes | ||||||||||||
Pesos | 536,222 | (227,042 | ) | 309,180 | ||||||||
Dollars | 7,124 | 57 | 7,181 | |||||||||
|
|
|
|
|
| |||||||
Total | 543,347 | (226,986 | ) | 316,361 | ||||||||
|
|
|
|
|
| |||||||
(1) Includes senior and subordinated bonds and participation certificates.
(2) Consists of unsecured checks and accounts receivable deriving from factoring transactions.
| Year ended December 31, | ||||||||||||
| 2017/2016 | ||||||||||||
| Increase (Decrease) Due to Changes in | ||||||||||||
| Volume | Rate | Net Change | ||||||||||
| (in thousands of Pesos) | ||||||||||||
Overdrafts | ||||||||||||
Pesos | 268,324 | (101,984 | ) | 166,340 | ||||||||
Dollars | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | 268,324 | (101,984 | ) | 166,340 | ||||||||
|
|
|
|
|
| |||||||
Loans to the financial sector | ||||||||||||
Pesos | 46,168 | (30,077 | ) | 16,091 | ||||||||
Dollars | 306 | — | 306 | |||||||||
|
|
|
|
|
| |||||||
Total | 46,474 | (30,077 | ) | 16,397 | ||||||||
|
|
|
|
|
| |||||||
Mortgage Loans | ||||||||||||
Pesos | 100,014 | 788 | 100,802 | |||||||||
Dollars | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | 100,014 | 788 | 100,802 | |||||||||
|
|
|
|
|
| |||||||
Automobile and other secured loans | ||||||||||||
Pesos | 15,457 | (1,812 | ) | 13,645 | ||||||||
Dollars | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | 15,457 | (1,812 | ) | 13,645 | ||||||||
|
|
|
|
|
| |||||||
Corporate unsecured loans | ||||||||||||
Pesos | 432,233 | (175,274 | ) | 256,959 | ||||||||
Dollars | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | 432,233 | (175,274 | ) | 256,959 | ||||||||
|
|
|
|
|
| |||||||
Personal loans | ||||||||||||
Pesos | 2,236,572 | 235,795 | 2,472,367 | |||||||||
Dollars | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | 2,236,572 | 235,795 | 2,472,367 | |||||||||
|
|
|
|
|
| |||||||
Credit card Loans | ||||||||||||
Pesos | 213,395 | (144,284 | ) | 69,112 | ||||||||
Dollars | 25 | (30 | ) | (5 | ) | |||||||
|
|
|
|
|
| |||||||
Total | 213,420 | (144,313 | ) | 69,107 | ||||||||
|
|
|
|
|
| |||||||
Receivables from financial leases | ||||||||||||
Pesos | 114,948 | (33,253 | ) | 81,695 | ||||||||
Dollars | 13,483 | 86 | 13,569 | |||||||||
|
|
|
|
|
| |||||||
Total | 128,430 | (33,167 | ) | 95,264 | ||||||||
|
|
|
|
|
| |||||||
Total Loans excl. Foreign Trade and U.S.$.loans | ||||||||||||
Pesos | 3,932,119 | (445,929 | ) | 3,486,190 | ||||||||
Dollars | 16,449 | 4,602 | 21,051 | |||||||||
|
|
|
|
|
| |||||||
Total | 3,948,568 | (441,327 | ) | 3,507,241 | ||||||||
|
|
|
|
|
| |||||||
Foreign Trade Loans and U.S.$.Loans | ||||||||||||
Pesos | — | — | — | |||||||||
Dollars | 242,255 | (11,190 | ) | 231,065 | ||||||||
Total | 242,255 | (11,190 | ) | 231,065 | ||||||||
|
|
|
|
|
| |||||||
Total Loans | ||||||||||||
Pesos | 3,932,119 | (445,929 | ) | 3,486,190 | ||||||||
Dollars | 259,317 | (7,201 | ) | 252,116 | ||||||||
|
|
|
|
|
| |||||||
Total | 4,191,437 | (453,130 | ) | 3,738,306 | ||||||||
|
|
|
|
|
| |||||||
(3) Includes overnight deposits and unlisted corporate bonds.
| Year ended December 31, | ||||||||||||
| 2017/2016 | ||||||||||||
| Increase (Decrease) Due to Changes in | ||||||||||||
| Volume | Rate | Net Change | ||||||||||
| (in thousands of Pesos) | ||||||||||||
Other receivables from financial transactions | ||||||||||||
Pesos | 226,720 | (53,542 | ) | 173,178 | ||||||||
Dollars | (75 | ) | 127 | 52 | ||||||||
|
|
|
|
|
| |||||||
Total | 226,645 | (53,415 | ) | 173,230 | ||||||||
|
|
|
|
|
| |||||||
Totalinterest-earning assets | ||||||||||||
Pesos | 5,044,306 | (906,246 | ) | 4,138,060 | ||||||||
Dollars | 544,543 | (50,061 | ) | 494,482 | ||||||||
|
|
|
|
|
| |||||||
Total | 5,588,849 | (956,307 | ) | 4,632,542 | ||||||||
|
|
|
|
|
| |||||||
LIABILITIES | ||||||||||||
Special checking accounts | ||||||||||||
Pesos | 633,945 | — | 633,945 | |||||||||
Dollars | 3,751 | — | 3,751 | |||||||||
|
|
|
|
|
| |||||||
Total | 637,696 | — | 637,696 | |||||||||
|
|
|
|
|
| |||||||
Time deposits | ||||||||||||
Pesos | 168,673 | (940,576 | ) | (771,903 | ) | |||||||
Dollars | 3,280 | (5,180 | ) | (1,900 | ) | |||||||
|
|
|
|
|
| |||||||
Total | 171,953 | (945,756 | ) | (773,803 | ) | |||||||
|
|
|
|
|
| |||||||
Borrowings from other financial institutions and unsubordinated negotiable obligations | ||||||||||||
Pesos | 1,246,156 | (144,724 | ) | 1,101,432 | ||||||||
Dollars | 16,790 | 165 | 16,955 | |||||||||
|
|
|
|
|
| |||||||
Total | 1,262,946 | (144,559 | ) | 1,118,387 | ||||||||
|
|
|
|
|
| |||||||
Subordinated Loan | ||||||||||||
Pesos | — | — | — | |||||||||
Dollars | 3,294 | (3,084 | ) | 210 | ||||||||
|
|
|
|
|
| |||||||
Total | 3,294 | (3,084 | ) | 210 | ||||||||
|
|
|
|
|
| |||||||
Totalinterest-bearing liabilities | ||||||||||||
Pesos | 1,987,972 | (1,024,497 | ) | 963,475 | ||||||||
Dollars | 80,639 | (61,623 | ) | 19,016 | ||||||||
|
|
|
|
|
| |||||||
Total | 2,068,611 | (1,086,120 | ) | 982,491 | ||||||||
|
|
|
|
|
| |||||||
Low &Non-Interest Bearing Deposits and Saving accounts | ||||||||||||
Pesos | 800 | (2,130 | ) | (1,330 | ) | |||||||
Dollars | 768 | (375 | ) | 393 | ||||||||
|
|
|
|
|
| |||||||
Total | 1,568 | (2,505 | ) | (937 | ) | |||||||
|
|
|
|
|
| |||||||
Interest-earning Assets: Net Interest Margin and Spread
The following table analyzes, by currency of denomination, our levels of averageinterest-earning assets and net interest income, and illustrates the comparative margins and spreads for each of the years indicated.
|
| Year ended |
| ||||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| Year ended December 31, | |||||||
|
| (in thousands of Pesos, except percentages) |
| 2018 | 2017 | ||||||||||
Average interest-earning assets(1)(2) |
|
|
|
|
|
|
| ||||||||
| (in thousands of Pesos, except percentages) | |||||||||||||||
Average interest-earning assets(1)(2) | |||||||||||||||
Pesos |
| 43,001,219 |
| 27,675,131 |
| 19,322,972 |
| 92,625,278 | 79,578,929 | ||||||
Dollars |
| 9,675,130 |
| 3,260,920 |
| 1,196,874 |
| 27,498,182 | 17,445,353 | ||||||
Total |
| 52,676,349 |
| 30,936,051 |
| 20,519,846 |
| 120,123,460 | 97,024,282 | ||||||
Net interest earned |
|
|
|
|
|
|
| ||||||||
Pesos |
| 9,381,135 |
| 6,205,220 |
| 3,629,092 |
| 18,740,049 | 17,733,075 | ||||||
Dollars |
| 655,535 |
| 180,462 |
| 94,480 |
| 2,475,555 | 1,058,220 | ||||||
Total |
| 10,036,670 |
| 6,385,682 |
| 3,723,572 |
| 21,215,604 | 18,791,295 | ||||||
Net Interest Margin |
|
|
|
|
|
|
| ||||||||
Pesos |
| 21.8 | % | 22.4 | % | 18.8 | % | 20.2 | % | 22.3 | % | ||||
Dollars |
| 6.8 | % | 5.5 | % | 7.9 | % | 9.0 | % | 6.1 | % | ||||
Weighted average yield(3) |
| 19.1 | % | 20.6 | % | 18.1 | % | ||||||||
Weighted average yield(3) | 17.7 | % | 19.4 | % | |||||||||||
Yield Spread |
|
|
|
|
|
|
| ||||||||
Pesos |
| 18.4 | % | 17.3 | % | 14.9 | % | 15.1 | % | 18.1 | % | ||||
Dollars |
| 6.5 | % | 5.9 | % | 9.5 | % | 9.1 | % | 5.7 | % | ||||
Weighted interest spread(4) |
| 16.5 | % | 16.8 | % | 15.0 | % | ||||||||
Weighted interest spread(4) | 15.0 | % | 16.0 | % | |||||||||||
Gross Yield |
|
|
|
|
|
|
| ||||||||
Pesos |
| 32.9 | % | 36.2 | % | 32.5 | % | 38.3 | % | 30.9 | % | ||||
Dollars |
| 8.5 | % | 10.0 | % | 15.2 | % | 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) |
|
As stated above under “Presentation of Financial and Other Information”, we have prepared our audited consolidated financial statements for 2018 and 2017 under IFRS. Data for past years has been prepared under prior accounting framework, which is not comparable with data prepared under IFRS.
| Year ended December 31, | ||||
| 2016 | ||||
| (in thousands of Pesos, except percentages) | ||||
Average interest-earning assets(1)(2) | ||||
Pesos | 27,675,131 | |||
Dollars | 3,260,920 | |||
Total | 30,936,051 | |||
Net interest earned | ||||
Pesos | 6,205,220 | |||
Dollars | 180,462 | |||
Total | 6,385,682 | |||
Net Interest Margin | ||||
Pesos | 22.4 | % | ||
Dollars | 5.5 | % | ||
Weighted average yield(3) | 20.6 | % | ||
Yield Spread | ||||
Pesos | 17.3 | % | ||
Dollars | 5.9 | % | ||
Weighted interest spread(4) | 16.8 | % | ||
Gross Yield | ||||
Pesos | 36.2 | % | ||
Dollars | 10.0 | % | ||
| (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, 20162018 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 |
|
| Year ended December 31, | ||||||||
| 2018 | 2017 | |||||||
| (in thousand of Pesos) | ||||||||
Debt Securities at fair value through profit or loss | ||||||||
LOCAL | ||||||||
Government securities | ||||||||
Treasury bills in dollars maturity May 10, 2019 | 1,238,920 | — | ||||||
Treasury bills in dollars maturity January 10, 2019 | 892,737 | — | ||||||
Treasury bills in dollars capitalizable maturity April 12, 2019 | 510,000 | — | ||||||
Treasury bills in dollars maturity June 14, 2019 | 204,447 | — | ||||||
Treasury bills in Pesos maturity January 31, 2019 | 177,199 | — | ||||||
Treasury bills in dollars maturity June 28, 2019 | 174,459 | — | ||||||
Treasury bills in Pesos capitalizable maturity June 28, 2019 | 99,500 | — | ||||||
Debt securities of the Province of Buenos Aires in Pesos maturity April 12, 2025 | 66,651 | — | ||||||
Argentine sovereign bonds in dollars 8.75% maturity 2024 | 90,805 | 79,095 | ||||||
Argentine sovereign bonds double denomination maturity June 21, 2019 | 38,899 | — | ||||||
Others | 238,646 | 2,217,926 | ||||||
Securities issued by the Central Bank: | ||||||||
Liquidity Central Bank bills maturity January 2, 2019(1) | 5,990,274 | — | ||||||
Liquidity Central Bank bills maturity January 4, 2019(1) | 2,985,462 | — | ||||||
Liquidity Central Bank bills maturity January 8, 2019 | 988,764 | — | ||||||
Liquidity Central Bank bills maturity January 7, 2019 | 742,766 | — | ||||||
Liquidity Central Bank bills maturity January 3, 2019 | 598,058 | — | ||||||
Central Bank bills in Pesos maturity January 17, 2018 – 273 days | — | 12,165,756 | ||||||
Central Bank bills in Pesos maturity July 18, 2018 – 273 days | — | 245,161 | ||||||
Central Bank bills in Pesos maturity June 21, 2018 – 274 days | — | 308,207 | ||||||
Central Bank bills in Pesos maturity May 16, 2018 – 273 days | — | 181,603 | ||||||
Central Bank bills in Pesos maturity February 21, 2018 – 280 days | — | 1,182,018 | ||||||
Others | — | 380,310 | ||||||
Corporate Securities | ||||||||
YPF S.A. notes class 41 in Pesos – Maturity.September 24, 2020 | 33,104 | 75,355 | ||||||
Bco Galicia Bs.As. notes class S2 – Maturity April 26, 2021 | 25,291 | — | ||||||
Credimas 33 financial trust debt securities Class A | 1,603 | — | ||||||
Quickfood Class 9 Maturity November 11, 2022 | 1,571 | 2,494 | ||||||
YPF S.A. notes class 28 at 8,75% – Maturity April 4, 2024 | 834 | — | ||||||
YPF S.A. notes class 36 – Maturity February 10, 2020 | 12,125 | — | ||||||
Total debt securities at fair value through profit or loss | 15,112,115 | 16,837,925 | ||||||
| Year ended December 31, | ||||||||
| 2018 | 2017 | |||||||
| (in thousand of Pesos) | ||||||||
OTHER DEBT SECURITIES | ||||||||
Measure at fair value through changes in OCI | ||||||||
LOCAL | ||||||||
Corporate bonds | ||||||||
Others | 32 | 47 | ||||||
Measure at amortized cost | ||||||||
LOCAL | ||||||||
Public bonds | ||||||||
Treasury bonds in Pesos maturity November 21, 2020(1) | 3,090,930 | — | ||||||
Treasury bills in dollars maturity March 15, 2019 – 203 days | 1,039,760 | — | ||||||
Treasury bills in dollars maturity January 26, 2018 | — | 178,440 | ||||||
Treasury bills in dollars maturity April 27, 2018 | — | 66,195 | ||||||
Treasury bills in dollars maturity April 13, 2018 | — | 42,593 | ||||||
Treasury bills in Pesos maturity April 30, 2019 | 671 | — | ||||||
Treasury bills in Pesos maturity January 31, 2019 | 145,550 | — | ||||||
Others | 3,569 | — | ||||||
Central Bank bills | ||||||||
Others | — | 150,438 | ||||||
Corporate bonds | ||||||||
Prear S.2 notes – Maturity February 15, 2019 | 2,560 | 3,670 | ||||||
Mbt 1 financial trust debt securities class A | 1,211 | 2,622 | ||||||
Credimas 32 | — | 84,188 | ||||||
Catalinas Coop. 1 PyMe notes September 19, 2018 | — | 1,491 | ||||||
OCOX6 Soc Com del Plata notes | — | 13 | ||||||
Ind Met Pescarmona notes Cl 12 | — | 133 | ||||||
Productos de Agua S.A. | — | 62 | ||||||
Others | 26,812 | — | ||||||
|
|
|
| |||||
Total other debt securities | 4,311,095 | 529,891 | ||||||
Investments in equity instruments | ||||||||
Measured at fair value through profit and loss | ||||||||
LOCAL | ||||||||
YPF S.A. | 1,082 | 12,219 | ||||||
Grupo Financiero Galicia S.A. | 521 | — | ||||||
Loma Negra S.A. | — | 34,722 | ||||||
Tenaris S.A. | — | 3,329 | ||||||
Pampa Energía S.A. | — | 5,836 | ||||||
Measured at fair value through changes in OCI | ||||||||
In Argentina | ||||||||
Others | 8,801 | 12,775 | ||||||
|
|
|
| |||||
Total investments in equity instruments | 10,404 | 68,881 | ||||||
|
|
|
| |||||
Total | 19,433,614 | 17,436,697 | ||||||
| (1) | The market value is the same as the book value for the issuer than exceeds ten percent of stockholder’s equit attributable to owners of the parent company. |
(1) Included within “other receivables fromAs stated above under “Presentation of Financial and Other Information”, we have prepared our audited consolidated financial transactions”. Consists mainly of participations in financial trusts created pursuant to our own securitization transactions.statements for 2018 and 2017 under IFRS. Data for past years has been prepared under prior accounting framework, which is not comparable with data prepared under IFRS.
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.
| Year ended December 31, | ||||
| 2016 | ||||
| (in thousands of Pesos) | ||||
LISTED GOVERNMENT SECURITIES | ||||
Holdings of Trading Securities | ||||
LOCAL | ||||
In Pesos: | ||||
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 | |||
Securities denominated in Pesos discount | 158 | |||
In Foreign Currency: | ||||
Argentine sovereign bonds in dollars 8% maturity 2020 BONAR XX | 14 | |||
Argentine sovereign bonds in dollars 7% maturity 2017 | 20 | |||
Securities denominated in dollars discount maturity 2033 | 155 | |||
Argentine sovereign bonds in dollars 2.40% maturity 2018 | 42,815 | |||
Argentine sovereign bonds in dollars 0.75% maturity 2017 | 25,137 | |||
Others | 2 | |||
Total listed government securities | 125,243 | |||
UNLISTED GOVERNMENT SECURITIES | ||||
In Foreign Currency: | ||||
Treasury Bills in dollars, maturity 2017 | 818,853 | |||
Total unlisted government securities | 818,853 | |||
SECURITIES ISSUED BY THE ARGENTINE CENTRAL BANK | ||||
Listed | ||||
Central Bank Bills in Pesos | 336,785 | |||
Unlisted | ||||
Central Bank Bills in Pesos | 1,077,268 | |||
Total securities issued by the Argentine Central Bank | 1,414,053 | |||
INVESTMENTS IN LISTED CORPORATE SECURITIES | ||||
LOCAL | ||||
Others | 1,895 | |||
Total investments in listed corporate securities | 1,895 | |||
Total government and corporate securities | 2,360,044 | |||
PARTICIPATION IN SECURITIZATION TRUSTS(1) | ||||
Financial trusts debt securities – senior | 100,644 | |||
Financial trusts participation certificates | 530,607 | |||
Total | 631,251 | |||
| (1) | Included within “other receivables from financial transactions”. Consists mainly of participations in financial trusts created pursuant to our own securitization transactions. |
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, 20172018 based on their terms when 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 May 10, 2019 | 1,238,920 | — | — | — | 1,238,920 | |||||||||||||||
Treasury bills in dollars maturity January 10, 2019 | 892,737 | — | — | — | 892,737 | |||||||||||||||
Treasury bills in dollars capitalizable maturity April 12, 2019 | 510,000 | — | — | — | 510,000 | |||||||||||||||
Treasury bills in dollars maturity June 14, 2019 | 204,447 | — | — | — | 204,447 | |||||||||||||||
Treasury bills in Pesos maturity January 31, 2019 | 177,199 | — | — | — | 177,199 | |||||||||||||||
Treasury bills in dollars maturity June 28, 2019 | 174,459 | — | — | — | 174,459 | |||||||||||||||
Treasury bills in Pesos capitalizable maturity June 28, 2019 | 99,500 | — | — | — | 99,500 | |||||||||||||||
Debt securities of the Province of Buenos Aires in Pesos maturity April 12, 2025 | — | — | 66,651 | — | 66,651 | |||||||||||||||
Argentine sovereign bonds in dollars 8.75% maturity 2024 | — | — | 90,805 | — | 90,805 | |||||||||||||||
Argentine sovereign bonds double denomination maturity June 21, 2019 | 38,899 | — | — | 38,899 | ||||||||||||||||
Others | 227,475 | — | — | 11,170 | 238,645 | |||||||||||||||
Securities issued by the Central Bank: | ||||||||||||||||||||
Liquidity Central Bank bills maturity January 2, 2019 | 5,990,274 | — | — | — | 5,990,274 | |||||||||||||||
Liquidity Central Bank bills maturity January 4, 2019 | 2,985,462 | — | — | — | 2,985,462 | |||||||||||||||
Liquidity Central Bank bills maturity January 8, 2019 | 988,764 | — | — | — | 988,764 | |||||||||||||||
Liquidity Central Bank bills maturity January 7, 2019 | 742,766 | — | — | — | 742,766 | |||||||||||||||
Liquidity Central Bank bills maturity January 3, 2019 | 598,058 | — | — | — | 598,058 | |||||||||||||||
Corporate Securities | ||||||||||||||||||||
YPF S.A. notes class 41 in Pesos—Maturity September 24, 2020 | — | 33,104 | — | — | 33,104 | |||||||||||||||
Bco Galicia Bs.As. notes class S2 – Maturity April 26, 2021 | — | 25,291 | — | — | 25,291 | |||||||||||||||
Credimas 33 financial trust debt securities Class A | 1,603 | — | — | 1,603 | ||||||||||||||||
Quickfood Class 9 Maturity November 11, 2022 | — | 1,571 | — | — | 1,571 | |||||||||||||||
YPF S.A. notes class 28 at 8,75%—Maturity April 4, 2024 | — | 834 | — | 834 | ||||||||||||||||
YPF S.A. notes class 36 – Maturity February 10, 2020 | — | 12,126 | — | — | 12,126 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total debt securities at fair value through profit or loss | 14,870,578 | 72,077 | 158,290 | 11,170 | 15,112,115 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 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) | ||||||||||||||||||||
OTHER DEBT SECURITIES | ||||||||||||||||||||
Measure at fair value through changes in OCI | ||||||||||||||||||||
LOCAL | ||||||||||||||||||||
Public Bonds | 32 | — | — | — | 32 | |||||||||||||||
Others | ||||||||||||||||||||
Measure at amortized cost | ||||||||||||||||||||
LOCAL | ||||||||||||||||||||
Public bonds | ||||||||||||||||||||
Treasury bonds in Pesos maturity November 21, 2020 | — | 3,090,930 | — | — | 3,090,930 | |||||||||||||||
Treasury bills in dollars maturity March 15, 2019 – 203 days | 1,039,760 | — | — | — | 1,039,760 | |||||||||||||||
Treasury bills in Pesos maturity April 30, 2019 | 671 | — | — | — | 671 | |||||||||||||||
Treasury bills in Pesos maturity January 31, 2019 | 145,550 | — | — | — | 145,550 | |||||||||||||||
Others | 3,569 | — | — | — | 3,569 | |||||||||||||||
Corporate bonds | ||||||||||||||||||||
Prear S.2 notes – Maturity February 15, 2019 | 2,560 | — | — | — | 2,560 | |||||||||||||||
Mbt 1 financial trust debt securities class A | 1,211 | — | — | — | 1,211 | |||||||||||||||
Others | 26,812 | — | — | — | 26,812 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total other debt securities | 1,220,165 | 3,090,930 | — | — | 4,311,095 | |||||||||||||||
Investments in equity instruments | ||||||||||||||||||||
Measured at fair value through profit and loss | ||||||||||||||||||||
LOCAL | ||||||||||||||||||||
YPF SA | 1,082 | — | — | — | 1,082 | |||||||||||||||
Grupo Financiero Galicia SA | 521 | — | — | — | 521 | |||||||||||||||
Measured at fair value through changes in OCI | ||||||||||||||||||||
LOCAL | ||||||||||||||||||||
Others | 8,801 | — | — | — | 8,801 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investments in equity instruments | 10,404 | — | — | — | 10,404 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | 16,101,147 | 3,163,007 | 158,290 | 11,170 | 19,433,614 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Weighted average yield | 44.6 | % | 28 | % | 38.4 | % | 0.0 | % | — | |||||||||||
(1) Included within “other receivables from financial transactions”. Consists mainly of participations in financial trusts created pursuant to our own securitization transactions.
Loan and other Financing Portfolio
The following table analyzes our loan and other financing portfolio by type as of December 31, 2017, 2016, 2015, 20142018 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 |
|
| Grupo Supervielle S.A. | ||||||||
| As of December 31, | ||||||||
| 2018 | 2017 | |||||||
| (in thousands of Pesos) | ||||||||
Loans and other financings | ||||||||
To thenon-financial public sector | 32,802 | 48,143 | ||||||
To the financial sector | 398,551 | 586,358 | ||||||
To thenon-financial private sector and foreign residents: | ||||||||
Overdrafts | 4,740,509 | 5,340,109 | ||||||
Promissory notes | 15,671,116 | 22,877,163 | ||||||
Mortgage loans | 5,343,792 | 2,288,160 | ||||||
| Grupo Supervielle S.A. | ||||||||
| As of December 31, | ||||||||
| 2018 | 2017 | |||||||
Automobile and other secured loans | 1,540,539 | 463,200 | ||||||
Personal loans | 19,024,837 | 24,743,905 | ||||||
Credit card loans | 9,210,204 | 11,761,502 | ||||||
Foreign trade loans and U.S. dollar loans | 18,896,869 | 16,559,563 | ||||||
Others | 3,884,935 | 3,378,518 | ||||||
Receivables from financial leases | 3,400,585 | 3,687,660 | ||||||
Less: allowance for loan losses | (4,936,275 | ) | (4,625,611 | ) | ||||
|
|
|
| |||||
Total loans and other financings | 77,208,464 | 87,108,670 | ||||||
(1) ConsistsAs stated above under “Presentation of unsecured checksFinancial and accounts receivable deriving from factoring transactions,Other Information”, we have prepared our audited consolidated financial statements for 2018 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 interestunder IFRS. Data for past years has been prepared under prior accounting framework, which 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 listednot comparable with data prepared under the item “Promissory notes.”
(3) Includes only line-items within other receivables from financial transactions that are considered financings under Argentine Banking GAAP.IFRS.
Loans and financings To thenon-financial public sector To the financial sector To thenon-financial private sector and foreign residents: Overdrafts Promissory notes(1)(2) Mortgage loans Automobile and other secured loans Personal loans Credit card loans Foreign trade loans and U.S. dollar loans Others Less: allowance for loan losses Total loans Other receivables from financial transactions(3) Unlisted corporate bonds Others Plus: accrued interest and adjustment receivables Less: allowances Total other receivables from financial transactions Receivables from financial leases Less: Allowances for receivables from financial leases Total receivables from financial leases Total financing As of December 31, 2017, 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 the 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 connection 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. Grupo Supervielle S.A. As of
December 31, 2016 2015 2014 (in thousands of Pesos) 4,306 8,778 12,666 473,414 181,734 3,514 3,110,097 1,634,870 993,284 9,101,773 5,707,289 5,296,100 78,057 50,032 69,554 65,076 104,469 168,603 9,916,776 6,018,601 3,631,840 6,678,578 5,677,922 3,688,328 5,311,475 618,410 591,887 1,056,104 763,469 557,827 (899,147 ) (617,313 ) (417,023 ) 34,896,509 20,148,261 14,596,580 29,166 14,243 191,372 669,119 423,640 243,246 1 1 1 (5,807 ) (5,944 ) (5,221 ) 692,479 431,940 429,398 1,543,109 1,090,368 590,960 (15,254 ) (15,391 ) (7,114 ) 1,527,855 1,074,977 583,846 37,116,843 21,655,178 15,609,824
| (1) | Consists of unsecured checks and accounts receivable deriving from factoring transactions, and unsecured corporate loans that totaled, Ps.3,102.8 million, Ps.2,399.3 million and Ps.1,547.5 million as of December 31, 2016, 2015 and 2014 , 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 onlyline-items within other receivables from financial transactions that are considered financings under Central Bank rules. |
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, |
| Grupo Supervielle S.A. | |||||||||||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2014 |
| 2013 |
| As of December 31, | |||||||||||
|
| (in thousands of Pesos) |
| 2016 | 2015 | 2014 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| (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 |
| 37,116,843 | 21,655,178 | 15,609,824 | |||||||||
Personal loan portfolio outstanding in each of the financial trusts (net of allowances for loan losses)(1) | 1,367,117 | 2,465,621 | 2,613,915 | ||||||||||||||||||||
Receivables from financial leases outstanding in each of the financial trusts (net of allowances for receivables from financial leases)(1) | 46,310 | 244,922 | 444,341 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
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 |
| 38,530,270 | 24,365,721 | 18,668,080 | |||||||||
|
|
| |||||||||||||||||||||
| (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, Ps.68.1 million for the years ended December 31, 2016, 2015 and 2014 respectively. |
(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, 2018 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, 2018 | ||||||||||||||||
| Within 1 year | After 1 year through 5 years | After 5 years | Total | |||||||||||||
| (in thousands of Pesos except percentages) | ||||||||||||||||
Loans and other financing | ||||||||||||||||
To thenon-financial public sector | 7,526 | 25,276 | — | 32,802 | ||||||||||||
To the financial sector | 358,177 | 40,374 | — | 398,551 | ||||||||||||
Overdrafts | 4,740,509 | — | — | 4,740,509 | ||||||||||||
Promissory notes | 14,202,960 | 1,454,005 | 14,151 | 15,671,116 | ||||||||||||
Mortgage loans | 436 | 8,092 | 5,335,264 | 5,343,792 | ||||||||||||
Automobile and other secured loans | 1,014,509 | 524,363 | 1,667 | 1,540,539 | ||||||||||||
Personal loans | 15,155,944 | 3,711,923 | 156,970 | 19,024,837 | ||||||||||||
Credit card loans | 9,196,035 | 14,169 | — | 9,210,204 | ||||||||||||
Foreign trade loans and U.S. dollar loans | 11,849,498 | 6,956,609 | 90,762 | 18,896,869 | ||||||||||||
Others | 2,929,217 | 955,630 | 89 | 3,884,935 | ||||||||||||
Receivables from financial leases | 1,352,487 | 2,045,444 | 2,654 | 3,400,585 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total loans and other financing | 60,807,298 | 15,735,885 | 5,601,557 | 82,144,739 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
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, 20172018 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 |
| ||
| Grupo Supervielle S.A. | ||||||||
| As of December 31, 2018 | ||||||||
| Loans and other financing | Total | |||||||
Variable rate | ||||||||
Ps. | 7,480,510 | 7,480,510 | ||||||
Foreign currency | 10,483 | 10,483 | ||||||
|
|
|
| |||||
Sub Total | 7,490,993 | 7,490,993 | ||||||
Fixed rate | ||||||||
Ps. | 53,508,814 | 53,508,814 | ||||||
Foreign currency | 21,144,932 | 21,144,932 | ||||||
|
|
|
| |||||
Sub Total | 74,653,746 | 74,653,746 | ||||||
|
|
|
| |||||
Total | 82,144,739 | 82,144,739 | ||||||
|
|
|
| |||||
(1) Includes only line-items within other receivables from financial transactions that are considered financings under Argentine Banking GAAP.
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 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 December 31, 2018 | |||||||||||||||
| Stage 1 | Stage 2 | Stage 3 | ||||||||||||||
Promissory notes | 7,177,104 | 473,676 | 242,381 | 7,893,161 | ||||||||||||
Unsecured corporate loans | 6,218,529 | 1,375,347 | 180,464 | 7,774,340 | ||||||||||||
Overdrafts | 4,477,760 | 712,868 | 117,677 | 5,308,305 | ||||||||||||
Mortgage loans | 5,436,111 | 141,024 | 9,71 | 5,586,845 | ||||||||||||
Automobile and other secured loans | 1,264,490 | 106,242 | 181,807 | 1,552,539 | ||||||||||||
Personal loans | 16,064,479 | 2,203,003 | 1,710,042 | 19,977,524 | ||||||||||||
Credit card loans | 8,125,029 | 595,713 | 508,028 | 9,228,770 | ||||||||||||
Foreign Trade Loans | 12,202,668 | 555,279 | 1,015,216 | 13,773,163 | ||||||||||||
Other financings | 5,205,674 | 901,476 | 114,367 | 6,221,517 | ||||||||||||
Other receivables from financial transactions | 1,325,729 | 12,086 | 21,293 | 1,359,108 | ||||||||||||
Receivables from financial leases | 3,213,033 | 172,515 | 83,919 | 3,469,467 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total as of December 31, 2018 | 70,710,606 | 7,249,229 | 4,184,904 | 82,144,739 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| Grupo Supervielle | ||||||||||||||||
| Assets Before Allowances | As of December 31, 2017 | |||||||||||||||
| Stage 1 | Stage 2 | Stage 3 | ||||||||||||||
Promissory notes | 14,001,854 | 198 | 41,673 | 14,241,527 | ||||||||||||
Unsecured corporate loans | 7,694,980 | 230,789 | 62,098 | 7,987,867 | ||||||||||||
Overdrafts | 5,714,366 | 88,99 | 63,972 | 5,867,328 | ||||||||||||
Mortgage loans | 2,354,797 | 61,753 | 1,344 | 2,417,894 | ||||||||||||
Automobile and other secured loans | 451,268 | 16,951 | 997 | 469,216 | ||||||||||||
Personal loans | 20,437,327 | 2,507,042 | 2,830,638 | 25,775,007 | ||||||||||||
Credit card loans | 10,410,793 | 857,782 | 514,502 | 11,783,078 | ||||||||||||
Foreign Trade Loans | 12,264,554 | 83,781 | 4,429 | 12,352,765 | ||||||||||||
Other financings | 5,782,869 | 44,534 | 41,184 | 5,868,587 | ||||||||||||
Other receivables from financial transactions | 1,177,816 | 19,048 | 16,805 | 1,213,669 | ||||||||||||
Receivables from financial leases | 3,635,703 | 66,143 | 55,497 | 3,757,343 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total as of December 31, 2017 | 83,926,327 | 4,174,815 | 3,633,139 | 91,734,281 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
(1)Current loansAs stated above under “Presentation of Financial and loans up to 31 daysOther Information”, we have prepared our audited consolidated financial statements for 2018 and 2017 under IFRS. Data for 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. Borroweryears has been prepared under prior accounting framework, which 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,not comparable 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 recoverydata prepared 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.IFRS.
| Grupo Supervielle S.A. | ||||||||||||||||||||||||
| Year ended December 31, | ||||||||||||||||||||||||
| 2016 | % | 2015 | % | 2014 | % | |||||||||||||||||||
| (in thousands of Pesos, except percentages) | ||||||||||||||||||||||||
Loan portfolio categories | ||||||||||||||||||||||||
Normal situation(1) | 34,057,394 | 95.1 | % | 19,613,596 | 94.5 | % | 14,192,413 | 94.5 | % | |||||||||||||||
Subject to specialmonitoring-underobservation- in negotiation or subject to refinancing agreements/low risk(2) | 726,232 | 2.0 | % | 470,003 | 2.3 | % | 357,393 | 2.4 | % | |||||||||||||||
With problems/ medium risk (3) | 498,572 | 1.4 | % | 264,492 | 1.3 | % | 176,231 | 1.2 | % | |||||||||||||||
High risk of insolvency/ high risk(4) | 494,126 | 1.4 | % | 364,649 | 1.8 | % | 256,510 | 1.7 | % | |||||||||||||||
Uncollectible(5) | 18,533 | 0.1 | % | 52,533 | 0.3 | % | 30,668 | 0.2 | % | |||||||||||||||
Uncollectible, classified as such under regulatory requirements(6) | 799 | 0.0 | % | 301 | 0.0 | % | 387 | 0.0 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total loans | 35,795,656 | 100.0 | % | 20,765,574 | 100.0 | % | 15,013,603 | 100.0 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Grupo Supervielle S.A. | ||||||||||||||||||||||||
| Year ended December 31, | ||||||||||||||||||||||||
| 2016 | % | 2015 | % | 2014 | % | |||||||||||||||||||
| (in thousands of Pesos, except percentages) | ||||||||||||||||||||||||
Other receivables from financial transactions portfolio categories | ||||||||||||||||||||||||
Normal situation(1) | 648,582 | 92,9 | % | 407,884 | 93.1 | % | 422,043 | 97.1 | % | |||||||||||||||
Subject to specialmonitoring-underobservation- in negotiation or subject to refinancing agreements/low risk(2) | 20,568 | 2.9 | % | 13,022 | 3.0 | % | 4,587 | 1.1 | % | |||||||||||||||
With problems/ medium risk(3) | 12,822 | 1.8 | % | 6,048 | 1.4 | % | 2,532 | 0.6 | % | |||||||||||||||
High risk of insolvency/ high risk(4) | 14,746 | 2.1 | % | 7,902 | 1.8 | % | 3,822 | 0.9 | % | |||||||||||||||
Uncollectible (5) | 1,562 | 0.2 | % | 3,028 | 0.7 | % | 1,633 | 0.4 | % | |||||||||||||||
Uncollectible, classified as such under regulatory requirements(6) | 6 | 0.0 | % | — | 0.0 | % | 1 | 0.0 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Other receivables from financial transactions | 698,286 | 100.0 | % | 437,884 | 100.0 | % | 434,619 | 100.0 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Categories of receivables from financial leases | ||||||||||||||||||||||||
Normal situation(1) | 1,510,245 | 97.9 | % | 1,065,057 | 97.7 | % | 567,063 | 96.0 | % | |||||||||||||||
Subject to specialmonitoring-underobservation- in negotiation or subject to refinancing agreements/low risk(2) | 18,114 | 1.2 | % | 12,113 | 1.1 | % | 12,715 | 2.6 | % | |||||||||||||||
With problems/ medium risk(3) | 5,331 | 0.3 | % | 1,674 | 0.2 | % | 6,010 | 1.0 | % | |||||||||||||||
High risk of insolvency/ high risk(4) | 9,386 | 0.6 | % | 10,987 | 1.0 | % | 1,098 | 0.2 | % | |||||||||||||||
Uncollectible(5) | 33 | 0.0 | % | 537 | — | 4,074 | 0.7 | % | ||||||||||||||||
Uncollectible, classified as such under regulatory requirements | — | 0.0 | % | — | 0.0 | % | — | 0.0 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total receivables from financial leases | 1,543,109 | 100.0 | % | 1,090,368 | 100.0 | % | 590,960 | 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, | ||||||||
| 2018 | 2017 | |||||||
Past Due | ||||||||
Loans and other Financing | ||||||||
To thenon-financial private sector and foreign residents | ||||||||
Overdrafts | 327,061 | 65,998 | ||||||
Promissory notes | 207,558 | 28,354 | ||||||
Mortgage loans | 9,658 | — | ||||||
Automobile and other secured loans | 184,658 | 118 | ||||||
Personal loans | 1,465,928 | 1,468,620 | ||||||
Credit card loans | 544,899 | 457,628 | ||||||
Foreign trade loans | 1,033,020 | 1,930 | ||||||
Other loans | 481,118 | 129,574 | ||||||
Receivables from financial leases | 240,082 | 62,472 | ||||||
|
|
|
| |||||
Total Past Due Loans and other financing | 4,493,982 | 2,214,693 | ||||||
|
|
|
| |||||
Past Due Financings | ||||||||
With Preferred Guarantees | 573,722 | 96,587 | ||||||
Without Guarantees | 3,920,260 | 2,118,106 | ||||||
|
|
|
| |||||
Total Past Due Financings | 4,493,982 | 2,214,693 | ||||||
|
|
|
| |||||
Our policyAs stated above under “Presentation of Financial and Other Information”, we have prepared our audited consolidated financial statements for placing Bank2018 and CCF loans on non-accrual status2017 under IFRS. Data for past years has been prepared under prior accounting framework, 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.
|
| 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. |
| ||||||||
|
| Year ended December31, |
| ||||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2014 |
| 2013 |
|
|
| (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 |
|
Promissory notes(1) |
| 19,204 |
| 23,695 |
| 50,026 |
| 23,128 |
| 6,793 |
|
Unsecured corporate loans |
| 51,364 |
| 46,789 |
| 141,557 |
| 36,397 |
| 15,476 |
|
Mortgage loans |
| — |
| 6,141 |
| 47 |
| 5,685 |
| 957 |
|
Automobile and other secured loans |
| 80 |
| 857 |
| 1,060 |
| 6,309 |
| 6,207 |
|
Personal loans |
| 994,693 |
| 558,722 |
| 123,072 |
| 204,569 |
| 166,708 |
|
Credit card loans |
| 309,950 |
| 202,698 |
| 256,475 |
| 115,312 |
| 95,504 |
|
Foreign trade loans |
| 1,307 |
| 2,562 |
| 47,476 |
| 25,461 |
| 5,476 |
|
Other loans |
| 32,941 |
| 13,102 |
| 36,629 |
| 8,434 |
| 5,088 |
|
Total Past Due Loans |
| 1,454,238 |
| 905,825 |
| 660,755 |
| 459,339 |
| 315,257 |
|
Other receivables from financial transactions |
|
|
|
|
|
|
|
|
|
|
|
Others |
| 3,456 |
| 8,322 |
| 1,946 |
| 2,870 |
| 1,857 |
|
Total Past Due Other receivables from financial transactions |
| 3,456 |
| 8,322 |
| 1,946 |
| 2,870 |
| 1,857 |
|
Receivables from financial leases |
| 42,312 |
| 21,602 |
| 113,375 |
| 19,168 |
| 9,593 |
|
Total Past Due Financings |
| 1,500,006 |
| 935,749 |
| 776,076 |
| 481,377 |
| 326,707 |
|
Past Due Financings |
|
|
|
|
|
|
|
|
|
|
|
With Preferred Guarantees |
| 65,418 |
| 70,901 |
| 119,075 |
| 70,821 |
| 24,792 |
|
Without Guarantees |
| 1,434,588 |
| 864,848 |
| 657,001 |
| 410,556 |
| 301,915 |
|
Total Past Due Financings |
| 1,500,006 |
| 935,749 |
| 776,076 |
| 481,377 |
| 326,707 |
|
| Grupo Supervielle S.A. | ||||||||||||
| Year ended December31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in thousands of Pesos) | ||||||||||||
Past Due Loans | ||||||||||||
To thenon-financial private sector and foreign residents | ||||||||||||
Overdrafts | 51,259 | 4,413 | 34,044 | |||||||||
Promissory notes(1) | 23,695 | 50,026 | 23,128 | |||||||||
Unsecured corporate loans | 46,789 | 141,557 | 36,397 | |||||||||
Mortgage loans | 6,141 | 47 | 5,685 | |||||||||
Automobile and other secured loans | 857 | 1,060 | 6,309 | |||||||||
Personal loans | 558,722 | 123,072 | 204,569 | |||||||||
Credit card loans | 202,698 | 256,475 | 115,312 | |||||||||
Foreign trade loans | 2,562 | 47,476 | 25,461 | |||||||||
Other loans | 13,102 | 36,629 | 8,434 | |||||||||
|
|
|
|
|
| |||||||
(1) Consists of unsecured checks and accounts receivable deriving from factoring transactions.
Risk Element — Interest
The following table analyzes the gross interest income that would have been recorded in the year ended December 31, 2017 if the loans had been current in accordance with their original terms and had been outstanding throughout the period or since origination, if held for part of the period, as well as the amount of interest income on those loans that was included in net income for the period.
| Grupo Supervielle S.A. | ||||||||||||
| Year ended December31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in thousands of Pesos) | ||||||||||||
Past Due Loans | ||||||||||||
Total Past Due Loans | 905,825 | 660,755 | 459,339 | |||||||||
|
|
|
|
|
| |||||||
Other receivables from financial transactions | ||||||||||||
Others | 8,322 | 1,946 | 2,870 | |||||||||
|
|
|
|
|
| |||||||
Total Past Due Other receivables from | 8,322 | 1,946 | 2,870 | |||||||||
|
|
|
|
|
| |||||||
Receivables from financial leases | 21,602 | 113,375 | 19,168 | |||||||||
|
|
|
|
|
| |||||||
Total Past Due Financings | 935,749 | 776,076 | 481,377 | |||||||||
|
|
|
|
|
| |||||||
Past Due Financings | ||||||||||||
With Preferred Guarantees | 70,901 | 119,075 | 70,821 | |||||||||
Without Guarantees | 864,848 | 657,001 | 410,556 | |||||||||
|
|
|
|
|
| |||||||
Total Past Due Financings | 935,749 | 776,076 | 481,377 | |||||||||
|
|
|
|
|
| |||||||
(1) |
| ||
| |||
|
| ||
|
| unsecured checks and accounts receivable deriving from factoring transactions. |
Analysis of the Allowance for Loan Losses
The Central Bank’s regulations require financial institutions to classify certain consumer or housing loans in excess of Ps.5.0 billion as commercial loans, and allow financial institutions to classify certain commercial loans of up to Ps.5.0 billion as consumer and housing loans. See “Argentine Banking Regulation—Liquidity and SolvencyRequirements—Debt Classification and Loan Loss Provisions—Credit Portfolio.” As of December 31, 2017 we did not hold any consumer or housing loans in excess of Ps.5.0 billion classified as commercial loans and we held commercial loans for less than Ps.5.0 billion for which we applied the consumer and housing loan classification for a total amount of Ps.4.3 billion. The estimated impact derived from the application of this classification on our loan loss provisions and allowance for loan losses for the year ended December 31, 2017 was an increase of Ps.6.5 million in both items.
The table below sets forth annual variations in the allowances for loan losses for the years ended December 31, 2017, 2016, 2015, 20142018 and 2013.2017. See “Item 5.A Operating Results—Critical Accounting Policies—Allowances for Loan Losses.” Amounts below include, and note 1.12 of our audited consolidated financial statements, for more detail of how the expected credit loss allowances for loans, leasing and other receivables from financial transactions.is measured.
|
| Grupo Supervielle S.A. |
| ||||||||
|
| Year ended December 31, |
| ||||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2014 |
| 2013 |
|
|
| (in thousands of Pesos) |
| ||||||||
Balance at the beginning of the year |
| 920,208 |
| 638,648 |
| 429,358 |
| 353,756 |
| 295,691 |
|
Provisions charged to income |
| 1,820,169 |
| 1,057,637 |
| 543,844 |
| 356,509 |
| 350,535 |
|
Write-offs and reversals(1) |
| (1,194,018 | ) | (776,077 | ) | (334,554 | ) | (280,907 | ) | (296,985 | ) |
Other adjustments |
| 23,575 |
| — |
| — |
| — |
| 4,515 |
|
Balance at the end of year |
| 1,569,934 |
| 920,208 |
| 638,648 |
| 429,358 |
| 353,756 |
|
Provisions net of write-offs and reversals |
| 1.5 | % | 1.1 | % | 1.2 | % | 0.6 | % | 0.6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Provisions charged to income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Promissory notes(2) |
| 63,519 |
| 58,557 |
| 2,228 |
| 33,143 |
| 18,218 |
|
Unsecured corporate loans |
| 37,305 |
| 34,929 |
| 31,089 |
| 15,163 |
| 10,764 |
|
Overdrafts |
| 40,755 |
| 67,737 |
| 27,392 |
| 17,752 |
| 14,967 |
|
Mortgage loans |
| 14,253 |
| 2,348 |
| 58 |
| 219 |
| 984 |
|
Automobile and other secured loans |
| 3,499 |
| 1,512 |
| 941 |
| 3,928 |
| 5,831 |
|
Personal loans |
| 1,091,171 |
| 542,792 |
| 265,770 |
| 140,817 |
| 138,146 |
|
Credit cards loans |
| 403,312 |
| 231,421 |
| 185,849 |
| 126,429 |
| 112,726 |
|
Foreign Trade Loans |
| 59,942 |
| 67,737 |
| 1,820 |
| 4,497 |
| 3,483 |
|
Other financings |
| 46,363 |
| 14,943 |
| 8,507 |
| 4,179 |
| 34,213 |
|
Other receivables from financial transactions |
| 42,750 |
| 11,453 |
| 5,957 |
| 6,366 |
| 4,508 |
|
Receivables from financial leases |
| 17,300 |
| 24,208 |
| 14,233 |
| 4,016 |
| 6,695 |
|
|
| 1,820,169 |
| 1,057,637 |
| 543,844 |
| 356,509 |
| 350,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-offs and reversals |
|
|
|
|
|
|
|
|
|
|
|
Promissory notes(2) |
| (22,167 | ) | (40,049 | ) | (6,858 | ) | (18,328 | ) | (14,477 | ) |
Unsecured corporate loans |
| (13,019 | ) | (39,488 | ) | (4,403 | ) | (9,191 | ) | (8,315 | ) |
Overdrafts |
| (23,682 | ) | (32,948 | ) | (10,895 | ) | (9,721 | ) | (8,658 | ) |
Mortgage loans |
| — |
| — |
| (294 | ) | (369 | ) | (601 | ) |
Automobile and other secured loans |
| (1,098 | ) | (2,636 | ) | (2,608 | ) | (4,293 | ) | (8,538 | ) |
Personal loans |
| (759,000 | ) | (372,784 | ) | (186,248 | ) | (142,797 | ) | (135,489 | ) |
Credit cards loans |
| (311,091 | ) | (254,072 | ) | (108,206 | ) | (79,733 | ) | (101,030 | ) |
Foreign Trade Loans |
| — |
| — |
| — |
| (3,842 | ) | (1,202 | ) |
Other financings |
| (19,208 | ) | (14,393 | ) | (3,852 | ) | (2,857 | ) | (9,016 | ) |
Other receivables from financial transactions |
| (38,893 | ) | (7,291 | ) | (5,234 | ) | (5,558 | ) | (3,191 | ) |
Receivables from financial leases |
| (5,860 | ) | (12,416 | ) | (5,956 | ) | (4,218 | ) | (6,468 | ) |
|
| (1,194,018 | ) | (776,077 | ) | (334,554 | ) | (280,907 | ) | (296,985 | ) |
| Grupo Supervielle S.A. | ||||||||||||||||
| ECL Allowance | ||||||||||||||||
| Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||
Balance at the beginning of the year 2017 | 1,691,344 | 1,002,757 | 1,931,510 | 4,625,611 | ||||||||||||
Transfers | ||||||||||||||||
1 to 2 | (72,358 | ) | 424,159 | — | 351,801 | |||||||||||
1 to 3 | (73,906 | ) | — | 1,045,830 | 971,924 | |||||||||||
2 to 3 | — | (152,605 | ) | 281,957 | 129,352 | |||||||||||
2 to 1 | 23,057 | (94,117 | ) | — | (71,060 | ) | ||||||||||
3 to 2 | — | 17,780 | (76,002 | ) | (58,222 | ) | ||||||||||
3 to 1 | 2,874 | — | (36,858 | ) | (33,984 | ) | ||||||||||
Net changes of financial assets | (139,216 | ) | (53,642 | ) | 1,812,007 | 1,619,149 | ||||||||||
Write-Offs | — | — | (2,611,824 | ) | (2,611,824 | ) | ||||||||||
Exchange Differences and Others | 6,308 | 1,688 | 5,532 | 13,528 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross carrying amount at December 31, 2018 | 1,438,103 | 1,146,020 | 2,352,152 | 4,936,275 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| Grupo Supervielle S.A. | ||||||||||||||||
| ECL Allowance | ||||||||||||||||
| Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||
Balance at the beginning of the year 2016 | 1,086,336 | 785,340 | 1,573,131 | 3,444,807 | ||||||||||||
Transfers | ||||||||||||||||
1 to 2 | (43,917 | ) | 343,391 | — | 299,474 | |||||||||||
1 to 3 | (36,608 | ) | — | 825,86 | 789,252 | |||||||||||
2 to 3 | — | (94,572 | ) | 262,639 | 168,067 | |||||||||||
2 to 1 | 22,113 | (98,791 | ) | — | (76,678 | ) | ||||||||||
3 to 2 | — | 17,963 | (68,160 | ) | (50,197 | ) | ||||||||||
3 to 1 | 3,969 | — | (62,859 | ) | (58,890 | ) | ||||||||||
Net changes of financial assets | 652,14 | 48,704 | 1,237,979 | 1,938,823 | ||||||||||||
Write-Offs | — | — | (1,837,941 | ) | (1,837,941 | ) | ||||||||||
Exchange Differences and Others | 7,311 | 722 | 861 | 8,894 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross carrying amount at December 31, 2017 | 1,691,344 | 1,002,757 | 1,931,510 | 4,625,611 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
(1) ConsistsAs stated above under “Presentation of decreases in the allowanceFinancial and Other Information”, we have prepared our audited consolidated financial statements for loan losses when the loan2018 and 2017 under IFRS. Data for which the allowance was created is no longer on our balance sheet because itpast years has been written-off, or because it has been collected, inprepared under prior accounting framework, which case the allowance is reversed. Loans are 100% provisioned before being written off.not comparable with data prepared under IFRS.
(2) Consists of unsecured checks and accounts receivable deriving from factoring transactions.
| Grupo Supervielle S.A. | ||||||||||||
| Year ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in thousands of Pesos) | ||||||||||||
Balance at the beginning of the year | 638,648 | 429,358 | 353,756 | |||||||||
Provisions charged to income | 1,057,637 | 543,844 | 356,509 | |||||||||
Write-offs and reversals(1) | (776,077 | ) | (334,554 | ) | (280,907 | ) | ||||||
Other adjustments | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Balance at the end of year | 920,208 | 638,648 | 429,358 | |||||||||
|
|
|
|
|
| |||||||
Provisions net ofwrite-offs and reversals | 1.1 | % | 1.2 | % | 0.6 | % | ||||||
Provisions charged to income | ||||||||||||
Promissory notes(2) | 58,557 | 2,228 | 33,143 | |||||||||
Unsecured corporate loans | 34,929 | 31,089 | 15,163 | |||||||||
Overdrafts | 67,737 | 27,392 | 17,752 | |||||||||
Mortgage loans | 2,348 | 58 | 219 | |||||||||
Automobile and other secured loans | 1,512 | 941 | 3,928 | |||||||||
Personal loans | 542,792 | 265,770 | 140,817 | |||||||||
Credit cards loans | 231,421 | 185,849 | 126,429 | |||||||||
Foreign Trade Loans | 67,737 | 1,820 | 4,497 | |||||||||
Other financings | 14,943 | 8,507 | 4,179 | |||||||||
Other receivables from financial transactions | 11,453 | 5,957 | 6,366 | |||||||||
Receivables from financial leases | 24,208 | 14,233 | 4,016 | |||||||||
|
|
|
|
|
| |||||||
| 1,057,637 | 543,844 | 356,509 | ||||||||||
|
|
|
|
|
| |||||||
Write-offs and reversals | ||||||||||||
| Grupo Supervielle S.A. | ||||||||||||
| Year ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in thousands of Pesos) | ||||||||||||
Promissory notes(2) | (40,049 | ) | (6,858 | ) | (18,328 | ) | ||||||
Unsecured corporate loans | (39,488 | ) | (4,403 | ) | (9,191 | ) | ||||||
Overdrafts | (32,948 | ) | (10,895 | ) | (9,721 | ) | ||||||
Mortgage loans | — | (294 | ) | (369 | ) | |||||||
Automobile and other secured loans | (2,636 | ) | (2,608 | ) | (4,293 | ) | ||||||
Personal loans | (372,784 | ) | (186,248 | ) | (142,797 | ) | ||||||
Credit cards loans | (254,072 | ) | (108,206 | ) | (79,733 | ) | ||||||
Foreign Trade Loans | — | — | (3,842 | ) | ||||||||
Other financings | (14,393 | ) | (3,852 | ) | (2,857 | ) | ||||||
Other receivables from financial transactions | (7,291 | ) | (5,234 | ) | (5,558 | ) | ||||||
Receivables from financial leases | (12,416 | ) | (5,956 | ) | (4,218 | ) | ||||||
|
|
|
|
|
| |||||||
| (776,077 | ) | (334,554 | ) | (280,907 | ) | |||||||
|
|
|
|
|
| |||||||
| (1) | Consists of decreases in the allowance for loan losses when the loan for which the allowance was created is no longer on our balance sheet because it has beenwritten-off, or because it has been collected, in which case the allowance is reversed. Loans are 100% provisioned before being written off. |
| (2) | Consists of unsecured checks and accounts receivable deriving from factoring transactions. |
Allocation of the Allowance for Loan Losses and Other Financing
Loans: Promissory notes Unsecured corporate loans Overdrafts Mortgage loans Automobile and other secured loans Personal loans Credit card loans Foreign Trade Loans Other financings Total Loans Other receivables from financial transactions Receivables from financial leases Total The following table allocates the allowance for loan and other financing losses by category of loans and sets forth the percentage distribution of the total allowances for each of the years ended December 31, 2018 and 2017. Grupo Supervielle S.A. As of December 31, 2018 2017 Amount % of Total Financing % of Financing Category Amount % of Total Financing % of Financing Category (in thousand of Pesos, except percentages) 185,219 3.8 % 3.8 % 169,858 3.7 % 3.7 % 245,849 5.0 % 5.1 % 187,145 4.0 % 4.1 % 280,873 5.7 % 5.8 % 309,575 6.7 % 6.8 % 96,154 1.9 % 2.0 % 29,470 0.6 % 0.6 % 172,602 3.5 % 3.6 % 17,564 0.4 % 0.4 % 2,364,865 47.9 % 48.7 % 2,456,930 53.1 % 53.9 % 1,099,178 22.3 % 22.7 % 1,246,315 26.9 % 27.4 % 273,080 5.5 % 5.6 % 49,364 1.1 % 1.1 % 130,770 2.7 % 2.7 % 89,996 1.9 % 2.0 % 4,848,590 98.3 % 100.0 % 4,556,217 98.4 % 100.0 % 24,538 0.5 % 100.0 % 16,816 0.4 % 100.0 % 63,147 1.2 % 100.0 % 52,579 1.1 % 100.0 % 4,936,275 100.0 % 100.0 % 4,625,611 100.0 % 100.0 %
As stated above under “Presentation of Financial and Other Information”, we have prepared our audited consolidated financial statements for loan2018 and other financing losses by category of loans and sets forth the percentage distribution of the total allowances2017 under IFRS. Data for each of thepast years ended December 31, 2017, 2016, 2015, 2014 and 2013. Amounts below include allowances for loans, leasing and other receivables from financial transactions.has been prepared under prior accounting framework, which is not comparable with data prepared under IFRS.
|
| Grupo Supervielle S.A. |
| Grupo Supervielle S.A. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Year ended |
| Year ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2014 |
| 2013 |
| 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Amount |
| % of Total |
| % of |
| Amount |
| % of Total |
| % of |
| Amount |
| % of Total |
| % of |
| Amount |
| % of Total |
| % of |
| Amount |
| % of Total |
| % of |
| Amount | % of Total Financing | % of Financing Category | Amount | % of Total Financing | % of Financing Category | Amount | % of Total Financing | % of Financing Category | |||||||||||||||||||||||||||
|
| (in thousands of Pesos, except percentages) |
| (in thousands of Pesos, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Promissory notes(1) |
| 107,661 |
| 7 | % | 7 | % | 74,272 |
| 8.1 | % | 8.3 | % | 53,627 |
| 8.4 | % | 8.7 | % | 54,891 |
| 12.8 | % | 13.2 | % | 42,726 |
| 12.1 | % | 12.5 | % | ||||||||||||||||||||||||||||||||||||
Promissory notes(1) | 74,272 | 8.1 | % | 8.3 | % | 53,627 | 8.4 | % | 8.7 | % | 54,891 | 12.8 | % | 13.2 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Unsecured corporate loans |
| 70,816 |
| 5 | % | 5 | % | 41,020 |
| 4.5 | % | 4.6 | % | 50,545 |
| 7.9 | % | 8.2 | % | 22,387 |
| 5.2 | % | 5.4 | % | 17,660 |
| 5.0 | % | 5.2 | % | 41,020 | 4.5 | % | 4.6 | % | 50,545 | 7.9 | % | 8.2 | % | 22,387 | 5.2 | % | 5.4 | % | |||||||||||||||||||||
Overdrafts |
| 66,997 |
| 4 | % | 4 | % | 47,237 |
| 5.1 | % | 5.3 | % | 43,902 |
| 6.9 | % | 7.1 | % | 26,601 |
| 6.2 | % | 6.4 | % | 19,888 |
| 5.6 | % | 5.8 | % | 47,237 | 5.1 | % | 5.3 | % | 43,902 | 6.9 | % | �� | 7.1 | % | 26,601 | 6.2 | % | 6.4 | % | ||||||||||||||||||||
Mortgage loans |
| 14,598 |
| 1 | % | 1 | % | 2,203 |
| 0.2 | % | 0.2 | % | 815 |
| 0.1 | % | 0.1 | % | 1,016 |
| 0.2 | % | 0.2 | % | 1,295 |
| 0.4 | % | 0.4 | % | 2,203 | 0.2 | % | 0.2 | % | 815 | 0.1 | % | 0.1 | % | 1,016 | 0.2 | % | 0.2 | % | |||||||||||||||||||||
Automobile and other secured loans |
| 3,475 |
| 0 | % | 0 | % | 993 |
| 0.1 | % | 0.1 | % | 2,535 |
| 0.4 | % | 0.4 | % | 4,244 |
| 1.0 | % | 1.0 | % | 5,147 |
| 1.5 | % | 1.5 | % | 993 | 0.1 | % | 0.1 | % | 2,535 | 0.4 | % | 0.4 | % | 4,244 | 1.0 | % | 1.0 | % | |||||||||||||||||||||
Personal loans |
| 837,490 |
| 53 | % | 55 | % | 446,552 |
| 48.6 | % | 49.7 | % | 225,616 |
| 35.3 | % | 36.5 | % | 149,508 |
| 34.8 | % | 35.9 | % | 122,147 |
| 34.5 | % | 35.7 | % | 446,552 | 48.6 | % | 49.7 | % | 225,616 | 35.3 | % | 36.5 | % | 149,508 | 34.8 | % | 35.9 | % | |||||||||||||||||||||
Credit card loans |
| 236,937 |
| 15 | % | 15 | % | 158,166 |
| 17.2 | % | 17.6 | % | 212,423 |
| 33.3 | % | 34.4 | % | 135,790 |
| 31.6 | % | 32.6 | % | 113,075 |
| 32.0 | % | 33.1 | % | 158,166 | 17.2 | % | 17.6 | % | 212,423 | 33.3 | % | 34.4 | % | 135,790 | 31.6 | % | 32.6 | % | |||||||||||||||||||||
Foreign Trade Loans |
| 31,595 |
| 2 | % | 2 | % | 33,777 |
| 3.7 | % | 3.8 | % | 11,212 |
| 1.8 | % | 1.8 | % | 8,055 |
| 1.9 | % | 1.9 | % | 8,868 |
| 2.5 | % | 2.6 | % | 33,777 | 3.7 | % | 3.8 | % | 11,212 | 1.8 | % | 1.8 | % | 8,055 | 1.9 | % | 1.9 | % | |||||||||||||||||||||
Other financings: |
| 164,029 |
| 10 | % | 11 | % | 94,627 |
| 10.3 | % | 10.5 | % | 16,638 |
| 2.6 | % | 2.7 | % | 14,531 |
| 3.4 | % | 3.5 | % | 11,194 |
| 3.2 | % | 3.3 | % | ||||||||||||||||||||||||||||||||||||
Other financings | 94,627 | 10.3 | % | 10.5 | % | 16,638 | 2.6 | % | 2.7 | % | 14,531 | 3.4 | % | 3.5 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Loans |
| 1,533,598 |
| 98 | % | 100 | % | 899,147 |
| 97.7 | % | 100.0 | % | 617,313 |
| 96.7 | % | 100.0 | % | 417,023 |
| 97.1 | % | 100.0 | % | 342,000 |
| 96.7 | % | 100.0 | % | 899,147 | 97.7 | % | 100.0 | % | 617,313 | 96.7 | % | 100.0 | % | 417,023 | 97.1 | % | 100.0 | % | |||||||||||||||||||||
Other receivables from financial transactions |
| 10,326 |
| 1 | % | 100 | % | 5,807 |
| 0.6 | % | 100.0 | % | 5,944 |
| 0.9 | % | 100.0 | % | 5,221 |
| 1.2 | % | 100.0 | % | 4,439 |
| 1.3 | % | 100.0 | % | 5,807 | 0.6 | % | 100.0 | % | 5,944 | 0.9 | % | 100.0 | % | 5,221 | 1.2 | % | 100.0 | % | |||||||||||||||||||||
Receivables from financial leases |
| 25,356 |
| 2 | % | 100 | % | 15,254 |
| 1.7 | % | 100.0 | % | 15,391 |
| 2.4 | % | 100.0 | % | 7,114 |
| 1.7 | % | 100.0 | % | 7,317 |
| 2.1 | % | 100.0 | % | 15,254 | 1.7 | % | 100.0 | % | 15,391 | 2.4 | % | 100.0 | % | 7,114 | 1.7 | % | 100.0 | % | |||||||||||||||||||||
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total |
| 1,569,280 |
| 100 | % | 100 | % | 920,208 |
| 100.0 | % | 100.0 | % | 638,648 |
| 100.0 | % | 100.0 | % | 429,358 |
| 100.0 | % | 100.0 | % | 353,756 |
| 100.0 | % | 100.0 | % | 920,208 | 100.0 | % | 100.0 | % | 638,648 | 100.0 | % | 100.0 | % | 429,358 | 100.0 | % | 100.0 | % | |||||||||||||||||||||
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | Consists of unsecured checks and accounts receivable deriving from factoring transactions. |
(1) Consists of unsecured checks and accounts receivable deriving from factoring transactions.
Loans and Other Financing Portfolio by Economic Activity
The table below analyzes our loan and other financing portfolio according to the borrower’s main economic activity as of December 31, 2017, 2016, 2015, 20142018 and 2013. Amounts below include allowances for loans, leasing and other receivables from financial transactions.2017.
|
| Grupo Supervielle S.A. |
| ||||||||||||||||||||||||||||||||||
|
| As of December 31, |
| Grupo Supervielle S.A. | |||||||||||||||||||||||||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2014 |
| 2013 |
| As of December 31, | |||||||||||||||||||||||||
|
| Loan |
| % of Loan |
| Loan |
| % of Loan |
| Loan |
| % of Loan |
| Loan |
| % of Loan |
| Loan |
| % of Loan |
| 2018 | 2017 | ||||||||||||||
|
| (in thousands of Pesos, except percentages) |
| Loan Portfolio | % of Loan Portfolio | Loan Portfolio | % of Loan Portfolio | ||||||||||||||||||||||||||||||
Oils and oilseeds |
| 147,262 |
| 0.2 | % | 31,452 |
| 0.1 | % | 40,392 |
| 0.18 | % | 35,021 |
| 0.22 | % | 90,159 |
| 0.73 | % | 255,470 | 0.3 | % | 217,426 | 0.2 | % | ||||||||||
Agriculture, crops and fruit |
| 3,000,710 |
| 5.0 | % | 1,217,849 |
| 3.2 | % | 780,888 |
| 3.50 | % | 1,008,363 |
| 6.29 | % | 752,418 |
| 6.06 | % | 3,582,942 | 4.4 | % | 4,430,416 | 4.8 | % | ||||||||||
Manufactured foodstuff, cattle beef |
| 977,564 |
| 1.6 | % | 611,499 |
| 1.6 | % | 373,955 |
| 1.68 | % | 260,980 |
| 1.63 | % | 272,804 |
| 2.20 | % | 2,099,180 | 2.6 | % | 1,443,330 | 1.6 | % | ||||||||||
Household items, sales / Trading |
| 657,475 |
| 1.1 | % | 744,842 |
| 2.0 | % | 162,113 |
| 0.73 | % | 127,949 |
| 0.80 | % | 308,531 |
| 2.49 | % | 166,692 | 0.2 | % | 970,733 | 1.1 | % | ||||||||||
Automotive vehicles and car parts |
| 1,495,123 |
| 2.5 | % | 360,406 |
| 0.9 | % | 267,917 |
| 1.20 | % | 522,760 |
| 3.26 | % | 300,554 |
| 2.42 | % | 1,925,114 | 2.3 | % | 2,207,483 | 2.4 | % | ||||||||||
Sugar |
| 684,014 |
| 1.1 | % | 256,371 |
| 0.7 | % | 117,589 |
| 0.53 | % | 185,419 |
| 1.16 | % | 113,845 |
| 0.92 | % | 512,403 | 0.6 | % | 1,009,917 | 1.1 | % | ||||||||||
Foreign and local banks |
| 415,393 |
| 0.7 | % | 127,058 |
| 0.3 | % | — |
| — |
| 22,801 |
| 0.14 | % | 108,422 |
| 0.87 | % | 27,255 | 0.0 | % | 613,310 | 0.7 | % | ||||||||||
Alcoholic beverages |
| 146,884 |
| 0.2 | % | 260,210 |
| 0.7 | % | 135,636 |
| 0.61 | % | 104,815 |
| 0.65 | % | 38,592 |
| 0.31 | % | 243,097 | 0.3 | % | 216,868 | 0.2 | % | ||||||||||
Civil construction |
| 1,190,588 |
| 2.0 | % | 745,777 |
| 2.0 | % | 590,772 |
| 2.65 | % | 253,976 |
| 1.58 | % | 180,836 |
| 1.46 | % | 5,012,463 | 6.1 | % | 1,757,851 | 1.9 | % | ||||||||||
Road works and specialized construction |
| 3,424,009 |
| 5.7 | % | 1,772,852 |
| 4.7 | % | 1,090,153 |
| 4.89 | % | 630,765 |
| 3.93 | % | 307,690 |
| 2.48 | % | 2,588,570 | 3.2 | % | 5,055,398 | 5.5 | % | ||||||||||
Cooperatives and small financial institutions |
| 3,222,067 |
| 5.4 | % | 1,171,755 |
| 3.1 | % | 339,852 |
| 1.52 | % | 311,261 |
| 1.94 | % | 344,283 |
| 2.78 | % | 3,884,093 | 4.7 | % | 4,757,240 | 5.2 | % | ||||||||||
Private and public mail services |
| 19,122 |
| 0.0 | % | 42,326 |
| 0.1 | % | 36,510 |
| 0.16 | % | 48,718 |
| 0.30 | % | 51,203 |
| 0.41 | % | 3,291 | 0.0 | % | 28,233 | 0.0 | % | ||||||||||
Cattle raising |
| 199,030 |
| 0.3 | % | 221,898 |
| 0.6 | % | 116,047 |
| 0.52 | % | 85,763 |
| 0.53 | % | 68,659 |
| 0.55 | % | 1,147,330 | 1.4 | % | 293,859 | 0.3 | % | ||||||||||
Leather |
| 120,995 |
| 0.2 | % | 89,509 |
| 0.2 | % | 73,699 |
| 0.33 | % | 90,456 |
| 0.56 | % | 49,776 |
| 0.40 | % | 131,968 | 0.2 | % | 178,644 | 0.2 | % | ||||||||||
Electricity and gas distribution |
| 1,135,089 |
| 1.9 | % | 315,947 |
| 0.8 | % | 66,588 |
| 0.30 | % | 108,440 |
| 0.69 | % | 47,162 |
| 0.38 | % | 894,849 | 1.1 | % | 1,675,909 | 1.8 | % | ||||||||||
Home appliances, audio and video devices, production and importation |
| 236,584 |
| 0.4 | % | 371,177 |
| 1.0 | % | 61,281 |
| 0.27 | % | 121,088 |
| 0.75 | % | 165,025 |
| 1.34 | % | 238,412 | 0.3 | % | 349,306 | 0.4 | % | ||||||||||
Hydrocarbon extraction and production |
| 358,217 |
| 0.6 | % | 400,658 |
| 1.1 | % | 12,610 |
| 0.06 | % | 138,053 |
| 0.86 | % | 88,623 |
| 0.71 | % | 32,306 | 0.0 | % | 528,892 | 0.6 | % | ||||||||||
Families and individuals(1) |
| 28,483,212 |
| 47.4 | % | 19,222,165 |
| 50.5 | % | 13,733,797 |
| 61.60 | % | 7,804,466 |
| 48.66 | % | 5,981,333 |
| 48.21 | % | ||||||||||||||||
Families and individuals(1) | 35,390,262 | 43.1 | % | 42,054,207 | 45.8 | % | |||||||||||||||||||||||||||||||
Hypermarkets and supermarkets |
| 1,550,732 |
| 2.6 | % | 1,324,768 |
| 3.5 | % | 391,316 |
| 1.76 | % | 580,535 |
| 3.62 | % | 349,912 |
| 2.82 | % | 44,448 | 0.1 | % | 2,289,587 | 2.5 | % | ||||||||||
Machines and tools — Production, sale and/or lease |
| 606,425 |
| 1.0 | % | 963,616 |
| 2.5 | % | 183,052 |
| 0.82 | % | 122,331 |
| 0.76 | % | 85,910 |
| 0.69 | % | ||||||||||||||||
Machines and tools – Production, sale and/or lease | 1,496,887 | 1.8 | % | 895,360 | 1.0 | % | |||||||||||||||||||||||||||||||
Motorcycles, parts and accessories |
| — |
| 0.0 | % | — |
| 0.0 | % | — |
| 0.0 | % | — |
| 0.0 | % | — |
| 0.0 | % | 53,826 | 0.1 | % | — | 0.0 | % | ||||||||||
Paper and cardboard |
| 274,312 |
| 0.5 | % | 141,229 |
| 0.4 | % | 70,663 |
| 0.32 | % | 52,404 |
| 0.33 | % | 45,642 |
| 0.37 | % | 322,926 | 0.4 | % | 405,010 | 0.4 | % | ||||||||||
Plastic - Manufactures |
| 824,191 |
| 1.4 | % | 265,851 |
| 0.7 | % | 309,765 |
| 1.39 | % | 247,564 |
| 1.55 | % | 273,101 |
| 2.20 | % | 1,150,078 | 1.4 | % | 1,216,882 | 1.3 | % | ||||||||||
Metal products |
| 155,878 |
| 0.3 | % | 55,185 |
| 0.1 | % | 56,168 |
| 0.25 | % | 59,907 |
| 0.37 | % | 47,547 |
| 0.38 | % | 161,819 | 0.2 | % | 230,147 | 0.3 | % | ||||||||||
Pharmaceutical products and laboratories |
| 519,605 |
| 0.9 | % | 517,629 |
| 1.4 | % | 243,158 |
| 1.09 | % | 203,976 |
| 1.27 | % | 137,143 |
| 1.11 | % | 542,742 | 0.7 | % | 767,174 | 0.8 | % | ||||||||||
Chemical products |
| 392,089 |
| 0.7 | % | 146,341 |
| 0.4 | % | 68,864 |
| 0.31 | % | 156,895 |
| 0.98 | % | 26,652 |
| 0.21 | % | 1,381,908 | 1.7 | % | 578,902 | 0.6 | % | ||||||||||
Waste collection and recycling |
| 384,648 |
| 0.6 | % | 294,848 |
| 0.8 | % | 273,732 |
| 1.23 | % | 88,991 |
| 0.55 | % | 59,604 |
| 0.48 | % | 614,009 | 0.7 | % | 567,916 | 0.6 | % | ||||||||||
Corporate services |
| 629,859 |
| 1.0 | % | 318,056 |
| 0.8 | % | 88,831 |
| 0.40 | % | 72,080 |
| 0.45 | % | 64,989 |
| 0.53 | % | 858,920 | 1.0 | % | 929,959 | 1.0 | % | ||||||||||
Health services |
| 360,065 |
| 0.6 | % | 142,107 |
| 0.4 | % | 59,358 |
| 0.27 | % | 101,869 |
| 0.64 | % | 67,961 |
| 0.55 | % | 595,655 | 0.7 | % | 531,620 | 0.6 | % | ||||||||||
Mineral extraction and production |
| 1,245,624 |
| 2.1 | % | 555,825 |
| 1.5 | % | 69,567 |
| 0.31 | % | 58,143 |
| 0.36 | % | 62,169 |
| 0.50 | % | 3,582,108 | 4.4 | % | 1,839,109 | 2.0 | % | ||||||||||
Telecommunications |
| 15,569 |
| 0.0 | % | 2,964 |
| 0.0 | % | 5,402 |
| 0.02 | % | 9,988 |
| 0.06 | % | 12,441 |
| 0.10 | % | 45,477 | 0.1 | % | 22,987 | 0.0 | % | ||||||||||
Textile industry |
| 551,755 |
| 0.9 | % | 159,865 |
| 0.4 | % | 250,000 |
| 1.12 | % | 258,411 |
| 1.61 | % | 235,666 |
| 1.90 | % | 1,611,223 | 2.0 | % | 814,642 | 0.9 | % | ||||||||||
Cargo transportation |
| 791,186 |
| 1.3 | % | 447,220 |
| 1.2 | % | 322,362 |
| 1.45 | % | 330,371 |
| 2.06 | % | 230,617 |
| 1.86 | % | 1,580,671 | 1.9 | % | 1,168,151 | 1.3 | % | ||||||||||
Wine industry |
| 1,026,849 |
| 1.7 | % | 662,557 |
| 1.7 | % | 396,564 |
| 1.78 | % | 369,166 |
| 2.30 | % | 274,601 |
| 2.21 | % | 2,237,627 | 2.7 | % | 1,516,097 | 1.7 | % | ||||||||||
Real estate agencies |
| 243,297 |
| 0.4 | % | 93,432 |
| 0.2 | % | 42,974 |
| 0.19 | % | 88,897 |
| 0.55 | % | 28,578 |
| 0.23 | % | 229,523 | 0.3 | % | 359,217 | 0.4 | % | ||||||||||
Other(2) |
| 4,569,374 |
| 7.6 | % | 3,985,806 |
| 10.5 | % | 1,462,251 |
| 6.56 | % | 1,376,560 |
| 8.59 | % | 1,133,785 |
| 9.14 | % | ||||||||||||||||
Other(2) | 7,499,195 | 9.1 | % | 9,812,502 | 10.7 | % | |||||||||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||||||||||
Total |
| 60,054,796 |
| 100.0 | % | 38,037,051 |
| 100.0 | % | 22,293,826 |
| 100 | % | 16,039,182 |
| 100 | % | 12,406,233 |
| 100 | % | 82,144,739 | 100.0 | % | 91,734,281 | 100.0 | % | ||||||||||
|
|
|
| ||||||||||||||||||||||||||||||||||
| (1) | Loans for personal consumption. |
| (2) | Includes all other industries. None of such industries exceeds 1% of the total loan and other financing portfolio. |
(1) LoansAs stated above under “Presentation of Financial and Other Information”, we have prepared our audited consolidated financial statements for personal consumption.2018 and 2017 under IFRS. Data for past years has been prepared under prior accounting framework, which is not comparable with data prepared under IFRS.
(2) Includes all other industries. None of such industries exceeds 1% of the total loan and other financing portfolio.
| Grupo Supervielle S.A. | ||||||||||||||||||||||||
| As of December 31, | ||||||||||||||||||||||||
| 2016 | 2015 | 2014 | ||||||||||||||||||||||
| Loan Portfolio | % of Loan Portfolio | Loan Portfolio | % of Loan Portfolio | Loan Portfolio | % of Loan Portfolio | |||||||||||||||||||
| (in thousands of Pesos, except percentages) | ||||||||||||||||||||||||
Oils and oilseeds | 31,452 | 0.1 | % | 40,392 | 0.18 | % | 35,021 | 0.22 | % | |||||||||||||||
Agriculture, crops and fruit | 1,217,849 | 3.2 | % | 780,888 | 3.50 | % | 1,008,363 | 6.29 | % | |||||||||||||||
Manufactured foodstuff, cattle beef | 611,499 | 1.6 | % | 373,955 | 1.68 | % | 260,980 | 1.63 | % | |||||||||||||||
Household items, sales / Trading | 744,842 | 2.0 | % | 162,113 | 0.73 | % | 127,949 | 0.80 | % | |||||||||||||||
Automotive vehicles and car parts | 360,406 | 0.9 | % | 267,917 | 1.20 | % | 522,760 | 3.26 | % | |||||||||||||||
Sugar | 256,371 | 0.7 | % | 117,589 | 0.53 | % | 185,419 | 1.16 | % | |||||||||||||||
Foreign and local banks | 127,058 | 0.3 | % | — | — | 22,801 | 0.14 | % | ||||||||||||||||
Alcoholic beverages | 260,210 | 0.7 | % | 135,636 | 0.61 | % | 104,815 | 0.65 | % | |||||||||||||||
Civil construction | 745,777 | 2.0 | % | 590,772 | 2.65 | % | 253,976 | 1.58 | % | |||||||||||||||
Road works and specialized construction | 1,772,852 | 4.7 | % | 1,090,153 | 4.89 | % | 630,765 | 3.93 | % | |||||||||||||||
| Grupo Supervielle S.A. | ||||||||||||||||||||||||
| As of December 31, | ||||||||||||||||||||||||
| 2016 | 2015 | 2014 | ||||||||||||||||||||||
| Loan Portfolio | % of Loan Portfolio | Loan Portfolio | % of Loan Portfolio | Loan Portfolio | % of Loan Portfolio | |||||||||||||||||||
Cooperatives and small financial institutions | 1,171,755 | 3.1 | % | 339,852 | 1.52 | % | 311,261 | 1.94 | % | |||||||||||||||
Private and public mail services | 42,326 | 0.1 | % | 36,510 | 0.16 | % | 48,718 | 0.30 | % | |||||||||||||||
Cattle raising | 221,898 | 0.6 | % | 116,047 | 0.52 | % | 85,763 | 0.53 | % | |||||||||||||||
Leather | 89,509 | 0.2 | % | 73,699 | 0.33 | % | 90,456 | 0.56 | % | |||||||||||||||
Electricity and gas distribution | 315,947 | 0.8 | % | 66,588 | 0.30 | % | 108,440 | 0.69 | % | |||||||||||||||
Home appliances, audio and video devices, production and importation | 371,177 | 1.0 | % | 61,281 | 0.27 | % | 121,088 | 0.75 | % | |||||||||||||||
Hydrocarbon extraction and production | 400,658 | 1.1 | % | 12,610 | 0.06 | % | 138,053 | 0.86 | % | |||||||||||||||
Families and individuals(1) | 19,222,165 | 50.5 | % | 13,733,797 | 61.60 | % | 7,804,466 | 48.66 | % | |||||||||||||||
Hypermarkets and supermarkets | 1,324,768 | 3.5 | % | 391,316 | 1.76 | % | 580,535 | 3.62 | % | |||||||||||||||
Machines and tools – Production, sale and/or lease | 963,616 | 2.5 | % | 183,052 | 0.82 | % | 122,331 | 0.76 | % | |||||||||||||||
Motorcycles, parts and accessories | — | 0.0 | % | — | 0.0 | % | — | 0.0 | % | |||||||||||||||
Paper and cardboard | 141,229 | 0.4 | % | 70,663 | 0.32 | % | 52,404 | 0.33 | % | |||||||||||||||
Plastic- Manufactures | 265,851 | 0.7 | % | 309,765 | 1.39 | % | 247,564 | 1.55 | % | |||||||||||||||
Metal products | 55,185 | 0.1 | % | 56,168 | 0.25 | % | 59,907 | 0.37 | % | |||||||||||||||
Pharmaceutical products and laboratories | 517,629 | 1.4 | % | 243,158 | 1.09 | % | 203,976 | 1.27 | % | |||||||||||||||
Chemical products | 146,341 | 0.4 | % | 68,864 | 0.31 | % | 156,895 | 0.98 | % | |||||||||||||||
Waste collection and recycling | 294,848 | 0.8 | % | 273,732 | 1.23 | % | 88,991 | 0.55 | % | |||||||||||||||
Corporate services | 318,056 | 0.8 | % | 88,831 | 0.40 | % | 72,080 | 0.45 | % | |||||||||||||||
Health services | 142,107 | 0.4 | % | 59,358 | 0.27 | % | 101,869 | 0.64 | % | |||||||||||||||
Mineral extraction and production | 555,825 | 1.5 | % | 69,567 | 0.31 | % | 58,143 | 0.36 | % | |||||||||||||||
Telecommunications | 2,964 | 0.0 | % | 5,402 | 0.02 | % | 9,988 | 0.06 | % | |||||||||||||||
Textile industry | 159,865 | 0.4 | % | 250,000 | 1.12 | % | 258,411 | 1.61 | % | |||||||||||||||
Cargo transportation | 447,220 | 1.2 | % | 322,362 | 1.45 | % | 330,371 | 2.06 | % | |||||||||||||||
Wine industry | 662,557 | 1.7 | % | 396,564 | 1.78 | % | 369,166 | 2.30 | % | |||||||||||||||
Real estate agencies | 93,432 | 0.2 | % | 42,974 | 0.19 | % | 88,897 | 0.55 | % | |||||||||||||||
Other(2) | 3,985,806 | 10.5 | % | 1,462,251 | 6.56 | % | 1,376,560 | 8.59 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 38,037,051 | 100.0 | % | 22,293,826 | 100 | % | 16,039,182 | 100 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| (1) | Loans for personal consumption. |
| (2) | Includes all other industries. None of such industries exceeds 1% of the total loan and other financing portfolio. |
Composition of Deposits
The following table sets out the composition of each category of deposits by currency of denomination that exceeded 10% of average total deposits at December 31, 2017, 20162018 and 2015.2017.
|
| Year ended December 31, |
| ||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| ||||||
|
| Average |
| Average |
| Average |
| Average |
| Average |
| Average |
|
|
| (in thousands of Pesos, except percentages) |
| ||||||||||
Deposits in domestic bank offices by local depositors |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing checking accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 6,721,317 |
| 0.0 | % | 6,541,551 |
| 0.0 | % | 4,766,849 |
| 0.0 | % |
Dollars |
| 2,762,491 |
| 0.0 | % | 601,764 |
| 0.0 | % | 99,828 |
| 0.0 | % |
Total |
| 9,483,808 |
| 0.0 | % | 7,143,315 |
| 0.0 | % | 4,866,677 |
| 0.0 | % |
Savings accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 8,988,542 |
| 0.0 | % | 6,189,649 |
| 0.1 | % | 4,622,839 |
| 0.1 | % |
Dollars |
| 3,840,462 |
| 0.1 | % | 1,237,333 |
| 0.1 | % | 286,579 |
| 0.1 | % |
Total |
| 12,829,004 |
| 0.1 | % | 7,426,982 |
| 0.1 | % | 4,909,418 |
| 0.1 | % |
Special checking accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
| — |
| — |
| — |
| — |
|
Pesos |
| 4,139,446 |
| 15.3 | % |
|
|
|
|
|
|
|
|
Dollars |
| 1,178,635 |
| 0.3 | % | — |
| — |
| — |
| — |
|
Total |
| 5,318,081 |
| 12.0 | % | — |
| — |
| — |
| — |
|
Time deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 12,567,532 |
| 15.4 | % | 11,645,642 |
| 26.4 | % | 8,952,849 |
| 24.8 | % |
Dollars |
| 1,325,298 |
| 0.31 | % | 806,650 |
| 1.3 | % | 337,459 |
| 0.1 | % |
Total |
| 13,892,830 |
| 12.1 | % | 12,452,292 |
| 24.7 | % | 9,290,308 |
| 24.0 | % |
Deposits in domestic bank offices by foreign depositors |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing checking accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 23 |
|
|
| 67 |
|
|
| 51 |
|
|
|
Dollars |
| — |
|
|
| — |
|
|
| — |
|
|
|
Total |
| 23 |
|
|
| 67 |
|
|
| 51 |
|
|
|
Savings accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 2,782 |
|
|
| 2,735 |
|
|
| 1,416 |
|
|
|
Dollars |
| 7,739 |
|
|
| 1,601 |
|
|
| 315 |
|
|
|
Total |
| 10,521 |
|
|
| 4,336 |
|
|
| 1,731 |
|
|
|
Time deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 372 |
|
|
| 450 |
|
|
| 331 |
|
|
|
Dollars |
| — |
|
|
| — |
|
|
| — |
|
|
|
Total |
| 372 |
|
|
| 450 |
|
|
| 331 |
|
|
|
| Grupo Supervielle S.A. | ||||||||||||||||
| As of December 31, | ||||||||||||||||
| 2018 | 2017 | |||||||||||||||
| Average balance | Average nominal rate | Average balance | Average nominal rate | |||||||||||||
| (in thousands of Pesos, except percentages) | ||||||||||||||||
Deposits in domestic bank offices by local depositors | ||||||||||||||||
Non-interest-bearing current accounts | ||||||||||||||||
Average | ||||||||||||||||
Pesos | 11,254,084 | 0.0 | % | 12,139,305 | 0.0 | % | ||||||||||
Dollars | 8,039,154 | 0.0 | % | 5,497,133 | 0.0 | % | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 19,293,238 | 0.0 | % | 17,636,438 | 0.0 | % | ||||||||||
Savings accounts | ||||||||||||||||
Average | ||||||||||||||||
Pesos | 14,278,477 | 0.3 | % | 16,251,245 | 0.0 | % | ||||||||||
Dollars | 11,398,857 | 0.0 | % | 6,945,709 | 0.0 | % | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 25,677,334 | 0.2 | % | 23,196,954 | 0.0 | % | ||||||||||
Special checking accounts | ||||||||||||||||
Average | ||||||||||||||||
Pesos | 16,894,587 | 30.0 | % | 7,483,676 | 13.4 | % | ||||||||||
Dollars | 5,229,407 | 0.4 | % | 1,628,001 | 0.3 | % | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 22,123,994 | 23.0 | % | 9,111,677 | 11.1 | % | ||||||||||
Time deposits | ||||||||||||||||
Average | ||||||||||||||||
Pesos | 23,580,100 | 27.3 | % | 22,721,433 | 16.5 | % | ||||||||||
Dollars | 4,463,278 | 1.2 | % | 2,395,998 | 0.6 | % | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 28,043,378 | 23.2 | % | 25,117,431 | 15.0 | % | ||||||||||
Deposits in domestic bank offices by foreign depositors | ||||||||||||||||
Non-interest-bearing current accounts | ||||||||||||||||
Average | ||||||||||||||||
Pesos | 180 | — | 34 | — | ||||||||||||
Dollars | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 180 | — | 34 | — | ||||||||||||
Savings accounts | ||||||||||||||||
Average | ||||||||||||||||
Pesos | 3,527 | — | 4,108 | — | ||||||||||||
Dollars | 14,074 | — | 11,426 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 17,601 | — | 15,534 | — | ||||||||||||
Time deposits | ||||||||||||||||
Average | ||||||||||||||||
Pesos | 1,56 | — | 549 | — | ||||||||||||
Dollars | 1,773 | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 3,333 | — | 549 | — |
As stated above under “Presentation of Financial and Other Information”, we have prepared our audited consolidated financial statements for 2018 and 2017 under IFRS. Data for past years has been prepared under prior accounting framework, which is not comparable with data prepared under IFRS.
| Year ended December 31, | ||||||||
| 2016 | ||||||||
| Average balance | Average nominal rate | |||||||
| (in thousands of Pesos, except percentages) | ||||||||
Deposits in domestic bank offices by local depositorsNon-interest-bearing checking accounts | ||||||||
Average | ||||||||
Pesos | 6,541,551 | 0.0 | % | |||||
Dollars | 601,764 | 0.0 | % | |||||
|
|
|
| |||||
Total | 7,143,315 | 0.0 | % | |||||
|
|
|
| |||||
Savings accounts | ||||||||
Average | ||||||||
Pesos | 6,189,649 | 0.1 | % | |||||
Dollars | 1,237,333 | 0.1 | % | |||||
|
|
|
| |||||
Total | 7,426,982 | 0.1 | % | |||||
|
|
|
| |||||
Special checking accounts | ||||||||
Average | — | — | ||||||
Pesos | ||||||||
Dollars | — | — | ||||||
|
|
|
| |||||
Total | — | — | ||||||
|
|
|
| |||||
Time deposits | ||||||||
Average | ||||||||
Pesos | 11,645,642 | 26.4 | % | |||||
Dollars | 806,650 | 1.3 | % | |||||
|
|
|
| |||||
Total | 12,452,292 | 24.7 | % | |||||
|
|
|
| |||||
Deposits in domestic bank offices by foreign depositorsNon-interest-bearing checking accounts | ||||||||
Average | ||||||||
Pesos | 67 | |||||||
Dollars | — | |||||||
|
| |||||||
Total | 67 | |||||||
|
| |||||||
Savings accounts | ||||||||
Average | ||||||||
Pesos | 2,735 | |||||||
Dollars | 1,601 | |||||||
|
| |||||||
Total | 4,336 | |||||||
|
| |||||||
Time deposits | ||||||||
Average | ||||||||
Pesos | 450 | |||||||
Dollars | — | |||||||
|
| |||||||
Total | 450 | |||||||
|
| |||||||
Maturity of Deposits
The following table sets forth information regarding the maturity of our deposits exceeding Ps.100,000 at December 31, 2017.2018.
| ||||
| Grupo Supervielle S.A. | ||||
| As of December 31, | ||||
(in thousands of Pesos) | ||||
Time Deposits | ||||
Within 3 months |
| 18,552,126 | ||
After 3 months but within 6 months |
| 5,339,862 | ||
After 6 months but within 12 months |
| 3,701,683 | ||
Over 12 months |
| 842,081 | ||
| ||||
|
| |||
| 28,435,752 | |||
| (1) |
|
Short-term Borrowings
The table below shows ourshort-term borrowings as of the dates indicated.
| Grupo Supervielle S.A. | |||||||||||||||||||||||||||||
|
| At December 31, |
| As of December 31, | |||||||||||||||||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2018 | 2017 | ||||||||||||||||||||
|
| Amount |
| Annualized |
| Amount |
| Annualized |
| Amount |
| Annualized |
| Amount | Annualized Rate | Amount | Annualized Rate | ||||||||||||
|
| (in thousands of Pesos, except percentages) |
| (in thousands of Pesos, except percentages) | |||||||||||||||||||||||||
International banks and Institutions: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total amount outstanding at the end of the reported period |
| 2,778,102 |
| 3.3 | % | 671,668 |
| 3.0 | % | 128,188 |
| 4.2 | % | 6,785,958 | 17.3 | % | 4,109,375 | 3.3 | % | ||||||||||
Average during period |
| 692,553 |
| 3.5 | % | 200,863 |
| 3.5 | % | 125,731 |
| 2.8 | % | 4,979,134 | 17.3 | % | 1,252,062 | 3.5 | % | ||||||||||
Maximum monthly average |
| 1,770,080 |
|
|
| 634,370 |
|
|
| 264,735 |
|
|
| 8,234,822 | 3,200,116 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Financing received from Argentine financial institutions: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total amount outstanding at the end of the reported period |
| 232,856 |
| 20.6 | % | 940,258 |
| 28.5 | % | 618,775 |
| 31.9 | % | 1,302,490 | 46.8 | % | 69,244 | 20.6 | % | ||||||||||
Average during period |
| 746,603 |
| 22.8 | % | 1,023,259 |
| 30.1 | % | 398,927 |
| 28.8 | % | 2,408,249 | 61.8 | % | 1,349,778 | 22.8 | % | ||||||||||
Maximum monthly average |
| 1,637,914 |
|
|
| 1,212,061 |
|
|
| 585,775 |
|
|
| 4,334,478 | 2,961,174 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Other(1) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total amount outstanding at the end of the reported period |
| 2,608,214 |
| 0.0 | % | 2,233,734 |
| 0.0 | % | 1,709,103 |
| 0.0 | % | 6,223,586 | 16.0 | % | 7,822,617 | 0.0 | % | ||||||||||
Average during year |
| 2,618,507 |
| 0.0 | % | 1,898,011 |
| 0.0 | % | 1,477,502 |
| 0.0 | % | 8,328,997 | 25.0 | % | 4,733,981 | 0.0 | % | ||||||||||
Maximum monthly average |
| 2,886,849 |
|
|
| 2,167,350 |
|
|
| 1,988,276 |
|
|
| 11,185,669 | 5,219,115 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Unsubordinated Corporate Bonds |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total amount outstanding at the end of the reported period |
| 795,647 |
| 26.2 | % | 1,172,341 |
| 24.6 | % | 831,848 |
| 28.9 | % | 8,716,881 | 31.7 | % | 12,265,219 | 26.2 | % | ||||||||||
Average during year |
| 503,994 |
| 29.1 | % | 1,146,906 |
| 29.7 | % | 599,742 |
| 26.3 | % | 2,980,071 | 40.8 | % | 911,167 | 29.1 | % | ||||||||||
Maximum monthly average |
| 1,733,866 |
|
|
| 1,390,135 |
|
|
| 831,848 |
|
|
| 3,362,981 | 3,134,645 | ||||||||||||||
| (1) |
|
As stated above under “Presentation of Financial and other transactions on behalf of third parties, miscellaneous (payment orders abroad)Other Information”, we have prepared our audited consolidated financial statements for 2018 and social security payment orders pending settlement.2017 under IFRS. Data for past years has been prepared under prior accounting framework, which is not comparable with data prepared under IFRS.
| Grupo Supervielle S.A. | ||||||||
| At December 31, 2016 | ||||||||
| Amount | Annualized Rate | |||||||
| (in thousands of Pesos, except percentages) | ||||||||
International banks and Institutions: | ||||||||
Total amount outstanding at the end of the reported period | 671,668 | 3.0 | % | |||||
Average during period | 200,863 | 3.5 | % | |||||
Maximum monthly average | 634,370 | |||||||
Financing received from Argentine financial institutions: | ||||||||
Total amount outstanding at the end of the reported period | 940,258 | 28.5 | % | |||||
Average during period | 1,023,259 | 30.1 | % | |||||
Maximum monthly average | 1,212,061 | |||||||
Other(1) | ||||||||
Total amount outstanding at the end of the reported period | 2,233,734 | 0.0 | % | |||||
Average during year | 1,898,011 | 0.0 | % | |||||
Maximum monthly average | 2,167,350 | |||||||
Unsubordinated Corporate Bonds | ||||||||
Total amount outstanding at the end of the reported period | 1,172,341 | 24.6 | % | |||||
Average during year | 1,146,906 | 29.7 | % | |||||
Maximum monthly average | 1,390,135 | |||||||
| (1) | Includes mainly collections and other transactions on behalf of third parties, miscellaneous (payment orders abroad) and social security payment orders pending settlement. |
Return on Equity and Assets
The following table presents certain selected financial information and ratios for the dates indicated.
|
| Year ended December 31, |
| ||||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| Grupo Supervielle S.A. | |||||||
|
| (in thousands of Pesos, except percentages) |
| As of December 31, | |||||||||||
|
|
|
|
|
|
|
| 2018 | 2017 | ||||||
Net Income |
| 2,437,059 |
| 1,311,304 |
| 674,109 |
| ||||||||
Average total assets(1) |
| 69,599,142 |
| 41,467,412 |
| 26,961,165 |
| ||||||||
| (in thousands of Pesos, except percentages) | |||||||||||||||
Net Income for the yeat attributable to owners of the parent company | (3,028,003 | ) | (754,370 | ) | |||||||||||
Average total assets(1) | 155,479,182 | 126,519,446 | |||||||||||||
Average shareholders’ equity |
| 9,580,785 |
| 4,986,499 |
| 2,094,750 |
| 19,150,644 | 16,214,538 | ||||||
Shareholders’ equity at the end of the period |
| 15,144,798 |
| 6,931,551 |
| 2,373,710 |
| ||||||||
Shareholders’ equity at the end of the period attributable to owners of the parent company | 16,953,987 | 20,069,467 | |||||||||||||
Net income as a percentage of: |
|
|
|
|
|
|
| ||||||||
Average total assets |
| 3.5 | % | 3.2 | % | 2.5 | % | (1.9 | )% | (0.6 | )% | ||||
Average shareholders’ equity |
| 25.4 | % | 26.3 | % | 32.2 | % | (15.8 | )% | (4.7 | )% | ||||
Declared cash dividends |
| 243,706 |
| 65,500 |
| 25,162 |
| 303,000 | 328,363 | ||||||
Dividend payout ratio |
| 10.0 | % | 5.0 | % | 3.7 | % | ||||||||
Dividend payout ratio(2) | (10.0 | )% | (43.5 | )% | |||||||||||
Average shareholders’ equity as a percentage of average total assets |
| 13.8 | % | 12.0 | % | 7.8 | % | 12.3 | % | 12.8 | % | ||||
| (1) |
|
| (2) | Calculated by dividing dividend paid in the year by net income for the year attributable to owners of the parent company under IFRS. As mentioned in note 25 to our audited consolidated financial statements, dividends are paid based on distributable retained earnings calculated in accordance with the rules of the Argentine Central Bank. As of December 31, 2018 and 2017, the dividend payout ratio considering those rules would be 11.8% and 13.4%, respectively. |
As stated above under “Presentation of Financial and Other Information”, we have prepared our audited consolidated financial statements for 2018 and 2017 under IFRS. Data for past years has been prepared under prior accounting framework, which is not comparable with data prepared under IFRS.
| Grupo Supervielle S.A. | ||||
| As of December 31, 2016 | ||||
| (in thousands of Pesos, except percentages) | ||||
Net Income | 1,311,304 | |||
Average total assets(1) | 41,467,412 | |||
Average shareholders’ equity | 4,986,499 | |||
Shareholders’ equity at the end of the period | 6,931,551 | |||
Net income as a percentage of: | ||||
Average total assets | 3.2 | % | ||
Average shareholders’ equity | 26.3 | % | ||
Declared cash dividends | 65,500 | |||
Dividend payout ratio | 5.0 | % | ||
Average shareholders’ equity as a percentage of average total assets | 12.0 | % | ||
| (1) | Calculated on a daily basis. |
Minimum Capital Requirements
Our main subsidiary, the Bank, is required to satisfy minimum capital requirements. The following table sets forth the Bank and CCF’s consolidated minimum capital requirements set by the Superintendency as of the dates indicated.
|
| Year ended December 31, |
| ||||
|
| 2017 |
| 2016 |
| 2015 |
|
|
| (in thousands of Pesos) |
| ||||
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 |
|
Credit Risk Weighted Assets(1) |
| 60,939,300 |
| 39,678,311 |
| 25,248,691 |
|
Risk Weighted Assets(1) |
| 75,301,392 |
| 49,168,958 |
| 34,314,613 |
|
|
|
|
|
|
|
|
|
Selected capital and liquidity ratios: |
|
|
|
|
|
|
|
Regulatory capital/risk weighted assets |
| 13.9 | % | 12.5 | % | 8.7 | % |
Tier 1 Capital / Risk Weighted assets |
| 12.6 | % | 10.9 | % | 6.7 | % |
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 |
| 8.2 | x | 7.8 | x | 10.9 | x |
Cash as a percentage of total deposits |
| 18.2 | % | 22.6 | % | 28.5 | % |
Liquid assets as a percentage of total deposits(2) |
| 42.4 | % | 27.0 | % | 32.6 | % |
(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 2018 and market risk weighted assets are calculated by multiplying their respective required minimum2017 under IFRS. Minimum capital underrequirements 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.
(2) Liquid assets include cash and securities issued by the Central Bank (LEBACs and NOBACs).
| Year ended December 31, | ||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
| (in thousands of Pesos) | ||||||||||||
Calculation of excess capital: | ||||||||||||
Allocated to assets at risk | 6,090,341 | 4,710,391 | 3,178,270 | |||||||||
Allocated to Bank premises and equipment, intangible assets and equity investment assets | 370,233 | 191,549 | 172,154 | |||||||||
Market risk | 301,724 | 121,155 | 45,385 | |||||||||
Public sector and securities in investment account | 96,882 | 131,109 | 78,472 | |||||||||
Operational Risk | 1,486,516 | 1,016,501 | 713,227 | |||||||||
|
|
|
|
|
| |||||||
Required minimum capital under Central Bank regulations | 8,345,696 | 6,170,705 | 4,187,508 | |||||||||
Basic net worth | 11,847,865 | 9,903,099 | 5,706,639 | |||||||||
Complementary net worth | 1,163,939 | 913,256 | 778,885 | |||||||||
Deductions | (867,798 | ) | (386,192 | ) | (338,671 | ) | ||||||
|
|
|
|
|
| |||||||
Total capital under Central Bank regulations | 12,144,006 | 10,430,163 | 6,146,853 | |||||||||
|
|
|
|
|
| |||||||
Excess capital | 3,798,310 | 4,259,458 | 1,959,345 | |||||||||
|
|
|
|
|
| |||||||
Credit Risk Weighted Assets(1) | 79,580,781 | 60,939,300 | 39,678,311 | |||||||||
Risk Weighted Assets(1) | 101,933,777 | 75,301,392 | 49,168,958 | |||||||||
Selected capital and liquidity ratios: | ||||||||||||
Regulatory capital/risk weighted assets | 15.3 | % | 13.9 | % | 12.5 | % | ||||||
Tier 1 Capital / Risk Weighted assets | 11.9 | % | 12.6 | % | 10.9 | % | ||||||
Average shareholders’ equity as a percentage of average total assets | 9.9 | % | 10.5 | % | 11.2 | % | ||||||
Total liabilities as a multiple of total shareholders’ equity | 9.4 | x | 8.2 | x | 7.8 | x | ||||||
Cash as a percentage of total deposits | 35.1 | % | 18.2 | % | 22.6 | % | ||||||
Liquid assets as a percentage of total deposits(2) | 47.4 | % | 42.4 | % | 27.0 | % | ||||||
| (1) | Risk Weighted Assets includes operational risk weighted assets, market risk weighted assets, and credit risk weighted assets. Operational risk weighted assets and market risk weighted assets are calculated by multiplying their respective required minimum capital under Central Bank regulations by 12.5. Credit Risk Weighted Assets is calculated by applying the respective credit risk weights to our assets, following Central Bank regulations. |
| (2) | Liquid assets include cash and securities issued by the Central Bank (LEBACs and NOBACs). |
As of December 31, 2017,2018, the Bank’s Tier 1 capital ratio on a consolidated basis with CCF was 12.6%11.9%, compared to 10.9%12.6% as of December 31, 2016.2017. Including the funds retained at the holding company (Grupo Supervielle) level after thefollow-on equity offering of Grupo Supervielle, which are available for further capital injections into its subsidiaries, the consolidatedpro-forma Tier 1 capital ratio as of December 31, 20172018 was 18.4%12.9%. The bank’s Tier1 ratio coincides with CET 1 ratio.
As of December 31, 2017,2018, the Bank’s total capital ratio onratioon a consolidated basis with CCF was 13.9%15.3% compared to 12.5%13.9% as of December 31, 2016.2017. Including the funds retained at the holding company (Grupo Supervielle) level after thefollow-on equity offering of Grupo Supervielle, which are available for further capital injections into its subsidiaries, the consolidatedpro-forma total capital ratio as of December 31, 20172018 was 19.6%14.0%.
| Item 5. | Operating and Financial Review and Prospects |
| Item 5.A |
This section containsforward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in theforward-looking statements as a result of various factors, including, without limitation, those set forth in “Forward-looking“Forward-looking Statements,” “Item“Item 3.D Risk Factors,” and the matters set forth in this annual report generally.
This discussion should be read in conjunction with our audited consolidated financial statements which are included elsewhere in this annual report.
Financial Presentation
Our audited consolidated financial statements are prepared in accordance with Argentine Banking GAAP. Argentine Banking GAAP differs in certain significant respects from U.S. GAAP and from Argentine GAAP. Note 35 to our audited consolidated financial statements provides a description ofIFRS as issued by 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 ofIASB. IFRS have been adopted for the first time for the year ended on December 31, 2018. Accordingly, comparative figures for the years ended on December 31, 2017 and 2016 and forhave been restated to reflect the years ended December 31, 2017, 2016 and 2015.adjustments from the previous accounting framework to IFRS.
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 ourOur audited consolidated financial statements providesare presented by applying IAS 29 “Financial reporting in hyperinflationary economies”. During 2018, Argentina met the criteria to be considered a descriptionhyperinflationary economy as inflation exceeded 100% in the last 3 years on a cumulative basis, together with other characteristics of the principal differences between Argentine Banking GAAP and IFRS, as they relate to us, and a reconciliation to IFRSeconomic environment that indicate the existence of shareholders’ equity as of December 31, 2017 and January 1, 2017 and of net incomehyperinflation. Accordingly, financial statements were restated for the year ended December 31, 2017.
changes in the general pricing power of the functional currency, using the Consumer Pricing Index (CPI) published by the INDEC.
Our segment disclosure for the years ended December 31, 2017, 20162018 and 20152017 is presented on a basis that corresponds with our internal reporting structure and is consistent with the manner in which our Board of Directors regularly evaluates the components of our operations in deciding how to allocate resources and in assessing the performance of our business.
We measure the performance of each of our business segments primarily in terms of net income (i.e., net revenues—revenues–or financial income and service fee income, net of financial expenses and service fee expenses—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.”
We operate our business along the following segments:
| • |
|
Corporate Banking: Through the Bank, we offer large corporations,medium-sized Treasury: The Treasury Segment is primarily responsible for the allocation of the Bank’s liquidity according to the needs and opportunities of the retail, corporate banking and treasury segments. The Treasury Segment implements the Bank’s financial risk management policies, manages the Bank’s trading desk, distributes treasury products, such as debt securities, and develops businesses with wholesale financial andnon-financial·• 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, corporate banking and treasury segments. The Treasury Segment implements the Bank’s financial risk management policies, manages the Bank’s trading desk, distributes treasury products, such as debt securities, and develops businesses with wholesale financial and non-financial clients.
| • | 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, Supervielle offersnon-financial products and services. Since the MILA acquisition, its new portfolio of used car loans and its respective results are recorded under Consumer Finance Segment. |
·Consumer Finance: Through CCF and Tarjeta, we offer credit card services and loans to the middle and lower-middle-income sectors. Through an exclusive agreement with Walmart Argentina, our offer of products includes consumer loans, credit cards and insurance products.
| • | Insurance: Supervielle Seguros began issuing its first insurance policies in October 2014 starting with a fewnon-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 the Bank 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. |
| • | Asset Management and Other Services: We also offer a variety of other services to its customers, including mutual fund products through Supervielle Asset Management. Since May 2018, Supervielle also offers products and services through InvertirOnline S.A.U. Since the MILA acquisition, the new portfolio of used car loans and its respective results are recorded under Consumer Finance Segment. MILA portfolio outstanding at the moment of the acquisition and its respective results are recorded under Asset Management and Others Segment. We offered microcredit financing through Cordial Microfinanzas. On March 31, 2017, we and the Bank sold our shares of Cordial Microfinanzas to Ciudad Microempresas. |
·Insurance: Supervielle Seguros began issuing its first insurance 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 the Bank 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..
·Asset Management & Other Services: We also offer a a variety of other services, including mutual fund products through Supervielle Asset Management and non-financial products and services through Espacio Cordial. Until March 31, 2017, we offered microcredit financing through Cordial Microfinanzas. On March 31, 2017, we and the Bank sold our shares of Cordial Microfinanzas to Ciudad Microempresas.
The Argentine Economy and Financial System
Introduction
According to recent International Monetary Fund (“IMF”)IMF estimates, the world economy is estimated to have grown by 3.6%3.7% in 2017, an improvement over2018, a slight deceleration as compared to the 3.2%3.8% growth recorded in 2016.2017. This greater economic expansion is the result of ana 4.6% estimated growth of 4.6% in emerging market countries and 2.2%a 2.3% estimated growth in developing market countries, anddeveloped countries. This growth deceleration occurred in a context of accelerateda falling growth rate in world trade (4.2%(4% in 2018 vs. 5.2% in 2017) due to the U.S. China trade conflict, the rise of international interest rates, particularly in the U.S., and the financial crisis in Turkey and Argentina, which gave rise to doubt with regard to growth in such year.
During 2018, practically all the currencies of Argentina’s business partners depreciated as compared to 2.4%the US dollar in nominal terms (except for the Japanese Yen and the Swiss Franc), which boosted even more the Argentine Peso’s depreciation during the year. In addition, due to tax and Payment Balance deficits, and within a context of capital flight from emerging countries, the local currency suffered a greater punishment than that of its peers. In real terms the Peso depreciated 23.5% on average (and 35.5%year-on-year in December 2018) according to the Central Bank’s Multilateral Real Exchange Rate Index.
In relation to Argentina, 2018 was featured by the discrepancy between the market expectations at the close of 2017 and what finally happened during the year. By way of example, in the Central Bank’s Market Expectations Survey (REM) of November 2017, economists estimated that the general inflation rate for the year would be 16.6%, the Currency Policy Rate (TPM) would end at 22%, the Nominal Exchange Rate (TCN) would close at Ps.20.3 and the economy would grow by 3.1%. Final data were far from expected as can be seen below.
Part of the explanation for such discrepancy lies on the international context described above which, despite the expectations at the beginning of the year, changed dramatically as compared to what had been observed during 2016 respectively).
Afterand 2017. This change made Argentina suffer more than the rest of emerging countries as a result of its vulnerability due to its high twin deficits (tax and checking account deficits) which reached historical maximums, with the need of foreign currency short term financing. This change in the international context, together with the rise in oil prices and the increase of administration in Argentina in late 2015, several corrective measures were put in place with respectcountry risk, led to the Argentine economy. In 2017,adoption of the administration introduced further structural financial and economic reforms.decision to seek assistance from the IMF so as to receive preventive financing. The first measures adopted includedStand By agreement was entered into on June 12, 2018. However, pressure on the exchange rate and the increase in the country risk continued, leading to a new agreement with the IMF for credit assistance, from the initially agreed upon U.S.$.50,000 million to U.S.$.57,000 million, including even tougher targets than the tax amnesty implemented by late 2016. balance target, which included meeting the primary balance target in 2019 and a primary tax surplus of 1% in GDP terms in 2020.
The Argentinehandling of the monetary policy did not contribute to mitigating the complex situation, which could be noticed in the pressure repeatedly exerted on the exchange market at the beginning of April. At first, the idea was to counteract such effects with reference interest rate rises and exchange rate interventions, which did not bring about the expected results. However, as the situation worsened, on June 14, Federico Sturzenegger resigned to his position as Central Bank continued implementing its inflation goalsgovernor and despite failingwas replaced by Luis Caputo (former Minister of Finance). Caputo’s management sought to reachincrease interest rate rises and foreign exchange interventions with constant increases in legal maximum reserve requirements in order to control foreign exchange volatility. Nevertheless, the goal initially proposedexpected results were never achieved and only three months after taking office, Caputo resigned and was replaced by Guido Sandleris (former Secretary of Economic Policy of the Ministry of FinanceEconomy) who implemented a new monetary and foreign exchange program aimed at having monetary aggregates as anchor, as agreed in 2016, managed to materially reduce the inflation rate.Memorandum of Understanding entered into with the IMF.
The Argentine Economy
Beginning in December 2001 and for most of 2002, Argentina experienced one of the most severe crises in its history which nearly left its economy at a standstill and deeply affected its financial sector. Between 2004 and 2009, the Argentine economy and the financial sector recovered considerably. Since 2009, the Argentine economy has shown increased volatility, with years of practically no growth (2009, 2012 and 2014), and years of strong (2010 and 2011) or slow (2013) growth.
In January 2007, the INDEC, which is the only institution in Argentina with the statutory authority to produce official nationwide statistics, modified the methodology used to calculate certain of its indices. On January 8, 2016, the Macri administration issued Decree No. 55/2016 declaring a state of administrative emergency with respect to the national statistical system and the INDEC until December 31, 2016. During this state of emergency, the INDEC suspended the publication of certain statistical data until it completed a reorganization of its technical and administrative structure to be 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 data, including inflation rates, GDP, foreign trade, poverty and balance of payment statistics among others.
The table below includes certain economic indicators in Argentina for the years indicated:
|
| December 31, |
| ||||||||||||||||||||||
|
| 2006 |
| 2007 |
| 2008 |
| 2009 |
| 2010 |
| 2011 |
| 2012 |
| 2013 |
| 2014 |
| 2015 |
| 2016 |
| 2017 |
|
GDP real growth (%)** |
| 8.0 |
| 9.0 |
| 4.1 |
| (5.9 | ) | 10.1 |
| 6.0 |
| (1.0 | ) | 2.4 |
| (2.5 | ) | 2.6 |
| (2.2 | ) | 2.9 | (4) |
Primary fiscal balance (excludes interest) (as a % of GDP) |
| 2.9 |
| 2.5 |
| 2.5 |
| 1.2 |
| 1.4 |
| 0.2 |
| (0.2 | ) | (0.7 | ) | (0.9 | ) | (2.7 | ) | (4.3 | )* | 3.9 |
|
Total public debt (as a % of GDP)** |
| 70.6 |
| 62.1 |
| 53.8 |
| 55.4 |
| 43.5 |
| 38.9 |
| 40.4 |
| 43.5 |
| 44.7 |
| 53.5 |
| 54.2 |
| 53.7 | (2) |
Trade balance (in million U.S.$)** |
| 12,393 |
| 11,273 |
| 12,577 |
| 16,886 |
| 11,382 |
| 9,020 |
| 12,008 |
| 1,521 |
| 3,178 |
| (2,969 | ) | 2,124 |
| (8,471 | ) |
Total deposits (as a % of GDP)** |
| 23.3 |
| 22.4 |
| 20.1 |
| 15.8 |
| 22.4 |
| 20.8 |
| 22.2 |
| 22.2 |
| 21.1 |
| 22.8 |
| 23.5 |
| 23.1 | (6) |
Loans to the private sector (as a % of GDP) |
| 10.4 |
| 11.9 |
| 11.2 |
| 8.4 |
| 11.8 |
| 13.2 |
| 14.2 |
| 14.7 |
| 12.9 |
| 13.7 |
| 13.1 |
| 15.4 | (6) |
Unemployment rate-end year- (%) |
| 8.7 |
| 7.5 |
| 7.3 |
| 8.4 |
| 7.3 |
| 6.7 |
| 6.9 |
| 6.4 |
| 6.9 |
| 5.9 | (3) | 7.6 |
| 7.2 | (5) |
Inflation in consumer prices —Dec./Dec. - CPI INDEC (%) |
| 9.8 |
| 8.5 |
| 7.2 |
| 7.7 |
| 10.9 |
| 9.5 |
| 10.8 |
| 10.9 |
| 23.9 |
| 26.9 | (1) | 41.0 | (1) | 24.8 |
|
Average nominal exchange rate (in Ps. Per U.S.$) |
| 3.07 |
| 3.12 |
| 3.16 |
| 3.73 |
| 3.91 |
| 4.13 |
| 4.55 |
| 5.48 |
| 8.12 |
| 9.27 |
| 14.78 |
| 16.57 |
|
| December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||||||||||||||||||||||||||
GDP real growth (%)** | 8.0 | 9.0 | 4.1 | (5.9 | ) | 10.1 | 6.0 | (1.0 | ) | 2.4 | (2.5 | ) | 2.7 | (2.1 | ) | 2.7 | (2.5 | ) | ||||||||||||||||||||||||||||||||||
Primary fiscal balance (excludes interest) (as a % of GDP) | 2.9 | 2.5 | 2.5 | 1.2 | 1.4 | 0.2 | (0.2 | ) | (0.7 | ) | (0.9 | ) | (2.7 | ) | (4.3 | )* | (3.9 | ) | (2.4 | ) | ||||||||||||||||||||||||||||||||
Total public debt (as a % of GDP)** | 70.6 | 62.1 | 53.8 | 55.4 | 43.5 | 38.9 | 40.4 | 43.5 | 44.7 | 52.6 | 53.3 | 57.1 | 95.4 | (2) | ||||||||||||||||||||||||||||||||||||||
Trade balance (in million U.S.$)** | 12,393 | 11,273 | 12,577 | 16,886 | 11,382 | 9,020 | 12,010 | 1,523 | 2,669 | (3,420 | ) | 2,059 | (8,309 | ) | (3,821 | ) | ||||||||||||||||||||||||||||||||||||
| December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||||||||||||||||||||||||||
Total deposits (as a % of GDP)** | 23.3 | 22.4 | 20.1 | 15.8 | 22.4 | 20.8 | 22.2 | 22.5 | 21.4 | 22.8 | 23.9 | 23.0 | 28.1 | |||||||||||||||||||||||||||||||||||||||
Loans to the private sector (as a % of GDP) | 10.4 | 11.9 | 11.2 | 8.4 | 11.8 | 13.2 | 14.2 | 15.0 | 13.2 | 13.8 | 13.2 | 15.5 | 16.2 | |||||||||||||||||||||||||||||||||||||||
Unemploymentrate-endyear- (%) | 8.7 | 7.5 | 7.3 | 8.4 | 7.3 | 6.7 | 6.9 | 6.4 | 6.9 | 5.9 | (3) | 7.6 | 7.2 | 9.1 | (4) | |||||||||||||||||||||||||||||||||||||
Inflation in consumer prices –Dec./Dec.- CPI INDEC (%) | 9.8 | 8.5 | 7.2 | 7.7 | 10.9 | 9.5 | 10.8 | 10.9 | 23.9 | 26.9 | (1) | 41.0 | (1) | 24.8 | 47.6 | |||||||||||||||||||||||||||||||||||||
Average nominal exchange rate (in Ps.Per U.S.$) | 3.07 | 3.12 | 3.16 | 3.73 | 3.91 | 4.13 | 4.55 | 5.48 | 8.12 | 9.27 | 14.78 | 16.57 | 28.09 | |||||||||||||||||||||||||||||||||||||||
Source: INDEC, Central Bank and City of Buenos Aires.
| (1) |
|
| (2) | As of September 30, 2018 |
| (3) | As of September 30, 2015. |
| (4) | As of December 31, 2018. |
| ** | These figures are calculated in accordance with the latest methodological reforms and adjustments for macroeconomic statistics as of the date of this annual report. |
| *** | These figures are calculated in accordance with the latest methodological reforms and the adjustments for macroeconomic statistics as of the date of this annual report. It does not include funds transferred from the Central Bank and from the Treasury. |
In 2013, Argentina’s real GDP grew 2.4% as compared to 2012, as domestic demand in 2013 helped to offset weak demand for Argentina’s exports.
In 2014, Argentina’s GDP contracted by 2.5% as compared to 2013, reflecting the impact of the deceleration of growth in developing economies on Argentina’s exports, growing uncertainty in the financial sector and fluctuations in foreign exchange rates.
In 2015, Argentina’s GDP increased by 2.5%2.7%, reflecting a recovery in consumption due to an improvement in the labor market and investment. GDP growth in 2015 was primarily driven by a 3.8%3.5% increase in gross investment, resulting from a 5.2%5.9% increase in total durable equipment of production and a 2.3%2.5% increase in construction, as well as a 4.0%4.2% increase in total consumption due to a 6.8%6.9% increase in public sector consumption and a 3.5%3.7% increase in private sector consumption.
In 2016, Argentina’s GDP decreased 2.2%2.1%. Imports of goods and services increased by 5.7%5.8% while investments in durable equipment for production decreased by 5.1%2.5%. Exported goods and services, however, increased by 3.7%5.3%.
In 2017, Argentina’s GDP recovered by 2.9%2.7%, recording 0.6%0.3%, 3.0%2.1%, 3.8% and 3.9% 4.5%year-on-year growth rates for the four quarters of the year, respectively.
During 2016,In 2018, Argentina’s GDP decreased by 2.5%. As regards the Macri administration introduced structural reformsannual dynamics, the economic activity recorded a positiveyear-on-year growth rate only in the financialfirst quarter (4.1%) and economic sectors. It was a transitional year in which macroeconomic corrections were made, such as the agreement reached with Argentina’s holdout creditors and the return of the Argentine government to the international debt market, the elimination of duties, the normalization of the INDEC, the adoption of energy efficiency measures and the universalization of benefits. The Central Bank adopted monetary measures that supported macroeconomic changes by strengthening the position of international reserves and by using a system of inflation targets. During 2017, the outcome of the mid-term legislative elections paved the way for the structural and social security reform law, which provides for a changethen negative rates in the calculation of pensionssecond (-3.8%), third quarter(-3.7%) and for the possibility that employees work for an additional five years beyond the pension eligibility age. In addition, a tax agreement between the federal government and all provinces (except for San Luis) and the City of Buenos Aires was entered into to reduce taxation, and the Tax Reform Law was passed by Congress in the last session of 2017. Further, utility rates were adjusted, allowing the government to materially reduce subsidies. On December 27, 2017, the Central Bank adopted 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, adjusting the pace of reduction announced in 2017 by one year.
fourth quarter (-6.2%).
Foreign Trade and Foreign Exchange Market
During 2017,2018 the trade balance recordeddeficit amounted to U.S.$.3,820 million, which implies a U.S.$8.5 billion deficit,drop as compared to athe U.S.$2.0 billion surplus.8,309 million deficit of 2017. The change in 2016.the dynamics of the trade balance is the result of the fall in the activity level which began as frommid-year, and of the foreign exchange depreciation which improved the relative prices of exportsvis-a-vis imports. While exports remained stable compared to 2016,increased 5.1% during the year, imports increased by 19.7%dropped 2.2%, recording
a greater fall in the last months (27.1% for the last month). Exports recorded reductionsa 0.5% fall caused by the drop in all sectors except for industrialsales of primary products and agricultural manufactured goods, which grewwere affected by 9.1%. Imports grewthe draught of the first months of the year. On the other hand, imports fell 6.5% due to the fall of capital goods and vehicles.
As was the case in all sectors, except for fuel, which recorded a 3% drop. The imports of vehicles increased by 40%.
International2016 and 2017, international reserves ofat the Central Bank grewrose by U.S.$15.7 billion,.10,751 million, ending 2017 at U.S.$55.1 billion.
The Nominal Exchange Rate ended 2017 at Ps.18.80 to U.S.$1.00, an 18.4% increase from December 31, 2016. While the Central Bank did not directly intervene in the exchange market in any significant manner during most of the year it did influence the Peso/with a stock of U.S. dollar exchange value$.65,806 million. However, 2018 was marked by the endstrong reduction of the year by reducting in the interest rates of medium term Letras del Banco Central (“LEBAC”), which encouraged a demand for US dollars.
Labor Market
In 2017, wages in Argentina increased by 27.5%international reserves on several occasions as a result of the sale of foreign currency to contain the devaluation, which reduction was later set off by loans mainly from the IMF. The most relevant reduction events were on June 21, when international reserves reached a 26.5% increaseminimum of U.S.$.48,478 million to then go up on the next day as a result of the first IMF disbursement, and on October 29, when reserves reached a minimum again (U.S.$.47,867 million) to then rise again on the next day, and in December, as a result of successive IMF disbursements and the the enhancement of a currency swap with the Central Bank of the People’s Republic of China.
The nominal exchange rate at the end of 2018 was Ps.37.8, up from Ps.19.03, which accounts for a devaluation of 101.4% as compared to the prior year closing. 2018 was marked by periods of strong devaluation, the most relevant being those recorded in May (+20.6%), June (+15.7%) and August (+35.8%), which forced the Central Bank to intervene on a daily basis in the foreign exchange market through sales of U.S.$.15,968 million with a view to containing the rise of the nominal exchange rate, but no successful results were achieved.
Labor Market
In 2018, total wages grew by 29.7%year-on-year as a result of the 30.4% rise of the total number of registered employees and the 31.5% increase27.2% rise of the private sectornon-registered employees. TheOn the other hand, the wages of private sector registered employees grew by 27.3%30.4% and those of the public sector grew by 25.0%30.3%. In all cases, wages grew above inflation.well below inflation, thus causing the fall of real wages.
The unemployment ratesrate of the first, second, third and fourth quarter were 9.1%, 9.6%, 9% and 9.1%, respectively, averaging 9.2% in the fourth quarters of 2017 stood at 9.2%, 8.7%, 8.3% and 7.2%, respectively, averaging 8.4% in 2017. There was a slight decrease of 40 basis points inthe year. Comparing the average unemployment rates of the first three quarters of 2018, there was an increase of 50 basic points (from 8.7% in 2017 to 9.2% in 2018). On the other hand, the activity rate ofincreased was 46.5% in the fourth quarter of 20172018 compared to 46.4% in comparison with that of the fourth quarter of 2016.
2017.
Fiscal Balance
In February 2017, the MinisterOne of the Treasury, Nicolás Dujovne, announced fiscal account targets for 2017 to 2019, which include primary deficit goals of a 1% reduction per year in the fiscal deficit: 4.2% of GDP in 2017, 3.2% of GDP in 2018 and 2.2% of GDP in 2019. The primary deficit goal of 1.2% in 2020 was announced in December 2017. According to the Ministrycritical aspects of the Treasury,year was access to financing by the fiscal deficit for 2017 was 3.9%U.S. Federal Treasury. While at the beginning of GDP, exceeding the proposed objectives. To reduce the fiscal deficit, the government increased utilities rates, mainly of electricity and gas. A new Pension Law andyear (with a Tax Reform Law passed in December 2017 provide, among other things, for a reduction in income tax rates for companies that reinvest their profits and changes to the income tax treatment applicable to financial income, and reduction of employer contributions. Changes will be deployed over five years. During 2017, fiscal revenues increased by 23.0%, while expenses fiscal increased by 22.0%. Reduction in economic subsidies ((22)% since December 2016), in particular in the energy sector, contributed to fulfilling the fiscal targets of 2017.
The government managed to secure funding in domestic and international debt markets, issuing bonds both in Pesos and in foreign currency, while the country risk (measured by J.P. Morgan’s EMBI index + Arg.) strongly fell 103 basis points from 453 by late 2016 to 350 by late 2017. This reduction came along with a spread reduction from 91of 349 basis points at the end of 20162017) the Government managed to only 22 basissecure foreign financing for U.S.$.9,000 million, external and internal shocks caused a constant increase of the country risk, which rose to 612 basic points (a 263 basic point increase). This severely limited access to the international markets and led to the execution of an agreement with the IMF for the first time since 2005. Thus, on June 12, the firststand-by36-month agreement was entered into with the IMF, which established certain fiscal and monetary targets. In exchange, the country obtained special drawing rights (“SRD”) 35,379 million—equivalent to approximately U.S.$.50,000 million— the first disbursement being of approximately U.S.$.15,000 million on June 20 and then U.S.$.2,900 million quarterly disbursements as from September, until June 2021, provided the agreed upon targets are met. However, after the first disbursement, the government was forced to renegotiate the IMF agreement due to the greater volatility, the rise in the nominal exchange rate and the increase in the country risk to about 800 basic points by late August (811 basic points at year end). On October 17, the Government entered into a secondstand-by agreement with the IMF increasing the agreement amount by SDR5,335 million (approximately U.S.$.7,100 million) reaching a total of U.S.$.57,000 million, in addition to the rescheduling of disbursements, advancing funds through December 2018 for SDR9,600 million (approximately U.S.$.13,400 million) reaching a total of U.S.$.28,400 million in the year, and SDR16,300 (approximately U.S.$.22,650 million) in 2019. At the end of 20172019, 90% of the agreed amount is expected to be disbursed if all targets have been achieved.
As a result of the IMF agreement, the Government accelerated the fiscal deficit reduction in Emerging Risk (measuredorder to gain access to the IMF disbursements. In such regard, the Government committed to having a primary fiscal deficit of 2.7% (as compared to the 2018 GDP), achieving the primary fiscal balance target in 2019 and a primary fiscal surplus of 1%, as compared to the 2020 GDP. Nicolás Dujovne, the Minister of Economy, announced on January 18, 2019 that the government achieved the IMF target of 2.4% primary deficit as compared to the GDP, which was reduced by J.P. Morgan’s EMBI index + Arg.1.4
p.p. as compared to the previous year. This was possible thanks to the rise in income during the year by 30.2% while primary expenses rose to 22.4% due to the limits imposed to capital expense (+1.1%) and other current expenses (+19.6%) which included, among other, discretional transfers to the provinces. However, the financial deficit closed at 5.2% as compared to the GDP, with a 0.8 percentage points decrease as compared to the primary deficit, due to the 72.9% increase of interest rates during the year. Looking to 2019, the Government and the Argentine Congress approve the national budget which complied with the IMF targets. To meet the primary balance target new taxes would have to be imposed (export taxes and increase of personal assets tax) and expenses would have to be reduced, mainly of capital and subsidies (transfer of subsidies to the provinces and increase in utilities rates).
Inflation
Argentina has faced and continues to face inflationary pressures. From 2011 to date, Argentina experienced increases in inflation as measured by CPI and WPI that reflected the continued growth in the levels of private consumption and economic activity (including exports and public and private sector investment), which applied upward pressure on the demand for goods and services.
On January 8, 2016, based on its determination that the INDEC had failed to produce reliable statistical information, particularly with respect to CPI, GDP and foreign trade data, as well as poverty and unemployment rates, President Macri declared a state of administrative emergency for the national statistical system and the INDEC until December 31, 2016. The INDEC suspended publication of certain statistical data pending reorganization of its technical and administrative structure to recover its ability to produce reliable statistical information. The INDEC published official CPI figures published by the City of Buenos Aires and the Province of San Luis for reference for the first four months of 2016. In June 2016, the INDEC began publishing an official inflation rate using its new methodology for calculating the CPI.
According to the available public information based on data from the City of Buenos Aires, CPI grew 38.0% in 2014, 26.9% in 2015, 41.0% in 2016 and 26.1% in 2017, while according to the data of the Province of San Luis, CPI grew 31.9% in 2013, 39.0% in 2014, 31.6% in 2015, 31.4% in 2016 and 24.3% in 2017.
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%. Based on the most recent information published by the INDEC, the CPI for the months of July, August, September, October, November and December 2016 registered variations of 2.0%, 0.2%, 1.1%, 2.4%, 1.6% and 1.2%, respectively, compared to the respective prior month. According to INDEC’s CPI, inflation was 16.9% for the period from May to December 2016.
On July 11, 2017, the INDEC started to publish a national CPI (the “National CPI”). The National CPI is based on a survey conducted by INDEC and several provincial statistical offices in 39 urban areas encompassing each of the Republic’s provinces. Results are not reported by the provinces, but on a national level and for six statistical regions: the Greater Buenos Aires Metropolitan area (which is the CPI that resumed publication in June 2016), the Cuyo region, the Northeast region, the Northwest region, the Central (Pampeana) Region and the Southern (Patagonia) region. The inflation rate for June, July, August, September and October, November and December 2017 and January and February
2018 published by the INDEC using the National CPI methodology was 1.2%, 1.7%, 1.4%, 1.9%, 1.5 %, 1.4%, 3.1%, 1.8% and 2.4%, respectively. For the period of January through December 2017,2018, accumulated inflation using the National CPI was 24.6%.47.6% comprared to 24.8% for 2017. In the past, the Argentine government has implemented programs to control inflation and monitor prices for essential goods and services, including attempts to freeze the price of certain supermarket products, and price support arrangements agreed between the Argentine government and private sector companies in several industries and markets that did not address the structural causes of inflation and failed to reduce inflation. Adjustments approved by the Argentine government in electricity and gas tariffs, as well as the increase in the price of gasoline have been passed through to prices, creating additional inflationary pressures.
The National CPI is prepared in accordance with current international standards and classifies individual consumption by purpose, previously used in the preparation of the former CPI. The adoption of the National CPI brings Argentina’s statistical practice in line with the OECD guidelines as well as the methodology followed by the statistical divisions of several international organizations, including the United Nations, World Bank, International Monetary Fund, Economic Commission for Latin America and the Caribbean, and the Inter-American Development Bank.
According to the INDEC, in 2017,2018 inflation was 47.6% while the core inflation rate (excluding regulated and seasonal goods prices) was 47.7%, as compared to the 24.8%, rate and 21.1% core inflation rate in 2017. The inflation rate was well above the 15% inflation rate target determined by the currencymonetary authority which was between 12% to 17%. On December 27, 2017,at the Central Bank adopted the inflation targets set by the Ministrybeginning of the Treasury foryear and the next three years, including targetsmarket expectations. Price increase accelerated in the third and fourth quarters due to successive devaluations, particularly following the increase of 15% for 2018, 10% for 2019 and 5% bythe nominal exchange rate at the end of 2020, adjustingAugust, and inflation reached its peak since 1991. Notwithstanding the paceforegoing, in October the Government implemented a new monetary plan based on the control of reduction announcedmonetary aggregates and a nominal exchange rate flotation band which is adjusted on a daily basis to anchor the economy and lower inflation expectations
As regards inflation components in 20172018, the price expansion was led by one year. Ingoods, with increases of 50.5%, while services increased by 42.8%. This was due to the past,fact that large devaluations have a greater impact on tradable goods than innon-tradable ones (services). This may be clearly seen in the Argentine government implemented programswholesale inflation rate (mostly affected by price increases due to control inflation and monitor prices for essential goods and services, including attempts to freeze the pricesdevaluation), which was of certain supermarket products, and price support arrangements agreed between the Argentine government and private sector companies in several industries and markets.73.5%, well above retail inflation.
During periods of high inflation, effective wages and salaries tend to fall and consumers adjust their consumption patterns to eliminate unnecessary expenses. The increase in inflationary risk may erode macroeconomic growth and further limit the availability of financing, causing a negative impact on our operations. See “Item 3.D—Risk Factors—Risks Relating to Argentina—If the current levels of inflation continue, the Argentine economy and our financial position and business could be adversely affected.”
Inflation increases also have a negative impact on our administrative expenses, in particular our payroll and social security charges.
The Financial System
In 2015, total depositsDuring 2018 the financial system liquidity increased by Ps.375.0 billion, representing a 38.3% increase from 2014, as reported bydue to the Central Bank. Public sector deposits increased by Ps.33.6 billion in 2015, representing a 13.1% increase from 2014. Non-financial private sector deposits increased by Ps.337.3 billion in 2015, representing a 47.2% increase from 2014, primarily driven by a Ps.263.5 billion increase, or a 40.7% increase in Peso deposits. Further,deposits, well above loans, in 2015, foreign currency deposits increased by Ps.78.8 billion or 101.8%. In termsa scenario of Peso deposits, the most significant were time deposits, which increased by Ps.159.0 billion or 56.1% from 2014, followed by savings accounts, registering a Ps.57.7 billion increase or 32.8% increase from 2014, and checking accounts, which increased by Ps.42.0 billion or 25.2% from 2014.
rising interest rates. The broad liquidity ratio (including not only cash but also Central Bank reported that total loans increased by Ps.245.6 billioninstruments and the Argentine treasury bills with maturity in 2015, representing a 36.9% increase from 2014. Non-financial private sector loans increased by Ps.223.9 billion or 37.1% from 2014. This increase was mainly due to an increase2020 -“Bonar 20”- recorded as reserve requirements) of the banks in loans denominatedaggregate reached 56% of deposits in Pesos, which grew by Ps.208.5 billion or 37.0% from 2014, while foreign currency loans increased by Ps.10.5 billion or 37.0%. The total amount of Peso loans increased in almost every category. With respect to loans to businesses, overdrafts increased by Ps.21.9 billion or 33.7% and secured loans increased by Ps.54.6 billion or 39.5%. With respect to consumer credit, credit card loans increased by Ps.65.7 billion or 54.2% and personal loans grew by Ps.44.0 billion or 37.4%. Finally, mortgages and pledge loans each registeredDecember, recording an increase of Ps.7.4 billion, representing16.3 percentage points in the year.
A significant aspect to be taken into account is that the financial system continued presenting good solvency ratios during 2018, in spite of the strong rise in the nominal exchange rate. The regulatory capital adequacy ratio of the sector totaled 15.6% of the risk weighted assets, according to November data, which represents an increase82.4% adequacy in excess of 15.4% and 22.6%, respectively.that under applicable regulations.
In 2016, total deposits increased by Ps.613.1 billion, representing a 45.2% increase from 2015, as reported by the Central Bank. Public sector deposits increased by Ps.145.4 billion in 2016, representing a 50.2% increase from 2015.Non-financial private sector deposits increased by Ps.463.4 billion in 2016, representing a 44.0% increase from 2015, primarily driven by a Ps.243 billion increase, or a 26.7% increase in Peso deposits and by Ps.231.3 billion in 2016, representing a 44.0% increase in foreign currency deposits. In terms of Peso deposits, the most significant were savings
accounts, registering a Ps.97.5 billion increase or 41.8% increase from 2015 followed by checking accounts, which increased by Ps.80.2 billion or 38.6% from 2015 and time deposits, which increased by Ps.54.6 billion or 12.3% from 2015.
The Central Bank reported that total loans increased by Ps.257.0 billion in 2016, representing a 28.3% increase from 2015.Non-financial private sector loans increased by Ps.266.2 billion or 32.5% from 2015. This increase was mainly due to an increase in foreign currency loans, which grew by Ps.105.2 billion or 272.6% from 2015, while loans denominated in local currency increased by Ps.147.3 billion or 19.2%. The total amount of Peso loans increased in almost every category. With respect to loans to businesses, overdrafts increased by Ps.14.5 billion or 16.6% and secured loans increased by Ps.9.2 billion or 4.8%. With respect to consumer credit, credit card loans increased by Ps.46.7 billion or 24.6% and personal loans grew by Ps.60.1 billion or 37.3%. Finally, mortgages and pledge loans each registered an increase of Ps.5.7 and Ps.13.1 billion, representing an increase of 10.4% and 32.7%, respectively.
In 2017, total deposits increased by Ps.477.4 billion, representing a 24.3% increase from 2016, as reported by the Central Bank. Public sector deposits increased by Ps.19.6 billion in 2017, representing a 4.5% increase from 2016.Non-financial private sector deposits increased by Ps.452.5 billion in 2017, representing a 29.8% increase from 2016, primarily driven by a Ps.294.8 billion increase, or a 25.5% increase in Peso deposits and by Ps.182.9 billion increase, or a 47.2% increase in foreign currency deposits. In terms of Peso deposits, the most significant were savings accounts, registering a Ps.144.9 billion increase or 43.8% increase from 2016 followed by time deposits, which increased by Ps.107.2 billion or 21.5% from 2016 and checking accounts, which increased by Ps.29.8 billion or 10.3% from 2016.
The Central Bank reported thatnon-financial private sector loans increased by Ps.546.7Ps.546.7 billion or 51.7% from 2016. This increase was mainly due to an increase in foreign currency loans, which grew by Ps.134.1 billion or 93.3% from 2016, while loans denominated in local currency increased by Ps.413.3 billion or 45.2%. The total amount of Peso loans increased in every category. With respect to loans to businesses, overdrafts increased by Ps.18.2 billion or 17.9% and secured loans increased by Ps.88.2 billion or 43.9%. With respect to consumer credit, credit card loans increased by Ps.56.4 billion or 23.8% and personal loans grew by Ps.130.7 billion or 59.1%. Finally, mortgages and pledge loans each registered an increase of Ps.68.8 and Ps.35.1 billion, representing an increase of 112.6% and 65.8%, respectively.
Throughout 2016, the new authorities ofIn 2018, total deposits increased by Ps.1,597.6 billion, representing a 66.6% increase from 2017, as reported by the Central Bank pursued monetary stability throughBank.Non-financial private sector deposits increased by Ps.1,196.1 billion in 2018, representing a monetary policy with inflation targets, financial stability focused on61.5% increase from 2017, primarily driven by a Ps.596.1 billion increase, or a 41.2% increase in Peso deposits and by Ps.600.0 billion increase, or a 120.9% increase in foreign currency deposits (expressed in dollars, foreign currency deposits increased by U.S.$.2.6 billion or 9.7% from 2017). In terms of Peso deposits, the developmentmost significant were time deposits registering a Ps.516.6 billion increase or 70.7% followed by Checking Accounts which increased by Ps.231.3 billion or 44.4% and the deepening of the domestic financial system and the adoption of measures that promote bankarization, financial inclusion, and the use of electronic means of payment.savings accounts, which increased a Ps.231.3 billion or 44.4% from 2017.
Beginning in January 2017, the Central Bank implemented a scheme of inflation targets with annually decreasing objectives, originally until 2019, which uses the 7-day repo reference rate as the anchor of its inflation targeting regime. The Central Bank determined a “rates corridor”, definedreported thatnon-financial private sector loans increased by the spread between active and passive repo rates,Ps.523.8 billion or 32.6% from 2017. This increase was mainly due to an increase in foreign currency loans expressed in Pesos, which the monetary policy rate is derived. The inflation target range for 2016 was between 20.0%-25.0% and forgrew by Ps.302.6 billion or 108.9% from 2017 it was set between 12.0%-17.0%. In 2017, however, inflation failedmainly due to subside as expected, and the monetary policy rate was increased to quicken the pace of deceleration and minimize the impact of the upcoming adjustments to regulated prices (electricity and gas). On December 27, 2017, the Central Bank adopted the inflation targets set by the Ministrydevaluation of the Treasury for the next three years, including targetsArgentinian Peso, while loans denominated in local currency increased by Ps.221.3 billion or 16.7%. With respect to loans to businesses, overdrafts increased by Ps.20.8 billion or 17.4% and secured loans decreased by Ps.37.2 billion or 12.9%. With respect to consumer credit, credit card loans increased by Ps.91.0 billion or 31.0% and personal loans grew by Ps.62.4 billion or 17.7%. Furthermore, mortgages and pledge loans each registered an increase of 15% for 2018, 10% for 2019Ps.80.8 and 5% by the endPs.9.4 billion, representing an increase of 2020, adjusting the pace of reduction announced in 2017 by one year.62.3% and 10.6%, respectively.
According to the Central Bank, ROAA was 3.0%3.9% in 2017,2018, as compared to 3.7%2.7% in 2016,2017, and ROAE for the financial system was 24.9%34.4% in 2017,2018, as compared to 29.7%23.4% in 2016.2017. Further, the Central Bank indicated that the net interest rate margin decrease was 10.4%10.9% of assets in 2017,2018, as compared to 11.4%10.1% of assets in 2016.2017. Net income from services represented 3.6%2.2% of assets in 2017,2018, as compared to 3.8%2.8% of assets in 2016.2017. Loan loss provisions resulting from the increase in private loan delinquencies totaled 1.3% of assets in 2018, as compared to 1.0% of assets in 2017, as compared to 0.8% of assets in 2016.
The following table shows average loans to the private sector in Argentina calculated on a daily basis:
|
| Year ended December 31, |
| Change December 31, |
| ||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2017/2016 |
| 2016/2015 |
|
|
| (in millions of Pesos) |
| (in percentages) |
| ||||||
Loans |
|
|
|
|
|
|
|
|
|
|
|
Overdrafts |
| 111,454.8 |
| 101,672.3 |
| 80,424.9 |
| 9.6 | % | 26.4 | % |
Promissory notes |
| 226,346.0 |
| 179,359.5 |
| 153,542.2 |
| 26.2 | % | 16.8 | % |
Mortgage loans |
| 82,527.2 |
| 55,750.3 |
| 49,973.0 |
| 48.0 | % | 11.6 | % |
Automobile and other secured loans |
| 69,654.1 |
| 43,695.2 |
| 35,310.8 |
| 59.4 | % | 23.7 | % |
Personal loans |
| 281,342.9 |
| 184,777.1 |
| 137,856.6 |
| 52.3 | % | 34.0 | % |
Credit cards |
| 242,480.7 |
| 194,295.1 |
| 137,645.7 |
| 24.8 | % | 41.2 | % |
U$S loans |
| 206,525.9 |
| 92,786.4 |
| 35,206.3 |
| 122.6 | % | 163.6 | % |
Others |
| 42,836.6 |
| 36,678.8 |
| 43,141.8 |
| 16.8 | % | (15.0 | )% |
Source: Central Bank.
The following table shows the average deposits from the private sector in Argentina calculated on a daily basis:
|
| Year ended December 31, |
| Change December 31, |
| ||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2017/2016 |
| 2016/2015 |
|
|
| (in millions of Pesos) |
| (in percentages) |
| ||||||
Deposits |
|
|
|
|
|
|
|
|
|
|
|
Checking accounts |
| 434,781.2 |
| 340,292.6 |
| 290,072.2 |
| 27.8 | % | 17.3 | % |
Savings accounts |
| 359,059.8 |
| 255,201.8 |
| 202,278.1 |
| 40.7 | % | 26.2 | % |
Time deposits |
| 693,892.0 |
| 581,081.0 |
| 452,483.5 |
| 19.4 | % | 28.4 | % |
Private sector |
| 1,603,057.3 |
| 1,170,012.2 |
| 832,231.7 |
| 37.0 | % | 40.6 | % |
Source: Central Bank.
The following table shows the average BADLAR rate calculated on a daily basis:
|
| Year ended December 31, |
| ||||
|
| 2017 |
| 2016 |
| 2015 |
|
BADLAR Rate |
| 23.25 | % | 19.88 | % | 27.25 | % |
TM20 |
| 23.69 | % | NA |
| NA |
|
Source: Central Bank.
2017.
Argentine Financial System Statistics from 2005 to 2017.2018.
The following table shows the 2005 to 20172018 evolution of major balance sheetfinancial statements items for the financial system:
|
| December 31, |
| December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2005 |
| 2006 |
| 2007 |
| 2008 |
| 2009 |
| 2010 |
| 2011 |
| 2012 |
| 2013 |
| 2014 |
| 2015 |
| 2016 |
| 2017 |
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||||||||||||||||||||||||||||
|
| (in millions of Pesos) |
| (in millions of Pesos) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets |
| 221,962 |
| 258,384 |
| 297,963 |
| 346,762 |
| 387,381 |
| 510,304 |
| 628,381 |
| 790,026 |
| 1,004,775 |
| 1,340,548 |
| 1,847,314 |
| 2,645,673 |
| 3,468,783 |
| 221,962 | 258,384 | 297,963 | 346,762 | 387,381 | 510,304 | 628,381 | 790,026 | 1,004,775 | 1,340,548 | 1,847,314 | 2,645,673 | 3,468,783 | 5,505,993 | ||||||||||||||||||||||||||||||||||||||||||
Liabilities |
| 195,044 |
| 225,369 |
| 261,143 |
| 305,382 |
| 339,047 |
| 452,752 |
| 558,264 |
| 699,205 |
| 883,086 |
| 1,172,335 |
| 1,620,451 |
| 2,348,461 |
| 3,067,587 |
| 195,044 | 225,369 | 261,143 | 305,382 | 339,047 | 452,752 | 558,264 | 699,205 | 883,086 | 1,172,335 | 1,620,451 | 2,348,461 | 3,067,587 | 4,906,850 | ||||||||||||||||||||||||||||||||||||||||||
Shareholders’ equity |
| 26,918 |
| 33,014 |
| 36,819 |
| 41,380 |
| 48,335 |
| 57,552 |
| 70,117 |
| 90,820 |
| 121,689 |
| 168,213 |
| 226,863 |
| 297,212 |
| 401,196 |
| 26,918 | 33,014 | 36,819 | 41,380 | 48,335 | 57,552 | 70,117 | 90,820 | 121,689 | 168,213 | 226,863 | 297,212 | 401,196 | 599,143 | ||||||||||||||||||||||||||||||||||||||||||
Capital, contributions, reserves |
| 37,440 |
| 36,859 |
| 37,930 |
| 38,571 |
| 39,538 |
| 41,204 |
| 44,587 |
| 59,395 |
| 73,219 |
| 89,307 |
| 126,264 |
| 212,157 |
| 311,814 |
| 37,440 | 36,859 | 37,930 | 38,571 | 39,538 | 41,204 | 44,587 | 59,395 | 73,219 | 89,307 | 126,264 | 212,157 | 311,814 | 374,622 | ||||||||||||||||||||||||||||||||||||||||||
Retained earning |
| (10,522 | ) | (3,845 | ) | (1,172 | ) | 2,809 |
| 8,797 |
| 16,348 |
| 25,530 |
| 31,426 |
| 48,471 |
| 78,907 |
| 100,600 |
| 85,055 |
| 89,382 |
| (10,522 | ) | (3,845 | ) | (1,172 | ) | 2,809 | 8,797 | 16,348 | 25,530 | 31,426 | 48,471 | 78,907 | 100,600 | 85,055 | 89,382 | 224,521 | |||||||||||||||||||||||||||||||||||||||
Loans |
| 84,171 |
| 103,668 |
| 132,157 |
| 154,719 |
| 169,868 |
| 230,127 |
| 332,317 |
| 433,925 |
| 563,344 |
| 649,206 |
| 886,046 |
| 1,136,954.6 |
| 1,691,214 |
| 84,171 | 103,668 | 132,157 | 154,719 | 169,868 | 230,127 | 332,317 | 433,925 | 563,344 | 649,206 | 886,046 | 1,136,954.6 | 1,691,214 | 2,279,521 | ||||||||||||||||||||||||||||||||||||||||||
Non-financial public sector |
| 25,836 |
| 20,874 |
| 16,772 |
| 17,083 |
| 20,570 |
| 25,907 |
| 31,346 |
| 39,951 |
| 48,438 |
| 51,470 |
| 75,254 |
| 52,25 |
| 37,738 |
| 25,836 | 20,874 | 16,772 | 17,083 | 20,570 | 25,907 | 31,346 | 39,951 | 48,438 | 51,470 | 75,254 | 52,25 | 37,738 | 49,351 | ||||||||||||||||||||||||||||||||||||||||||
Financial sector |
| 2,450 |
| 4,962 |
| 5,030 |
| 4,793 |
| 4,052 |
| 5,018 |
| 9,263 |
| 10,299 |
| 13,049 |
| 10,729 |
| 13,199 |
| 26,426 |
| 44,306 |
| 2,450 | 4,962 | 5,030 | 4,793 | 4,052 | 5,018 | 9,263 | 10,299 | 13,049 | 10,729 | 13,199 | 26,426 | 44,306 | 61,653 | ||||||||||||||||||||||||||||||||||||||||||
Non-financial private sector |
| 55,885 |
| 77,832 |
| 110,355 |
| 132,844 |
| 145,247 |
| 199,202 |
| 291,708 |
| 383,674 |
| 501,857 |
| 604,062 |
| 819,174 |
| 1,085,655 |
| 1,655,049 |
| 55,885 | 77,832 | 110,355 | 132,844 | 145,247 | 199,202 | 291,708 | 383,674 | 501,857 | 604,062 | 819,174 | 1,085,655 | 1,655,049 | 2,254,400 | ||||||||||||||||||||||||||||||||||||||||||
Provisions |
| (4,930 | ) | (3,728 | ) | (4,089 | ) | (4,744 | ) | (5,824 | ) | (6,232 | ) | (7,173 | ) | (9,596 | ) | (13,117 | ) | (17,054 | ) | (21,581 | ) | (27,952 | ) | (45,879 | ) | (4,930 | ) | (3,728 | ) | (4,089 | ) | (4,744 | ) | (5,824 | ) | (6,232 | ) | (7,173 | ) | (9,596 | ) | (13,117 | ) | (17,054 | ) | (21,581 | ) | (27,952 | ) | (45,879 | ) | (85,884 | ) | ||||||||||||||||||||||||||||
Deposits |
| 136,492 |
| 170,898 |
| 205,550 |
| 236,217 |
| 271,853 |
| 376,344 |
| 462,517 |
| 595,764 |
| 752,422 |
| 979,388 |
| 1,355,353 |
| 1,969,029 |
| 2,445,998 |
| 136,492 | 170,898 | 205,550 | 236,217 | 271,853 | 376,344 | 462,517 | 595,764 | 752,422 | 979,388 | 1,355,353 | 1,969,029 | 2,445,998 | 4,084,868 | ||||||||||||||||||||||||||||||||||||||||||
Non-financial public sector |
| 34,019 |
| 45,410 |
| 48,340 |
| 67,151 |
| 69,143 |
| 115,954 |
| 129,885 |
| 163,691 |
| 202,434 |
| 256,996 |
| 291,104 |
| 441,890 |
| 457,657 |
| 34,019 | 45,410 | 48,340 | 67,151 | 69,143 | 115,954 | 129,885 | 163,691 | 202,434 | 256,996 | 291,104 | 441,890 | 457,657 | 864,853 | ||||||||||||||||||||||||||||||||||||||||||
Non-financial private sector |
| 100,809 |
| 123,431 |
| 155,048 |
| 166,378 |
| 199,278 |
| 257,595 |
| 328,463 |
| 427,857 |
| 544,331 |
| 720,645 |
| 1,062,590 |
| 1,521,687 |
| 1,981,988 |
| 100,809 | 123,431 | 155,048 | 166,378 | 199,278 | 257,595 | 328,463 | 427,857 | 544,331 | 720,645 | 1,062,590 | 1,521,687 | 1,981,988 | 3,207,019 | ||||||||||||||||||||||||||||||||||||||||||
Source: Central Bank
| Source: | Central Bank. Figures are expressed in original currency, not adjusted for inflation. |
The table below shows the evolution of the number of financial institutions in the system:
|
| December 31, |
| December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2005 |
| 2006 |
| 2007 |
| 2008 |
| 2009 |
| 2010 |
| 2011 |
| 2012 |
| 2013 |
| 2014 |
| 2015 |
| 2016 |
| 2017 |
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||||||||||||||||||||||||||||
Banks |
| 71 |
| 72 |
| 67 |
| 67 |
| 66 |
| 64 |
| 64 |
| 65 |
| 66 |
| 65 |
| 62 |
| 63 |
| 62 |
| 71 | 72 | 67 | 67 | 66 | 64 | 64 | 65 | 66 | 65 | 62 | 63 | 62 | 63 | ||||||||||||||||||||||||||||||||||||||||||
Public banks |
| 13 |
| 12 |
| 12 |
| 12 |
| 12 |
| 12 |
| 12 |
| 12 |
| 12 |
| 12 |
| 13 |
| 13 |
| 13 |
| 13 | 12 | 12 | 12 | 12 | 12 | 12 | 12 | 12 | 12 | 13 | 13 | 13 | 13 | ||||||||||||||||||||||||||||||||||||||||||
Private banks |
| 58 |
| 60 |
| 55 |
| 55 |
| 54 |
| 52 |
| 52 |
| 53 |
| 54 |
| 53 |
| 49 |
| 50 |
| 49 |
| 58 | 60 | 55 | 55 | 54 | 52 | 52 | 53 | 54 | 53 | 49 | 50 | 49 | 50 | ||||||||||||||||||||||||||||||||||||||||||
Private argentine capital banks |
| 34 |
| 35 |
| 33 |
| 33 |
| 32 |
| 32 |
| 31 |
| 33 |
| 34 |
| 33 |
| 32 |
| 33 |
| 33 |
| 34 | 35 | 33 | 33 | 32 | 32 | 31 | 33 | 34 | 33 | 32 | 33 | 33 | 34 | ||||||||||||||||||||||||||||||||||||||||||
Foreign capital domestic banks |
| 12 |
| 13 |
| 12 |
| 12 |
| 12 |
| 11 |
| 12 |
| 11 |
| 11 |
| 11 |
| 10 |
| 10 |
| 9 |
| 12 | 13 | 12 | 12 | 12 | 11 | 12 | 11 | 11 | 11 | 10 | 10 | 9 | 9 | ||||||||||||||||||||||||||||||||||||||||||
Foreign financial institution branch banks |
| 11 |
| 11 |
| 9 |
| 9 |
| 9 |
| 9 |
| 9 |
| 9 |
| 9 |
| 9 |
| 7 |
| 7 |
| 7 |
| 11 | 11 | 9 | 9 | 9 | 9 | 9 | 9 | 9 | 9 | 7 | 7 | 7 | 7 | ||||||||||||||||||||||||||||||||||||||||||
Financial companies |
| 16 |
| 16 |
| 16 |
| 15 |
| 15 |
| 14 |
| 14 |
| 14 |
| 15 |
| 15 |
| 15 |
| 14 |
| 14 |
| 16 | 16 | 16 | 15 | 15 | 14 | 14 | 14 | 15 | 15 | 15 | 14 | 14 | 14 | ||||||||||||||||||||||||||||||||||||||||||
Credit unions |
| 2 |
| 2 |
| 2 |
| 2 |
| 2 |
| 2 |
| 2 |
| 2 |
| 1 |
| 1 |
| 1 |
| 1 |
| 1 |
| 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 1 | 1 | 1 | 1 | 1 | 1 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total financial institutions |
| 89 |
| 90 |
| 85 |
| 84 |
| 83 |
| 80 |
| 80 |
| 81 |
| 82 |
| 81 |
| 78 |
| 78 |
| 77 |
| 89 | 90 | 85 | 84 | 83 | 80 | 80 | 81 | 82 | 81 | 78 | 78 | 77 | 78 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Source: Central Bank
Bank. Figures are expressed in original currency, not adjusted for inflation.
The graph below shows the evolution of loans and deposits growth in Argentina:
Source: Central BankBank. Figures are expressed in original currency, not adjusted for inflation.
The graph below shows the evolution of the private loans portfolio composition in Argentina:
Source: Central Bank
Bank. Figures are expressed in original currency, not adjusted for inflation.
The graph below shows the evolution ofnon-performing loan ratios in Argentina:
Source: Central BankBank. Figures are expressed following Argentine Banking GAAP and therefore do not apply IFRS 9 provisions.
The following graph shows the evolution ofnon-performing loans coverage, measured as allowances overnon-performing loans:
Source: Central Bank
Bank. Figures are expressed following Argentine Banking GAAP and therefore do not apply IFRS 9 provisions.
The following graphs show the evolution of ROAA and ROAE in Argentina:
Source: Central BankBank. Figures are expressed following Argentine Banking GAAP and therefore do not apply IFRS 9 provisions, and they are in original currency and not adjusted for inflation.
Source: Central BankBank. Figures are expressed following Argentine Banking GAAP and therefore do not apply IFRS 9 provisions, and they are in original currency and not adjusted for inflation.
The following tables show market share of Argentine banks in terms of assets, loans and deposits as of December 31, 20172018 according to the Central Bank:
Market Share of Assets | Market Share of Loans | |||||
Banco de la Nación Argentina S.A. | 22.0% | Banco de la Nación Argentina S.A. | 16.1% | |||
Banco de Galicia y Buenos Aires S.A. | 9.3% | Banco de Galicia y Buenos Aires S.A. | 10.3% | |||
Banco Santander Río S.A. | 9.0% | Banco de la Provincia de Buenos Aires | 9.2% | |||
Banco de la Provincia de Buenos Aires | 8.8% | Banco Santander Río S.A. | 8.9% | |||
BBVA Banco Francés S.A. | 6.4% | BBVA Banco Francés S.A. | 7.8% | |||
Banco Macro S.A. | 5.9% | Banco Macro S.A. | 7.2% | |||
HSBC Bank Argentina S.A. | 4.1% | Banco de la Ciudad de Buenos Aires | 3.9% | |||
ICBC S.A. | 3.3% | HSBC Bank Argentina S.A. | 3.7% | |||
Banco de la Ciudad de Buenos Aires | 3.3% | ICBC S.A. | 3.5% | |||
Credicoop Cooperativo Limitado | 2.9% | Banco Patagonia S.A. | 3.4% | |||
Banco Patagonia S.A. | 2.7% | Banco Supervielle S.A. | 3.0% | |||
Banco Supervielle S.A. | 2.4% | Credicoop Cooperativo Limitado | 2.0% | |||
Banco de la Provincia de Córdoba S.A. | 2.1% | Banco de la Provincia de Córdoba S.A. | 1.9% | |||
Citibank N.A. | 1.9% | Banco Hipotecario S.A. | 1.7% | |||
Banco Hipotecario S.A. | 1.4% | BICE SA | 1.6% | |||
Market Share of | ||||
Banco de la Nación Argentina S.A. |
|
| ||
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| % | ||
Banco de la Provincia de Buenos Aires | 10.1 | % | ||
Banco Santander Río S.A. |
| 9.3 | % | |
Banco de Galicia y Buenos Aires S.A. |
| 8.8 | % | |
BBVA Banco Francés S.A. |
| 6.4 | % | |
Banco Macro S.A. |
| 5.4 | % | |
HSBC Bank Argentina S.A. |
| 4.0 | % | |
Banco de la Ciudad de Buenos Aires |
|
| ||
|
| % | ||
Credicoop Cooperativo Limitado | 3.3 | % | ||
ICBC S.A. |
| 2.9 | % | |
Banco Patagonia S.A. |
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| % | ||
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Banco de la Provincia de Córdoba |
| 2.4 | % | |
Banco |
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Nuevo Santa Fe |
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Citibank N.A. | 1.4 | % |
1.4
%
Source: Central Bank.
With respect to the distribution network, as of December 31, 2017,2018, the financial system had 4,4974,605 branches, 6,3587,081 self-service terminals and 14,70716,301 ATMs, with coverage throughout Argentina.
The table below shows the distribution of the network by jurisdiction as of December 31, 2017.2018.
Jurisdiction |
| Branches |
| ATMs |
| Self-Service |
|
City of Buenos Aires |
| 843 |
| 2,534 |
| 1,575 |
|
Buenos Aires |
| 1,449 |
| 4,578 |
| 1,766 |
|
Catamarca |
| 22 |
| 84 |
| 19 |
|
Córdoba |
| 437 |
| 1,518 |
| 450 |
|
Corrientes |
| 77 |
| 267 |
| 52 |
|
Chaco |
| 65 |
| 317 |
| 53 |
|
Chubut |
| 69 |
| 258 |
| 82 |
|
Entre Ríos |
| 132 |
| 475 |
| 182 |
|
Formosa |
| 26 |
| 129 |
| 14 |
|
Jujuy |
| 34 |
| 189 |
| 76 |
|
La Pampa |
| 73 |
| 172 |
| 26 |
|
La Rioja |
| 27 |
| 105 |
| 24 |
|
Mendoza |
| 173 |
| 494 |
| 261 |
|
Misiones |
| 65 |
| 287 |
| 103 |
|
Neuquén |
| 80 |
| 276 |
| 84 |
|
Río Negro |
| 75 |
| 254 |
| 118 |
|
Salta |
| 69 |
| 328 |
| 134 |
|
San Juan |
| 40 |
| 186 |
| 73 |
|
San Luis |
| 51 |
| 175 |
| 70 |
|
Santa Cruz |
| 48 |
| 169 |
| 52 |
|
Santa Fe |
| 477 |
| 1,224 |
| 912 |
|
Santiago del Estero |
| 54 |
| 230 |
| 41 |
|
Tucumán |
| 87 |
| 367 |
| 145 |
|
Tierra del Fuego |
| 24 |
| 91 |
| 46 |
|
Total |
| 4,497 |
| 14,707 |
| 6,358 |
|
Jurisdiction | Branches | ATMs | Self-Service Terminals | |||||||||
City of Buenos Aires | 853 | 2636 | 1801 | |||||||||
Buenos Aires | 1507 | 4988 | 2021 | |||||||||
Catamarca | 21 | 152 | 22 | |||||||||
Córdoba | 449 | 1654 | 484 | |||||||||
Corrientes | 78 | 315 | 54 | |||||||||
Chaco | 67 | 360 | 58 | |||||||||
Chubut | 71 | 274 | 87 | |||||||||
Entre Ríos | 131 | 520 | 183 | |||||||||
Formosa | 26 | 148 | 17 | |||||||||
Jujuy | 34 | 206 | 78 | |||||||||
La Pampa | 73 | 202 | 31 | |||||||||
La Rioja | 27 | 138 | 26 | |||||||||
Mendoza | 174 | 630 | 293 | |||||||||
Misiones | 68 | 321 | 114 | |||||||||
Neuquén | 85 | 295 | 92 | |||||||||
Río Negro | 76 | 289 | 133 | |||||||||
Salta | 74 | 370 | 153 | |||||||||
San Juan | 41 | 219 | 86 | |||||||||
San Luis | 48 | 172 | 84 | |||||||||
Santa Cruz | 49 | 207 | 60 | |||||||||
Santa Fe | 481 | 1468 | 962 | |||||||||
Santiago del Estero | 55 | 250 | 43 | |||||||||
Tucumán | 93 | 387 | 152 | |||||||||
Tierra del Fuego | 24 | 100 | 47 | |||||||||
Total | 4,605 | 16,301 | 7,081 | |||||||||
Presentation of Financial Statements in Pesos. Inflation.
Inflation.
Historically, inflation in Argentina has played a significant role in influencing the economic conditions in Argentina and, in turn, the operations and financial results of companies operating in Argentina, such as Grupo Supervielle.
Argentina has faced and continues to face inflationary pressures. From 2011 to date, Argentina experienced increases in inflation as measured by the wholesale price index WPI that reflected the continued growth in the levels of private consumption and economic activity (including exports and public and private sector investment), which applied upward pressure on the demand for goods and services.
During periods of high inflation, effective wages and salaries tend to fall and consumers tend to accelerate their consumption patterns and also eliminate unnecessary expenses. The increase in inflationary risk may erode macroeconomic growth and further limit the availability of financing, causing a negative impact on our operations.
However, the government expects to reduce the current level of inflation promoting monetary stability and introducing a program for the systematic and sustainable lowering of inflation. WPI decreased to 19% from 35% in 2017.
IAS 29 requires that financial statements of any entity whose functional currency is the currency of a hyperinflationary economy, be stated in terms of the measuring unit current at the end of the reporting period. IAS 29 does not establish a 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 last three years, along with other several macroeconomic-related qualitative factors.
Despite the high inflation rates in Argentina in recent years, we conducted an analysis pursuant to the Following this criteria, set forth in IAS 29 and we have determined that Argentina does not qualify as a hyperinflationary economy for any of the years included in our audited consolidated financial statements included in this annual report. Once we have completed our transition to IFRS, if we determine that Argentina qualifies as a hyperinflationary economy, we may need to restate our audited consolidated financial statements and other financial information. In making our determination, we considered the lack of objective data available regarding the CPI; the existence of other qualitative and quantitative indicators, such as the program established by the Argentine Central Bank to foster monetary stability that aims to induce a systematic and sustainable low inflation rate, the alternative WPI, according to which the inflation rate was below 100% in the three-year cumulative period ended December 31, 2017; and that the market has evidenced a strong downward trend in inflation rates during December 2017. We believe that our analysis and conclusion is consistent with that of most public entities in Argentina. We reassess inflation data periodically to determine whether this conclusion continues to be applicable. See “Item 3.D. Risk Factors—Risks Relating to Argentina—If the high levels of inflation continue, the Argentine economy maymust be considered hyperinflationary for purposes ofaccording to IAS 29 which couldstarting July 1, 2018. As a consequence, financial statements for the year ended on December 31, 2018 have an impact on our auditedbeen stated in terms of the measuring unit current at the consolidated financial statements and other financial information, and we may need to adjust or restate our audited consolidated financial statements and other information.”
Notwithstandingstatement date. Also, comparative figures for the foregoing, 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. See “Item 3.D. Risk Factors—Risks Relating to Argentina—Economic and political instability in Argentina may adversely and materially affect our business, results of operations and financial condition.”
years ended on December 31, 2017 were restated into the same current measuring unit.
The following table shows the rate of inflation, as measured by the variations in the WPI and the CPI, according to INDEC and the evolution of the CER index used to adjust the principal of certain of our assets and liabilities, for the periods indicated. The accuracy of the measurements of INDEC is in doubt, and the actual CPI and WPI for periods prior to January 2016 could be substantially higher than those indicated by INDEC. On January 8, 2016, Decree No. 55/2016 was issued by the Argentine government declaring a state of administrative emergency on the national statistical system and on the official agency in charge of the system, the INDEC, until December 31, 2016. Following the declared emergency, the INDEC ceased publishing statistical data until it rearranged its technical and administrative structure. During the implementation of these reforms, however, INDEC used official CPI figures and other statistics published by the Province of San Luis and the City of Buenos Aires. Despite these expected reforms, there is uncertainty as to whether official data will be sufficiently corrected and within what time period such data will be corrected, and what effect these reforms will have on the Argentine economy. According to the most recent publicly
available information based on data from the City of Buenos Aires, as shown in the second table below, CPI grew 26.6% in 2013, 38.0% in 2014, 26.9% in 2015, 41.0% in 2016 and 26.1% in 2017. According to the INDEC’s CPI figures, inflation was 16.9% between May and December 2016. The INDEC reported a cumulative variation of the CPI of 24.8% for 2017, while the CPI measured by the Argentine Congress registered an increase of 24.6%. The CPI variation was of 1.8% for the month of January 2018, compared to the previous month. For information on INDEC figures see “Item 3.D. Risk Factors—Risks Relating to Argentina—Economic and political instability in Argentina may adversely and materially affect our business, results of operations and financial condition” and “Item 3.D. Risk Factors—Risks Relating to Argentina—If the current levels of inflation continue, the Argentine economy and our financial position and business could be adversely affected.”
|
| Year ended December 31, |
| ||||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| Year ended December 31, | |||||||
|
| (in percentages) |
| 2018 | 2017 | ||||||||||
Price Indices:(1) |
|
|
|
|
|
|
| ||||||||
| (in percentages) | |||||||||||||||
Price Indices:(1) | |||||||||||||||
WPI |
| 18.8 | % | 34.5 | %(***) | 10.6 | %(*) | 73.5 | % | 18.8 | % | ||||
CPI |
| 24.8 | %(**) | 16.9 | (****) | 11.9 | %(*) | 47.6 | % | 24.8 | % | ||||
Adjustment Index: |
|
|
|
|
|
|
| ||||||||
CER |
| 22.6 | % | 35.72 | % | 15.09 | % | 47.2 | % | 22.6 | % | ||||
UVA |
| 21.15 | % | 17.26 | % | — |
| 46.86 | % | 21.15 | % | ||||
(1) Source: INDEC.
(2) Source: Acquisition Value Unit (Unidad de Valor Adquisitivo) (the base value as of March 31, 2016 was Ps.14.05).
* Through October 31, 2015, the last day on which such information was reported by INDEC.
** Calculated based on the National CPI method used by INDEC, which replaced the previous CPI in February 2014.
*** 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 INDEC did not publish the CPI for the last two months of 2015, and resumed publishing CPI data in May 2016, reporting that the CPI grew 16.9% between April and December 2016
|
| Year ended December 31, |
| ||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2014 |
|
|
| (in percentages) |
| ||||||
Price Index: |
|
|
|
|
|
|
|
|
|
City of Buenos Aires CPI* |
| 26.1 | % | 41.0 | % | 26.9 | % | 38.0 | % |
* Calculated based on the Macri administration’s alternative CPI index based on data from the City of Buenos Aires.
Currency Composition of Our Balance Sheet
our Consolidated Financial Statements
The following table sets forth our assets and liabilities denominated in Pesos, in Pesos adjusted by the CER and UVA and in foreign currency, at the dates indicated.
| Grupo Supervielle S.A. | ||||||||||||
| As of December 31, | As of January 1ST, | |||||||||||
| 2018 | 2017 | 2017 | ||||||||||
| (in thousands of Pesos) | ||||||||||||
Assets | ||||||||||||
In Pesos, unadjusted | 93,573,249 | 101,475,378 | 80,770,691 | |||||||||
In Pesos, adjusted by CER | 5,619,116 | 2,406,493 | 929 | |||||||||
In Foreign Currency(1) (2) | 42,541,631 | 31,348,279 | 19,349,119 | |||||||||
Total Assets | 141,733,996 | 135,230,150 | 100,120,739 | |||||||||
Liabilities and Shareholders’ Equity | ||||||||||||
In Pesos, unadjusted, including Shareholders’ Equity | 100,985,837 | 108,456,402 | 81,670,398 | |||||||||
In Pesos, Adjusted by the CER | 83,733 | 15,202 | 7,726 | |||||||||
In Foreign Currency(1) (2) | 40,664,426 | 26,758,546 | 18,442,615 | |||||||||
Total Liabilities and Shareholders’ Equity | 141,733,996 | 135,230,150 | 100,120,739 | |||||||||
|
| As of December 31, |
| ||||
|
| 2017 |
| 2016 |
| 2015 |
|
|
| (in thousands of Pesos) |
| ||||
Assets |
|
|
|
|
|
|
|
In Pesos |
| 71,109,253 |
| 43,704,277 |
| 30,171,309 |
|
In Pesos, adjusted by CER and UVAs(1) |
| 1,629,912 |
| 504 |
| 1,545 |
|
In Foreign Currency(2) (3) |
| 21,232,113 |
| 10,501,261 |
| 2,872,963 |
|
Total Assets |
| 93,971,278 |
| 53,206,042 |
| 33,045,817 |
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
In Pesos, Unadjusted, Including Shareholders’ Equity |
| 75,837,484 |
| 43,192,571 |
| 30,177,605 |
|
In Pesos, Adjusted by CER and UVAs(1) |
| 10,296 |
| 4,193 |
| 2,737 |
|
In Foreign Currency(3) (4) |
| 18,123,498 |
| 10,009,278 |
| 2,865,475 |
|
Total Liabilities and Shareholders’ Equity |
| 93,971,278 |
| 53,206,042 |
| 33,045,817 |
|
| (1) | UVAs are inflation adjusted units introduced in September 2016. Converted into Pesos based on the reference exchange rates reported by the Central Bank for December 31, 2018 (U.S.$ 1.00 to Ps.37.8083), December 31, 2017 (U.S.$ 1,00 to Ps.18.7442) and December 31, 2016 (U.S.$ 1.00 to Ps.15.8502). |
(1) UVAs (unidades de valor adquisitivo) are inflation adjusted units introduced in September 2016.
(2) As of December 31, 2017, includes Ps.20,773.2 million in U.S. dollars, Ps.338.9 million in euros and Ps.120.1 million in other foreign currency. As of December 31, 2016, includes Ps.10,302.9 million in U.S. dollars, Ps.126.0 million in euros and Ps.72.3 million in other foreign currency. As of December 31, 2015, includes Ps.2,780.9 million in U.S. dollars, Ps.32.8 million in euros and Ps.59.3 million in other foreign currency.
(3) Converted into Pesos based on the reference exchange rates reported by the Central Bank for December 31, 2017 (U.S.$1.00 to Ps.18.7742), December 31, 2016 (U.S.$1.00 to Ps.15.8502) and December 31, 2015 (U.S.$1.00 to Ps.13.0050).
(4) As of December 31, 2017, includes Ps.17,822.4 million in U.S. dollars, Ps.299.7 million in euros and Ps.1.4 million in other foreign currency. As of December 31, 2016, includes Ps.9,875.7 million in U.S. dollars, Ps.132.4 million in euros and Ps.1.1 million in other foreign currency. As of December 31, 2015, includes Ps.2,836.7 million in U.S. dollars, Ps.27.5 million in euros and Ps.1.3 million in other foreign currency.
Critical Accounting Policies
In the preparation of our audited consolidated financial statements,, we have relied on variables and assumptions derived from historical experience and various other factors that we deemed reasonable and relevant. Although we review these estimates and assumptions in the ordinary course of business, the presentation of our financial condition and results of operation often requires our management to make judgments regarding the effects of matters that are inherently uncertain on the carrying value of our assets and liabilities and, consequently, our results of operations.
An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our audited consolidated financial statements.
statements.
In order to provide an understanding about how management forms its judgments about future events, including the variables and assumptions underlying the estimates, and the sensitivity of those judgments to different variables and conditions, we summarize our main critical accounting policies under Argentine banking GAAP.IFRS.
a- Fair value of derivatives and other instruments
AllowancesThe fair value of financial instruments that do not list in active markets are measured through the use of valuation techniques. Such techniques are validated and regularly reviewed by qualified independent personnel of the area that developed such techniques. All models are evaluated and adjusted before being use in order to make sure that results express current information and comparative market prices. As long as possible, models use only observable information; however, factors such as credit risk (own or counterparty), volatilities and correlations require the use of estimates. Changes in assumptions regarding such factors may impact on the fair value reported for Loan Lossesfinancial instruments.
The information on instruments that have not been valuated based on the market information is included in Note 6. In this regard, the Senior Management decides whether significant risks and property benefits of financial assets and financial lease are transferred to the counterparty, especially those of higher risk.
The Bank and CCF record allowancesb- Allowances for loan losses
We assess on a forward-looking basis the expected credit losses (“ECL”) associated with respect to their portfolios in accordanceits debt instrument assets carried at amortised cost and at fair value through other comprehensive income, and with the rules established by the Central Bank. Under such regulations, theexposure arising from loan portfolio is divided into two classes: consumercommitments and commercial. For consumer portfolio management, the minimumfinancial guarantee contracts. We recognize a loss allowance for loansuch losses is calculated primarily based on past due status. Forat each reporting date. The measurement of the classes, customers are allocated within one of six categories taking into consideration credit quality and the fulfillment of their obligations. Please see “Item 4.B Business overview—Argentine Banking Regulation.” In addition, the quality of guarantee backing the relevant loan must be considered in each case.ECL reflects:
DeterminingAn unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
The time value of money; and
Reasonable and supportable information that is available without undue cost or effort at the loan loss reserve requires judgmentreporting date about past events, current conditions and estimates from management. To classify its commercial loan portfolio, the Bank and CCF must consider the borrower’s ability to repay the debt in termsforecasts of such borrower’s estimated cash flow, the quality of its cash management, its present and projected financial situation, his or her payment history and ability to service debt, the borrower’s internalfuture economic conditions.
For further information, and control systems and inherent risks in the sector in which the borrower conducts business.
Tarjeta and Espacio Cordial maintain allowances for loan losses in accordance with their internal policies, which do not differ significantly from those established by the Central Bank. Until the date of its sale, Cordial Microfinanzas maintained allowances for loan losses in accordance with its internal policies, which did not differ significantly from those established by the Central Bank. For more information regarding the balances of the allowance for loan losses see Note 7note 1.12 to our audited consolidated financial statements.
c- Impairment ofNon-Financial Assets
Intangible assets with definite useful life and property, plant and equipment are amortized or depreciated on a straight-line basis during their estimated useful life. We monitor the conditions associated with these assets to determine whether the events and circumstances require a review of the remaining amortization or depreciation term and whether there are factors or circumstances indicating impairment in the value of the assets which might not be recoverable.
Identifying the indicators of impairment of property, plant and equipment and intangible assets requires the use of judgment. We have concluded that there were no indicators of impairment for any of the years reported in its consolidated financial statements.
Assets with indefinite useful life are tested for impairment. This process require Management to make judgements, including the identification of cash-generating units, the identification and allocation of assets and liabilities to a cash-generating unit and the definition of their recoverable value. When calculating the recoverable value of a cash-generating unit, we use estimates and significant judgments and assumptions.
Although we believe that assumptions and forecasts used are suitable in virtue of the information available for the administration, changes in assumptions or circumstances may require changes in the assessment. Negative changes in assumptions used in impairment tests of assets with indefinite useful life may result in a potential impairment recognition.
d- Structured Entities.
Assessing whether we control a structured entity, requires the management to make judgments.
The management assesses its exposure to risks and rewards, as well as its ability to make decisions and direct the relevant activities of such structured entity. Structured entities controlled by us are subject to consolidation. The following elements were used to determine if we control a structured entity:
Allowances for Doubtful Accounts for Other Receivables from Financial TransactionsThe purpose and Miscellaneous Receivablesdesign of the trust;
Our receivables from financial transactions and our miscellaneous receivablesIdentification of relevant activities of the trust;
Decision-making process on these activities;
If we have the power to direct the relevant activities of the trust;
If we are exposed to, losses dueor has rights to, uncollectible accounts. The allowance for doubtful accounts correspondingvariable returns from its involvement with the trust; and
If we have the ability to financial transactionsaffect those returns through its power over the trust.
e- Income tax and miscellaneous receivablesdeferred tax
A significant level of judgment is determined on an account-by-account basis considering factors such as the borrower’s financial condition, past payment history, guaranteesrequired to determine current and past-due status. Future adjustments to the allowances may be necessary if future economic conditions differ substantially from the assumptions used in the assessment for each period.
In the case of our securitized portfolio, allowances for loan losses with respect to securitizations are maintaineddeferred tax assets and liabilities. Current income tax is measured at the trust level, pursuantamount expected to Central Bank regulations. We then record our participations in loan securitizationsbe paid while deferred income tax is measured based on the trust’s equity value. No additional allowances for participationstemporary differences between the carrying amount of assets and liabilities and their tax base, at the rates expected to be in loan securitizationsforce at the time of reversal of such differences.
Deferred tax assets and Loss Carryforward are required in our audited consolidated financial statements.
For more information regarding the balances of the allowance for doubtful accounts, see Note 13recognized when future taxable income is expected to our audited consolidated financial statements.
Accrued Litigation
In the normal course of business, we are a partyexist to lawsuits of various types. We disclose in our audited consolidated financial statements contingent liabilities with respect to existingoffset such temporary differences or potential claims, lawsuits and other legal proceedings and record an accrual for litigation when it is probable that future costs will be incurred and these costs can be reasonably estimated. These accruals arelosses, based on the specific circumstancesSenior Management’s assumptions about the amounts and timing of each claim, the evolution of recent developments and the evaluation of our legal advisors. Changes to the accrual amounts may be needed if subsequent events differ substantially from the assumptions used in the assessment for each period. There were no changes to assumptions or methods used to establish accruals from year to year for litigation.
U.S. GAAP—Critical Accounting Policies
Additional information in connection with critical accounting policies for U.S. GAAP purposes is described as follows.
Allowance for Loan Losses
Under U.S. 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 expectedsuch 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,taxable income. Then, it is probable that the borrower willnecessary to determine whether tax assets are likely to 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 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,used and leases.
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 lossoffset against future taxable income. Current results may differ from these estimates, such as changes in real estate values, localthe applicable tax laws or the outcome of the final review of the tax returns by tax authorities and national economies, underwriting standardstax courts.
Future taxable income and the regulatory environment. The probabilitynumber of defaulttax benefits likely to be available in the future are based on a loan is basedmedium term business plan prepared by management on an analysisthe basis of the movement of loans with the measured attributes from either current or any of the delinquency categories to default over a twelve-month period.reasonable expectations.
Many factors can affect Grupo Supervielle’s estimates of allowance for loan losses, including volatility of default probability, migrations and estimated loss severity.
A 10% decrease in the expected cash flows of significant impaired loans individually analyzed, could result in an additional impairment of approximately Ps.3.0 million.
A 10% increase in the historical loss ratios for loans collectively analyzed could result in an additional impairment of approximately Ps.196.0 million.
These sensitivity analyses do not represent management’s expectations of the deterioration in risk ratings or the increases in loss rates but are provided as hypothetical scenarios to assess the sensitivity of the allowance for loan and lease losses to changes in key inputs. We believe the risk ratings and loss severities currently in use are appropriate and represent management’s expectations about the credit risk inherent in its loan portfolio.
Determining the allowance for loan losses requires significant management judgments and estimates including, among others, identifying impaired loans, determining customers’ ability to pay and estimating the fair value of underlying collateral or the expected future cash flows to be received. Actual events are likely to differ from the estimates and assumptions used in determining the allowance for loan losses.
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.
· Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
Inputs include the following:
a) Quoted prices for similar assets or liabilities in active markets;
b) Quoted prices for identical or similar assets or liabilities in non-active markets;
c) Pricing models whose inputs are observable for substantially the full term of the asset or liability; and
d) Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means
· Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement.
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.
Impairment of Assets Other Than Loans
Certain assets, such as goodwill and equity investments are subject to an impairment review. Asset impairment charges require considerable judgment and are recorded when market value declines below the carrying value, for declines other-than-temporary, or where the cost of the asset is deemed to not be recoverable.
Under U.S. 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.
Deferred Tax Asset Valuation Allowance
Under U.S. GAAP, FASB ASC 740 “Income Taxes,” income taxes are 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 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.
Securitizations
The Group has securitized certain of its 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.
Under U.S. 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.
Under FASB ASC 810, financial trusts were considered variable interest entities. The Group was deemed to be the primary beneficiary of these trusts and, therefore, the Group included them in its consolidated financial statements.
Results of Operations for the Years Ended December 31, 2017, 20162018 and 2015
2017
We discuss below: (i) our results of operations for the year ended December 31, 20172018 as compared with our results of operations for the year ended December 31, 2016; and (ii) our results of operations for the year ended December 31, 2016 as compared with our results of operations for the year ended December 31, 2015.
2017.
Guidelines Towards Conversion to IFRSAttributable Comprehensive Income and Attributable Net Income
Consolidated Income Statement Data IFRS Interest income Interest expenses Net interest income Net income from financial instruments (NIFFI) at fair value through profit or loss Exchange rate difference on gold and foreign currency NIFFI and Exchange Rate Differences Net Financial Income Services fee income Services fee expense Income from insurance activities Net Service Fee Income Sub Total Result from exposure to changes in the purchasing power of money Other operating income Loan loss provisions Net Operating Income Personnel expenses Administration expenses Depreciations and impairment of non-financial assets Other operating expenses Operating income Income / (loss) before taxes Income tax Net loss for the year Net loss for the year attributable to owners of the parent company Net loss for the year attributable tonon-controlling interest Other Comprehensive Income Other comprehensive income attributable to parent company Other comprehensive income attributable tonon-controlling interest Comprehensive Loss Comprehensive loss for the year attributable to owners of the parent company Comprehensive loss for the year attributable tonon-controlling interest Return on Average Shareholders’ Equity Return on Average AssetsOn 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 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). Grupo Supervielle S.A. As of December 31 2018 2017 Change $ $ % (in thousands of Pesos, except percentages) 30,416,242 22,264,831 36.6 % (17,413,360 ) (8,309,665 ) 109.6 % 13,002,882 13,955,166 (6.8 )% 6,310,371 3,545,647 78.0 % 1,126,705 393,112 186.6 % 7,437,076 3,938,759 88.8 % 20,439,958 17,893,925 14.2 % 5,927,689 6,063,719 (2.2 )% (1,418,180 ) (1,220,427 ) 16.2 % 848,665 899,491 (5.7 )% 5,358,174 5,742,783 (6.7 )% 25,798,132 23,636,708 9.1 % �� (6,015,001 ) (2,591,255 ) 132.1 % 2,473,558 1,838,024 34.6 % (5,179,033 ) (4,033,187 ) 28.4 % 17,077,656 18,850,290 (9.4 )% (8,778,580 ) (8,736,238 ) 0.5 % (5,600,508 ) (4,918,531 ) 13.9 % (432,389 ) (621,988 ) (30.5 )% (4,311,940 ) (4,156,824 ) 3.7 % (2,045,761 ) 416,709 N.A. (2,045,761 ) 416,709 N.A. (1,010,888 ) (1,171,969 ) (13.7 )% (3,056,649 ) (755,260 ) 304.7 % (3,028,003 ) (754,370 ) 301.4 % (28,646 ) (890 ) 3118.7 % 241,573 46,882 415.3 % 241,322 46,869 414.9 % 251 13 1830.8 % (2,815,076 ) (708,378 ) 297.4 % (2,786,681 ) (707,501 ) 293.9 % (28,395 ) (877 ) 3137.7 % (14,6 )% (4,4 )% (1.8 )% (0,6 )%
According to such convergence process, IFRS have been adopted for the fiscal year beginning on January 1, 2018 and IFRS transition date pursuant to IFRS 1 “First-time Adoption of IFRS” was scheduled for January 1, 2017.
IFRS 1, First Time Adoption of International Financial Reporting Standards, is the guidance that is applied during preparation of a company’s first IFRS-based financial statements. IFRS 1 was created to help companies transition to IFRS and provides practical accommodations intended to make first-time adoption cost-effective. It also provides application guidance for addressing difficult conversion topics.
The key principle of IFRS 1 is full retrospective application of all IFRS standards that are effective as of the closing balance sheet or reporting date of the first IFRS financial statements. IFRS 1 requires companies to (i) identify the first IFRS financial statements; (ii) prepare an opening balance sheet at the date of transition to IFRS; (iii) select accounting policies that comply with IFRS and to apply those policies retrospectively to all of the periods presentedAttributable Comprehensive Income in the first IFRS financial statements; (iv) consider whether to apply any of the optional exemptions from retrospective application; (v) apply the mandatory exceptions from retrospective application; and (vi) make extensive disclosures to explain the
transition to IFRS. Exemptions provide limited relief for first-time adopters, mainly in areas where the information needed to apply IFRS retrospectively may be most challenging to obtain.
The Bank will present consolidated financial statements under IFRS as issued by the IASB, as adopted by the Central Bank for the first time in its consolidated financial statements for the year ended December 31, 2018 which will include comparative financial statements for the year ended December 31, 2017. The Bank will present unaudited consolidated interim financial statements under IFRS as issued by the IASB, as adopted by the Central Bank for the first time in its unaudited consolidated interim financial statements for the three months ended March 31, 2018, which will include comparative financial statements for the three months ended March 31, 2017. 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 income for the year ended December 31, 2017. The figures shown in that note may be subject to change and may only be considered definitive when audited consolidated financial statements for fiscal year 2018 are released.
Results of Operations for the Years Ended December 31, 2017, 2016 and 2015
We discuss below: (i) our results of operations for the year ended December 31, 2017 as compared with our results of operations for the year ended December 31, 2016; and (ii) our results of operations for the year ended December 31, 2016 as compared with our results of operations for the year ended December 31, 2015.
Net Income
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| Year ended December 31, |
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| 2017 |
| 2016 |
| 2015 |
| 2017/2016 |
| 2016/2015 |
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| (in percentages) |
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Consolidated Income Statement |
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Argentine Banking GAAP |
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Financial Income |
| 15,494,671 |
| 10,794,579 |
| 6,741,744 |
| 43.5 | % | 60.1 | % |
Financial Expenses(1) |
| (6,194,288 | ) | (4,866,525 | ) | (3,386,050 | ) | 27.3 | % | 43.7 | % |
Gross Financial Margin |
| 9,300,383 |
| 5,928,054 |
| 3,355,694 |
| 56.9 | % | 76.7 | % |
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Loan Loss Provisions |
| (1,820,169 | ) | (1,057,637 | ) | (543,844 | ) | 72.1 | % | 94.5 | % |
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Services Fee Income |
| 4,973,272 |
| 3,527,516 |
| 2,835,708 |
| 41.0 | % | 24.4 | % |
Services Fee Expense |
| (1,495,848 | ) | (1,080,660 | ) | (778,492 | ) | 38.4 | % | 38.8 | % |
Net Services Fee Income |
| 3,477,424 |
| 2,446,856 |
| 2,057,216 |
| 42.1 | % | 18.9 | % |
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Income from Insurance Activities |
| 479,061 |
| 606,143 |
| 175,947 |
| (21.0 | )% | 244.5 | % |
Administrative Expenses |
| (8,390,622 | ) | (6,060,281 | ) | (4,261,402 | ) | 38.5 | % | 42.2 | % |
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Income from Financial Transactions |
| 3,046,077 |
| 1,863,135 |
| 783,611 |
| 63.5 | % | 137.8 | % |
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Miscellaneous Income |
| 545,842 |
| 429,884 |
| 367,165 |
| 27.0 | % | 17.1 | % |
Miscellaneous Losses |
| (376,480 | ) | (458,946 | ) | (213,427 | ) | (18.0 | )% | 115.0 | % |
Miscellaneous Income / (Loss), Net |
| 169,362 |
| (29,062 | ) | 153,738 |
| 682.8 | % | (118.9 | )% |
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Non-controlling Interest Result |
| (5,897 | ) | (22,166 | ) | (16,079 | ) | 73.4 | % | 37.9 | % |
Income before income tax |
| 3,209,542 |
| 1,811,907 |
| 921,270 |
| 77.1 | % | 96.7 | % |
Income Tax |
| (772,483 | ) | (500,603 | ) | (247,161 | ) | 54.3 | % | 102.5 | % |
Net income for the period |
| 2,437,059 |
| 1,311,304 |
| 674,109 |
| 85.9 | % | 94.5 | % |
Return on Average Assets(1) |
| 3.5 | % | 3.2 | % | 2.5 | % |
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Return on Average Shareholders’ Equity(2) |
| 25.4 | % | 26.3 | % | 32.2 | % |
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(1) Includes losses related to NDF hedging transactions, which totaled Ps.0 million as of December 31, 2017 and Ps.0 million as of December 31, 2016 and Ps.228.2 million as of December 31, 2015.
(2) Net income, divided by average assets, calculated on a daily basis.
(3) Net income, divided by average shareholder equity, calculated on a daily basis.
The following table shows our yields on interest-earning assets and cost of funds:
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| As of December 31, |
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| 2017 |
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Interest-Earning Assets |
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Investment Portfolio(1) |
| 8,201,062 |
| 24,2 | % | 3,993,113 |
| 31.4 | % | 2,562,300 |
| 26.3 | % |
Loans |
| 42,831,384 |
| 29.4 | % | 26,248,876 |
| 33.7 | % | 17,654,501 |
| 32.5 | % |
Other receivables from financial transactions(2) |
| 1,643,903 |
| 23.9 | % | 694,063 |
| 31.5 | % | 303,044 |
| 17.7 | % |
Interest-Bearing Liabilities |
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Checking and Savings accounts |
| 12,839,525 |
| 0.0 | % | 7,431,318 |
| 0.1 | % | 4,903,695 |
| 0.1 | % |
Special checking accounts(3) |
| 5,318,081 |
| 12.0 | % | — |
| 0.0 | % | — |
| 0.0 | % |
Time deposits |
| 13,893,201 |
| 16.6 | % | 12,452,742 |
| 24.7 | % | 9,287,475 |
| 24.0 | % |
Borrowings from other financial institutions and unsubordinated negotiable obligations |
| 7,963,979 |
| 23.4 | % | 2,550,226 |
| 29.1 | % | 1,651,911 |
| 25.6 | % |
Subordinated loans and negotiable obligations |
| 1,319,046 |
| 9.7 | % | 1,285,162 |
| 10.0 | % | 800,088 |
| 10.2 | % |
Spread and Net Yield |
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Interest spread, nominal basis |
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| 16.5 | % |
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| 16.8 | % |
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| 15.0 | % |
Net interest margin` |
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| 19.1 | % |
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| 20.6 | % |
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| 18.1 | % |
(1) Includes securities issued by our securitization trusts and held by us, instruments issued by the Central Bank (LEBACs, NOBACs, and BOPOMs) and other government and corporate securities.
(2) Includes overnight deposits and unlisted corporate bonds.
(3) Special checking accounts refers to checking accounts for institutions which are allowed to pay interest.
Net income for 2017 amounted to Ps.2.4a Ps.2.8 billion loss, as compared to a Ps.707.5 million loss in 2017.
Attributable net income of Ps.1.3Income in 2018 amounted to a Ps.3.0 billion loss, as compared to aPs.754.4 million loss in 2016.
2017.
ROAA and ROAE were 3.5%(1.8%) and 25.4%,(14.3 %) respectively, for 2017,in 2018, as compared to 3.2%(0.5%) and 26.3%,(4.1%) respectively, during 2016. For 2015, ROAA was 2.5% and ROAE was 32.2%. In the period ended December 31, 2017, ROAE reflected the temporary dilution that resulted from the capital raised in our follow-on equity offering on September 12, 2017 (including the subsequent exercise of the green shoe). This resulted in a Ps.5.6 billion increase in the shareholder’s equity which fully impacted the fourth quarter of 2017, but only 15 days of the third quarter of 2017. Results in 2017 included (i) non-recurring net gains from the sale of Viñas del Monte and other non-strategic properties, and (ii) a Ps.50 million net loss due to impact of the appreciation of the Peso against the U.S. dollar between pricing and settlement of the Ps.4,768,170,000 global term note issued by the Bank in February 2017.
2018 Compared to 2017
In 2016, ROAE reflected the temporary dilution that resulted from the capital raised in our IPO on May 19, 2016. Results in 2016 included a Ps.92.4 million net gain from the termination of the Supervielle Renta Inmobiliaria Financial Trust.
The following table sets forth net income by quarter for the four quarters in 2017 and 2016. In general, our net income in the second half of the year is higher than in the first half, mainly due to the seasonality of economic activity plus the effect of the monthly cumulative increase of our assets in nominal terms and the fact that the salary increases agreed upon between us and the banking employees’ trade union during the second quarter are applied retroactively to the first quarter. This year, fourth quarter of 2017 reflects the 5.3% increase in salaries applied retroactively for the full year to catch up with 2017 inflation following the trigger clause included in the banking union 2017 wage increase agreement.
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2017 Compared to 2016
During 2017, net2018, attributable comprehensive income amounted to Ps.2.4a Ps 3.0 billion loss, a Ps.1.1Ps.2.3 billion increasedecrease compared to net income of Ps.1.3 billiona Ps.715.8 million loss in 2016.
2017.
The main factors explaining the increasedecrease were:
·a Ps.3.4Ps.6.0 billion loss from exposure to changes in the purchasing power of the currency compared to Ps.2.6 billion loss in 2017,
a Ps.1.1 billion increase in gross financial margin,loan loss provisions to Ps.9.3Ps.5.2 billion from Ps.5.9Ps.4.0 billion,
·a Ps.1.0Ps.724.3 million increase in personnel and administrative expenses, to Ps.14.4 billion increasefrom Ps.13.7 billion,
a Ps.333.8 million decrease in net services fee income, to Ps.3.5Ps.4.5 billion from Ps.2.4Ps.4.8 billion, and
·a net miscellaneous gain of Ps.169.4Ps.50.8 million as compareddecrease in income from insurance activities, to a net miscellaneous loss of Ps.29.1Ps.848.7 million from Ps.899.5 million.
These factors were partially offset by:
·a Ps.2.3Ps.2.5 billion increase in administrative expenses,net financial income to Ps.8.4Ps.20.4 billion from Ps.6.1Ps.17.9 billion,
·a Ps.762.5Ps.194.4 million increase in loan loss provisionsother comprehensive income, to Ps.1.8 billionPs.241.3 million from Ps.1.1 billion, reflecting the growth of the loan portfolio, a deterioration in asset quality mainly in the consumer finance segment as well as increased loan loss provisions required by the aging of delinquent loans as from previous quarters,Ps.46.9 million, and the 470-basis point increase in the coverage ratio to 91.8%,
·a Ps.271.9 increasePs.161.1 million decrease in income tax, to Ps.772.5 millionPs.1.0 billion from Ps.500.6 million,Ps.1.2 billion.
Net Financial Income (Net Interest Income-NII-, Net Income from Financial Instruments -NIFFI- and Exchange Rate Differences on Gold and Foreign Currency)
Net Financial Income
Net financial income in 2018 amounted to Ps.20.4 billion, net financial margin was 17.0% and net interest margin was 17.7%, compared to Ps.17.9 billion, 18.4% and 18.3%, respectively, in 2017.
Breakdown Net Interest Income, NIFFI and Exhange Rate Differences
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| Grupo Supervielle S.A. | ||||||||||||
| As of December 31, | Change | |||||||||||
| 2018 | 2017 | 2018-2017 | ||||||||||
| $ | $ | % | ||||||||||
Net Interest Income | 13,002,882 | 13,955,166 | (6.8 | )% | ||||||||
NIFFI and Exchange Rate differences | 7,437,076 | 3,938,759 | 88.8 | % | ||||||||
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Total | 20,439,958 | 17,893,925 | 14.2 | % | ||||||||
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· a Ps.127.1 million decrease in income from insurance activities, to Ps.479.1 million from Ps.606.1 million.
NIM and NFM by currency
2016 Compared to 2015
| Grupo Supervielle S.A. | ||||||||
| As of December 31, | ||||||||
| 2018 | 2017 | |||||||
Net interest margin | 17.7 | % | 18.3 | % | ||||
Pesos | 20.2 | % | 22.5 | % | ||||
Dollars | 9.0 | % | (0.8 | )% | ||||
Net financial margin | 17.0 | % | 18.4 | % | ||||
Pesos | 20.0 | % | 22.3 | % | ||||
Dollars | 6.9 | % | 0.8 | % | ||||
| Grupo Supervielle S.A. | ||||||||
| As of December 31, | ||||||||
| 2018 | 2017 | |||||||
| (in percentages) | ||||||||
Net Interest Margin Breakdown | ||||||||
Total NIM | 17.7 | % | 19.4 | % | ||||
Ps.NIM | 20.2 | % | 22.5 | % | ||||
U.S.$.NIM | 9.0 | % | (0.8 | )% | ||||
Loan Portfolio NIM | 16.2 | % | 18.9 | % | ||||
Ps.NIM | 20.5 | % | 23.9 | % | ||||
U.S.$.NIM | 3.9 | % | (4.0 | )% | ||||
Investment Portfolio NIM | 23.9 | % | 15.4 | % | ||||
Ps.NIM | 19.2 | % | 15.8 | % | ||||
U.S.$.NIM | 41.7 | % | 13.4 | % | ||||
During 2016, netNIM includes interest income amounted to Ps.1.3 billion, a Ps.637.2 million increase compared to net income of Ps.674.1 million in 2015.
The main factors explaining the increase were:
· a Ps.2.6 billion increase in gross financial margin, to Ps.5.9 billion from Ps.3.4 billion,
· a Ps.389.6 million increase in net services fee income, to Ps.2.4 billion from Ps.2.1 billion, and
· a Ps.430.2 million increase in income from insurance activities, to Ps.606.1 million from Ps.175.9 million.
These factors were partially offset by:
· a Ps.1.8 billion increase in administrative expenses, to Ps.6.1 billion from Ps.4.3 billion,
· a Ps.513.8 million increase in loan loss provisions to Ps.1,1 billion from Ps.543.8 million,
· a Ps.253.4 million increase in income tax, to Ps.500.6 million from Ps.247.2 million, and
· a Ps.29.1 million loss in other income, compared to other net gains of Ps.153.7 million in 2015.
Financial Income
Our financial income was comprised of the following:
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| Year ended December 31, |
| Change December 31, |
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| 2017 |
| 2016 |
| 2015 |
| 2017/2016 |
| 2016/2015 |
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Interest on loans to the financial sector |
| 90,151 |
| 73,754 |
| 9,173 |
| 22.2 | % | 704.0 | % |
Interest on overdrafts |
| 1,162,911 |
| 996,570 |
| 594,315 |
| 16.7 | % | 67.7 | % |
Interest on promissory notes |
| 1,403,685 |
| 1,087,323 |
| 838,464 |
| 29.1 | % | 29.7 | % |
Interest on mortgage loans |
| 109,801 |
| 8,998 |
| 10,014 |
| 1120.3 | % | (10.1 | )% |
Interest on automobile and other secured loans |
| 30,916 |
| 17,271 |
| 32,678 |
| 79.0 | % | (47.1 | )% |
Interest on personal loans |
| 6,104,346 |
| 3,631,979 |
| 2,144,410 |
| 68.1 | % | 69.4 | % |
Interest on corporate unsecured loans |
| 1,076,056 |
| 819,097 |
| 561,635 |
| 31.4 | % | 45.8 | % |
Interest on credit cards loans |
| 1,802,713 |
| 1,733,606 |
| 1,289,386 |
| 4.0 | % | 34.5 | % |
Interest on foreign trade loans |
| 361,112 |
| 130,047 |
| 42,975 |
| 177.7 | % | 202.6 | % |
Interest on leases |
| 454,851 |
| 359,588 |
| 207,411 |
| 26.5 | % | 73.4 | % |
Interest on other receivables from financial transactions |
| 392,172 |
| 218,942 |
| 56,762 |
| 79.1 | % | 285.7 | % |
Income from government and corporate securities(1) |
| 518,698 |
| 157,396 |
| 131,058 |
| 229.5 | % | 20.1 | % |
Income from participation in our securitization trusts(2) |
| 148,627 |
| 362,242 |
| 282,553 |
| (59.0 | )% | 28.2 | % |
Income from securities issued by the Central Bank(1) |
| 1,318,422 |
| 734,096 |
| 257,274 |
| 79.6 | % | 185.3 | % |
Exchange rate differences of gold and foreign currency(3) |
| 250,759 |
| 367,436 |
| 44,735 |
| (31.8 | )% | 721.4 | % |
Other(4) |
| 269,451 |
| 96,234 |
| 238,901 |
| 180.0 | % | (59.7 | )% |
Total |
| 15,494,671 |
| 10,794,579 |
| 6,741,744 |
| 43.5 | % | 60.1 | % |
(1) Includes interest and variations in fair value.
(2) Includes interest on and changes in the fair value of senior and subordinated bonds issued by our securitization trusts and held by us,expense, as well as variations inresults from investment portfolio, but does not include the book value of participation certificates issued by such trusts. Income derived from participation certificates (but not from senior and subordinated bonds) is not subject to income tax, which is deducted at the financial trusts’ level. Allowances for loan losses are also maintained at the trust level following Central Bank regulations.
(3) Includes exchange rate differences bothand net gains or losses from currency derivatives. For example, when we took peso denominated deposits and granted foreign currency trading andloans, with a forward contract to hedge the currency mismatch, its NIM ratio did not include the hedge gain or loss, leading to an inaccurate rate. The same occurs when we took dollar denominated deposits to buy foreign currency securities, its NIM ratio did not include the exchange rate gain or loss from the liabilities adjustment. The NFM ratio captures all the components of our financial margin and is more accurate and representative of its financial margin and spreads.
Net Interest Income
Net interest income in 2018 totaled Ps.13.0 billion, a 6.8% decrease from the Ps.14.0 billion recorded in 2017. Additional deposits to fund new investments in high-yield short term Central Bank securities resulted in higher interest expenses, impacting net holdings of assets and liabilities.
(4) Includes premiums on repo transactions, which totaled Ps.180.1 millioninterest income, while yields from the investment in those securities held for trading purposes are recorded in the year ended December 31, 2017 and Ps.13.6 million for the year ended December 31, 2016.
The following table sets forth our yields on interest-earning assets:net income from financial instruments.
|
| Year ended December 31, |
| ||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| ||||||
|
| Average |
| Average |
| Average |
| Average |
| Average |
| Average |
|
|
| (in thousands of Pesos, except percentages) |
| ||||||||||
Interest-Earning Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
Government and corporate securities |
| 2,099,353 |
| 24.7 | % | 763,096 |
| 23.4 | % | 504,119 |
| 26.5 | % |
Participation in our securitization trusts |
| 818,852 |
| 18.2 | % | 1,277,081 |
| 28.4 | % | 1,348,974 |
| 21.0 | % |
Securities issued by the Central Bank. |
| 5,282,857 |
| 25.0 | % | 1,952,936 |
| 37.1 | % | 709,207 |
| 36.3 | % |
Total Investment Portfolio |
| 8,201,062 |
| 24.2 | % | 3,993,113 |
| 31.7 | % | 2,562,300 |
| 26.3 | % |
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans to the financial sector |
| 508,888 |
| 17.7 | % | 240,611 |
| 30.7 | % | 28,977 |
| 31.7 | % |
Overdrafts |
| 3,262,650 |
| 35.6 | % | 2,509,796 |
| 39.7 | % | 1,638,881 |
| 36.3 | % |
Promissory notes(1) |
| 6,411,891 |
| 21.9 | % | 3,837,761 |
| 28.3 | % | 3,177,646 |
| 26.4 | % |
Mortgage loans |
| 457,344 |
| 24.0 | % | 40,766 |
| 22.1 | % | 59,344 |
| 16.9 | % |
Automobile and other secured loans |
| 157,946 |
| 19.6 | % | 78,980 |
| 21.9 | % | 133,740 |
| 24.4 | % |
Personal loans |
| 12,443,671 |
| 49.1 | % | 7,884,433 |
| 46.1 | % | 5,170,131 |
| 41.5 | % |
Corporate unsecured loans |
| 4,041,754 |
| 26.6 | % | 2,418,252 |
| 33.9 | % | 1,769,763 |
| 31.7 | % |
Credit cards loans |
| 6,365,177 |
| 28.3 | % | 5,544,763 |
| 31.3 | % | 4,193,038 |
| 30.8 | % |
Receivables from financial leases |
| 1,963,819 |
| 23.2 | % | 1,317,689 |
| 27.3 | % | 837,151 |
| 24.8 | % |
Total loans excl. Foreign trade and U.S. dollar loans |
| 35,613,140 |
| 34.4 | % | 23,873,051 |
| 36.6 | % | 17,008,671 |
| 33.4 | % |
Foreign Trade Loans and U.S. dollar loans |
| 7,218,244 |
| 5.0 | % | 2,375,825 |
| 5.5 | % | 645,829 |
| 6.7 | % |
Total Loans |
| 42,831,384 |
| 29.4 | % | 26,248,876 |
| 33.7 | % | 17,654,501 |
| 32.5 | % |
Other receivables from financial transactions |
| 1,643,903 |
| 23.9 | % | 694,063 |
| 31.5 | % | 303,044 |
| 17.7 | % |
Total Interest-Earning Assets |
| 52,676,349 |
| 28.4 | % | 30,936,051 |
| 33.4 | % | 20,519,845 |
| 31.5 | % |
Net repo transactions |
| (374,483 | ) |
|
| 262,985 |
|
|
| 145,246 |
|
|
|
Total Interest-Earning Assets with Repo transactions |
| 52,301,866 |
|
|
| 31,199,036 |
|
|
| 20,665,090 |
|
|
|
| i) | Interest Income |
(1) Consists of unsecured checks and accounts receivable deriving from factoring transactions.
Our financial income includes net income derived from our participation in financial trusts created in connection with our securitization transactions.
From time to time, each of the Bank and CCF and prior to 2013, Tarjeta as well transfer portions of their loan portfolio, mainly personal loans, to special purpose financial trusts that fund the purchase of these loans by issuing securities, most of which are sold to third parties, thereby creating an additional source of funding for operations. Before the IPO, loan securitization was part of our self-funded strategy. However, since the IPO we have reduced substantially the securitization made by the Bank, although we continued to follow this strategy at CCF.
In the case of the securitization transactions carried out by the Bank and CCF, the trustee typically issues senior bonds, subordinated bonds and participation certificates (equivalent to equity), and the Bank places these bonds in the Argentine capital markets. Generally, the Bank and CCF, as settlors of the trust, retain the balance of the subordinated bonds and the participation certificates that are not purchased by investors, as well as some senior bonds. The Bank and CCF generally retain servicing rights with respect to the loan portfolio transferred to the financial trusts. The payment obligations of these securities are secured by the trust assets consisting of the portfolio of the loans transferred and any reserved fund established by the Bank or CCF for such purpose. We have no exposure to such trusts beyond the senior and subordinated debt and the participation certificates that we hold.
For more information regarding our securitization transactions see “Item 5.B Liquidity and Capital Resources—Funding—Securitization Transactions.”
2017 Compared to 2016
FinancialInterest income in 20172018 totaled Ps.15.5 Ps.30.4 billion, a 43.5%36.6% increase from the Ps.10.8Ps.22.3 billion recorded in 2016.2017. This increase was primarily the result of an increase in average interest-earning assets (including repo transactions) followingloans.
Our interest income was comprised of the IPO and the follow-on equity offering in September 2017 and Ps.173.2 million increase in other financial income to Ps.269.5 million from Ps.96.2 million recorded in 2016.following:
| Grupo Supervielle S.A. | ||||||||||||
| Year ended December 31, | ||||||||||||
| 2018 | 2017 | Change | ||||||||||
| $ | $ | % | ||||||||||
Interest on cash and due from banks | 11,009 | — | N.R. | |||||||||
Interest on loans to the financial sector | 247,055 | 38,257 | 545.8 | % | ||||||||
Interest on overdrafts | 3,250,648 | 1,886,213 | 72.3 | % | ||||||||
Interest on promissory notes | 4,077,348 | 2,448,911 | 66.5 | % | ||||||||
Interest on mortgage loans | 1,968,843 | 171,077 | 1050.9 | % | ||||||||
Interest on automobile and other secured loans | 492,218 | 49,185 | 900.7 | % | ||||||||
Interest on personal loans | 10,928,385 | 10,757,018 | 1.6 | % | ||||||||
Interest on corporate unsecured loans | 3,018,809 | 1,989,510 | 51.7 | % | ||||||||
Interest on credit cards loans | 3,412,689 | 3,285,212 | 3.9 | % | ||||||||
Interest on foreign trade loans | 1,169,104 | 584,527 | 100.0 | % | ||||||||
Interest on leases | 921,149 | 742,115 | 24.1 | % | ||||||||
Other | 918,985 | 312,806 | 193.8 | % | ||||||||
|
|
|
|
|
| |||||||
Total | 30,416,242 | 22,264,831 | 36.6 | % | ||||||||
The following table sets forth our yields oninterest-earning assets:
| As of December 31, | ||||||||||||||||
| 2018 | 2017 | |||||||||||||||
| Interest-Earning Assets | Average Balance | Average Nominal Rate | Average Balance | Average Nominal Rate | ||||||||||||
Investment Portfolio | ||||||||||||||||
Government and Corporate Securities | 8,260,093 | 32.6 | % | 5,216,557 | 21.6 | % | ||||||||||
Securities Issued by the Central Bank | 14,950,311 | 41.3 | % | 11,481,607 | 24.7 | % | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investment Portfolio | 23,210,404 | 38.2 | % | 16,698,164 | 23.8 | % | ||||||||||
Loans | ||||||||||||||||
Loans to the Financial Sector | 911,408 | 27.1 | % | 613,363 | 6.2 | % | ||||||||||
Overdrafts | 6,845,401 | 47.5 | % | 5,898,524 | 32.0 | % | ||||||||||
Promissory Notes | 10,994,328 | 37.1 | % | 11,592,015 | 21.1 | % | ||||||||||
Mortgage loans | 4,817,047 | 40.9 | % | 808,083 | 21.2 | % | ||||||||||
Automobile and Other Secured Loans | 1,964,008 | 25.1 | % | 285,550 | 17.2 | % | ||||||||||
Personal Loans | 25,581,143 | 42.7 | % | 25,987,481 | 41.4 | % | ||||||||||
Corporate Unsecured Loans | 8,971,718 | 33.6 | % | 7,307,059 | 27.2 | % | ||||||||||
Credit Card Loans | 11,053,433 | 30.9 | % | 11,244,456 | 29.2 | % | ||||||||||
Receivables from Financial Leases | 4,096,280 | 22.5 | % | 3,539,773 | 21.0 | % | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Loans excl. Foreign trade and U.S.$.loans | 75,234,766 | 37.6 | % | 67,276,304 | 31.8 | % | ||||||||||
Foreign Trade Loans and U.S.$.loans | 21,514,371 | 5.4 | % | 13,049,814 | 4.5 | % | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Loans | 96,749,137 | 30.5 | % | 80,326,118 | 27.3 | % | ||||||||||
Repo transactions | 163,920 | 31.1 | % | — | 0.0 | % | ||||||||||
|
|
|
|
|
|
|
| |||||||||
TotalInterest-Earning Assets | 120,123,461 | 32.0 | % | 97,024,282 | 26.7 | % | ||||||||||
The average balance of our interest-earning assets totaled Ps.52.7 billion in 2017, representing a 70.3% increase from Ps.30.9 billion in 2016. This increase was mainly a result of (i) a 49.2% increase in the average balance of our total loan portfolio excluding foreign trade and U.S. dollarUS dollars loans to Ps.35.6totaled Ps.75.2 billion in 20172018, representing a 11.8% increase from Ps.23.9Ps.67.3 billion in 2016, (ii) a 203.8% increase in the average foreign trade and U.S. dollar loan portfolio to Ps.7.2 billion in 2017, from Ps.2.4 billion in 2016, (iii) a 105.4% increase in the average balance of our total investment portfolio to Ps.8.2 billion in 2017, from Ps. 4.0 billion in 2016, and (iv) a Ps.173.2 million increase in other financial income.
2017. The increase in the average balance of our total loan portfolio (excluding foreign trade loans and U.S. dollar loans) was mainly explained by the following changes in our balance sheet. First, the average balance of personal loans increased by 57.8%, representing the increase in the average balance of personal loans when deducting therefrom the portfolio of personal loans that was securitized during 2017 and 2016, as applicable. The average amount of securitized personal loans was higher during 2017 when compared to 2016. If no personal loans had been securitized during 2017 and 2016, the increase in the average balance of personal loans would have been 80.5%, which is higher than the estimated 52.3% average increase recorded by the Argentine financial system in the same period. In addition to the increase in our average balance of personal loans, our total loan portfolio was also impacted bystatements: i). a 67.1%496.1%, or Ps.2.6Ps.4.0 billion increase in promissory notes,mortgages from Ps.808.1 million to Ps.4.8 billion, ii). a 67.1%22.8%, or Ps.1.6Ps.1.7 billion, increase in corporate unsecured loans from Ps.7.3 billion to Ps.9.0 billion, iii). a 49.0%587.8%, or Ps.646.1Ps.1.7 billion increase in Automobile and Other Secured Loans from Ps.285.6 million to Ps.2.0 billion mainly due to the residual portfolio of Mila at the moment of the acquisition, iv). a 15.7%, or Ps.556.5 million, increase in receivables from financial leases, a 1,021.9%,leases. These increases were partially offset by i). 1.6% or Ps.416.6Ps.406.3 million increasedecrease in mortgages, a 30.0%,personal loans and 1.7% or Ps.752.9Ps.191.0 million increase in overdrafts and a 14.8%, or Ps.820.4 million, increasedecrease in credit cards.
The 203.8%, or Ps.4.8 billion, increase
Other Interest Income amounted to Ps.919.0 million in the average balance of our foreign trade loans and U.S. dollar loans outperformed industry growth and represented 13.7% of the total average loan portfolio.
The 105.4% increase in the average balance of our total investment portfolio was primarily due2018 comparing to increases in the average balances of the following securities after the IPO and our follow-on equity offering, which provided us with additional liquidity: (i) securities issued by the Central Bank, which increased to Ps.5.3 billionPs.312.8 in 2017, reflecting higher results from Ps.2.0 billion in 2016 and (ii) other government and corporateinvestments securities which increasedheld to Ps.2.1 billion in 2017, from Ps.763.1 million in 2016.maturity or available for sale, recorded at amortized cost.
The 80.5% increase in the average balance of our personal loans in 2017 was driven by growth both in the consumer finance segment and in the Retail Segment and reflects a higher level of contribution of these types of loans to securitization trusts compared with the same period of 2016. The growth in both segments was mainly due to the issuance by CCF of financial trusts to fund loan growth. The average amount of securitized personal loans was higher during 2017 when compared to 2016. Nevertheless, as of December 31, 2017, the total amount of securitized personal loan portfolio was lower than the balance registered as of December 31, 2016.
The average yield on interest-earning assets was 28.4% in 2017, a 500 basis point decrease from 33.4% recorded in 2016. The average interest rate on total loans (excluding foreign trade loans and U.S. dollar loans) decreased to 34.4% in 2017 from 36.6% in 2016, driven by lower average interest rates in corporate segment products and credit cards, which was partially offset by higher average interest rates on personal loans. Lower average interest rates on corporate segment products is the result of declining market interest rates, which directly impact corporate segment rates. Average BADLAR decreased 520 basis points in 2017 compared to 2016.
An increase in foreign trade and U.S. dollar-denominated loans, promissory notes and receivables from financial leases reflect the growth achieved in our corporate segment portfolio since the IPO and follow-on equity offering. The IPO, the follow-on equity offering and subsequent capital contributions to the Bank allowed it to have a higher
capital base to increase its loans to its corporate customers. The increase in the average balance of personal loans was driven by growth both in the consumer finance segment and in the retail segment.
The average yield on our total investment portfolio decreased 746 basis points to 24.2% in 2017, driven by decreased yields on securities issued by the Central Bank due to lower interest rates in Peso-denominated instruments. In 2016, the increase in yield of participation in our securitization trusts registered a net gain from the termination of the Supervielle Renta Inmobiliaria Financial Trust. This was partially offset by higher returns on government and corporate securities.
2016 Compared to 2015
Financial income in 2016 totaled Ps.10.8 billion, a 60.1% increase from the Ps.6.7 billion recorded in 2015. This increase was primarily the result of an increase in the average balance of our interest-earning assets due to the deployment of the capital raised in the IPO in May 2016, an increase of 195 basis points in the average yields of such assets after the removal by the Central Bank authorities in mid-December 2015 of interest rates caps and floors that had been in place during 2015 and the net gain on the termination of the Supervielle Renta Inmobiliaria Financial Trust. For an explanation of the termination of the Supervielle Renta Inmobiliaria Financial Trust and the related net gains, see “Item 4.D Property, Plants and Equipment.”
The average balance of interest-earning assets totaled Ps.30.9 billion in 2016, representing a 50.8% increase from Ps.20.5 billion in 2015. This increase was mainly a result of (i) a 40.4% increase in the average balance of our total loan portfolio (excluding our foreign trade and U.S. dollar loan portfolio) to Ps.23.9 billion in 2016, from Ps.17.0 billion in 2015, (ii) a 267.9% increase in the average balance of our foreign trade and U.S. dollar loan portfolio to Ps.2.4 billion in 2016, from Ps.645.8 million in 2015 and (iii) a 55.8% increase in the average balance of our total investment portfolio increasing to Ps.4.0 billion in 2016 from Ps.2.6 billion in 2015.
The increase in the average balance of our total loan portfolio (excluding foreign trade loans and U.S. dollar loans) was mainly explained by: (i) a 52.6% increase in the average balance of personal loans (compared to a 34% increase of those loans registered by the Argentine financial system), (ii) a 32.2% increase in the average balance of credit card loans, (iii) a 36.6% increase in the average balance of corporate unsecured loans, (iv) a 53.1% increase in the average balance of overdrafts (compared to a 26.5% increase registered by the Argentine financial system) and (v) a 57.4% increase in the average balance of receivables from financial leases.
The 267.9% increase in the average balance of foreign trade loans and U.S. dollar loans reflects the growth achieved in our corporate segment portfolio since the IPO.
The 55.8% increase in the average balance of our total investment portfolio was primarily due to a 175.4% increase in the average balance of our holdings of Central Bank securities due to the investment of a portion of the IPO proceeds, and a 51.4% increase in the average balance of our holdings of government and corporate securities, which represent 2% of our total average interest earning assets.
The 52.6% increase in the average balance of personal loans in 2016 was driven by growth both in the consumer finance segment and in the retail segment and reflects a lower level of contribution of these loans to securitization trusts in 2016 compared to 2015. Had the pace of securitization remained even, the increase in the average balance of personal loans in 2016 would have been approximately 27%. This 27% is lower than the estimated 34% average increase recorded by Argentine financial system in the same period.
The average yield on interest-earning assets was 33.4% in 2016, a 195 basis point increase from 31.5% in 2015. The average interest rate on total loans (excluding foreign trade loans and U.S. dollar loans) increased to 36.6%37.6% in 20162018 from 33.4%31.8% in 2015, reflecting an increase2017. Average BADLAR increased 1,370 basis points in the average interest rate on personal loans and overdrafts, and a higher incidence of personal loans and overdrafts in our loan portfolio, which bear a higher interest rate than other assets in the average portfolio.
The average nominal rate on our investment portfolio (which includes our income from participations in our securitization trusts) increased2018 to 31.4% in 2016 from 26.3% in 2015, primarily due to an increase in the average
nominal rate on participations in our securitization trusts and further impacted by the net gain on the termination of the Supervielle Renta Inmobiliaria Financial Trust. For an explanation of the termination of the Supervielle Renta Inmobiliaria Financial Trust and the related net gains, see “Item 4.D Property, Plants and Equipment.”
Financial income for 2016 includes a Ps.367.4 million gain from exchange rate differences of gold and foreign currency,34.3% compared to a gain of Ps.44.7 million from such exchange rate differences20.6% in 2015 (excluding gains related to NDF hedging transactions).2017.
Other financial income decreased by 59.7% to Ps.96.2 million in 2016 from Ps.238.9 million in 2015, as the results for the year 2015 included particular hedging transactions of Ps.228.2 million, entered into to protect our capital against an expected devaluation of the Peso in the fourth quarter of 2015, which materialized in December 2015.
Financialii) Interest Expenses
Our financialInterest expenses were composedcomprised of the following:
|
| Year ended December 31, |
| Change December 31, |
| ||||||||||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2017/2016 |
| 2016/2015 |
| As of December 31, | |||||||||||
|
| (in thousands of Pesos) |
| (in percentages) |
| 2018 | 2017 | Change | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| $ | $ | % | |||||||||
Interest on savings accounts |
| 3,702 |
| 4,639 |
| 4,830 |
| (20.2 | )% | (4.0 | )% | ||||||||||||
Interest on checking and savings accounts | 41,303 | 6,027 | 585.3 | % | |||||||||||||||||||
Interest on special checking accounts |
| 637,696 |
| — |
| — |
| 100.0 | % | 0.0 | % | 5,087,949 | 1,011,062 | 403.2 | % | ||||||||
Interest on time deposits |
| 2,308,058 |
| 3,070,847 |
| 2,224,748 |
| (24.8 | )% | 38.0 | % | 6,495,145 | 3,761,294 | 72.7 | % | ||||||||
Interest on other liabilities from financial transactions |
| 1,651,228 |
| 359,126 |
| 266,760 |
| 359.8 | % | 34.6 | % | 4,743,168 | 2,899,854 | 63.6 | % | ||||||||
Interest on financing from the financial sector |
| 208,869 |
| 382,588 |
| 156,915 |
| (45.4 | )% | 143.8 | % | 739,476 | 248,796 | 197.2 | % | ||||||||
Interest on subordinated loans and negotiable obligations |
| 128,237 |
| 128,027 |
| 81,282 |
| 0.2 | % | 57.5 | % | 86,809 | 211,436 | (58.9 | )% | ||||||||
Other |
| 1,256,498 |
| 921,297 |
| 651,515 |
| 36.4 | % | 41.4 | % | 219,510 | 171,196 | 28.2 | % | ||||||||
|
|
| |||||||||||||||||||||
Total |
| 6,194,288 |
| 4,866,525 |
| 3,386,050 |
| 27.3 | % | 43.7 | % | 17,413,360 | 8,309,665 | 109.6 | % | ||||||||
(1) Includes mainly turnover tax and payments to the deposit guarantee fund.
The following table shows our cost of funds:
|
| Year ended December 31, |
| ||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| ||||||
|
| Average |
| Average |
| Average |
| Average |
| Average |
| Average |
|
|
| (in thousands of Pesos, except percentages) |
| ||||||||||
Interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Special Checking Accounts |
| 5,318,081 |
| 12.0 | % | — |
| 0.0 | % | — |
| 0.0 | % |
Ps. Time Deposits |
| 4,139,446 |
| 15.3 | % | — |
| 0.0 | % | — |
| 0.0 | % |
Foreign Exchange Time deposits |
| 1,178,635 |
| 0.3 | % | — |
| 0.0 | % | — |
| 0.0 | % |
Time Deposits |
| 13,893,202 |
| 16.6 | % | 12,452,742 |
| 24.7 | % | 9,287,475 |
| 24.0 | % |
Ps. Time Deposits |
| 12,567,904 |
| 18.3 | % | 11,646,092 |
| 26.3 | % | 8,950,016 |
| 24.8 | % |
Foreign Exchange Time deposits |
| 1,325,298 |
| 0.6 | % | 806,650 |
| 1.3 | % | 337,459 |
| 0.8 | % |
Borrowings from other financial institutions and unsubordinated negotiable obligations |
| 7,963,979 |
| 23.4 | % | 2,550,226 |
| 29.1 | % | 1,651,911 |
| 25.6 | % |
Subordinated loans and negotiable obligations |
| 1,319,046 |
| 9.7 | % | 1,285,162 |
| 10.0 | % | 800,088 |
| 10.2 | % |
Total interest-bearing liabilities |
| 28,494,308 |
| 17.3 | % | 16,288,130 |
| 24.2 | % | 11,739,473 |
| 23.3 | % |
Low & Non-Interest Bearing Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings accounts |
| 12,839,525 |
| 0.0 | % | 7,431,318 |
| 0.1 | % | 4,903,695 |
| 0.1 | % |
Ps. Savings Accounts |
| 8,991,324 |
| 0.0 | % | 6,192,384 |
| 0.1 | % | 4,616,801 |
| 0.1 | % |
Foreign Exhnage Savings Accounts |
| 3,848,201 |
| 0.0 | % | 1,238,934 |
| 0.1 | % | 286,894 |
| 0.1 | % |
Demand Deposits |
| 9,483,831 |
|
|
| 7,143,382 |
|
|
| 4,866,728 |
|
|
|
Ps. Checking Accounts |
| 6,721,340 |
|
|
| 6,541,618 |
|
|
| 4,766,900 |
|
|
|
Foreign Exchange Checking Accounts |
| 2,762,491 |
|
|
| 601,764 |
|
|
| 99,828 |
|
|
|
Special Checking Accounts |
| — |
|
|
| 1,749,023 |
|
|
| 1,117,708 |
|
|
|
Ps. Special Checking Accounts |
| — |
|
|
| 1,749,023 |
|
|
| 1,117,708 |
|
|
|
Foreign Exchange Special Checking Accounts |
| — |
|
|
| — |
|
|
| — |
|
|
|
Total low & non interest-bearing deposits |
| 22,323,356 |
|
|
| 14,574,700 |
|
|
| 9,770,423 |
|
|
|
Total Interest-bearing liabilities & low & non-interest bearing deposits |
| 50,817,664 |
| 9.7 | % | 30,862,830 |
| 12.8 | % | 21,509,896 |
| 12.7 | % |
The following table sets forth interest bearing deposits by denomination:
|
| Year ended December 31, |
| ||||||||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| ||||||||||||
|
| Average |
| Interest |
| Average |
| Average |
| Interest |
| Average |
| Average |
| Interest |
| Average |
|
|
| (in thousands of Pesos, except percentages) |
| ||||||||||||||||
Savings accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 8,991,324 |
| (2,569 | ) | 0.0 | % | 6,192,384 |
| (3,899 | ) | 0.1 | % | 4,616,801 |
| (4,556 | ) | 0.1 | % |
Dollars |
| 3,848,201 |
| (1,133 | ) | 0.0 | % | 1,238,934 |
| (740 | ) | 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 | % |
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 |
| (3,060,566 | ) | 26.4 | % | 8,950,016 |
| (2,221,941 | ) | 24.8 | % |
Dollars |
| 1,325,298 |
| (8,382 | ) | 0.2 | % | 806,650 |
| (10,282 | ) | 1.3 | % | 337,459 |
| (2,807 | ) | 0.8 | % |
Total |
| 13,893,202 |
| (2,308,058 | ) | 16.6 | % | 12,452,742 |
| (3,070,848 | ) | 24.7 | % | 9,287,475 |
| (2,224,748 | ) | 24.0 | % |
Total by currency |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 25,698,673 |
| (2,936,190 | ) | 11.4 | % | 17,838,476 |
| (3,064,465 | ) | 17.2 | % | 13,566,817 |
| (2,226,497 | ) | 16.4 | % |
Dollars |
| 6,352,134 |
| (13,266 | ) | 0.2 | % | 2,045,584 |
| (11,022 | ) | 0.5 | % | 624,353 |
| (3,081 | ) | 0.5 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Deposits |
| 32,050,807 |
| (2,949,456 | ) | 9.2 | % | 19,884,060 |
| (3,075,487 | ) | 15.5 | % | 14,191,170 |
| (2,229,578 | ) | 15.7 | % |
2017 Compared to 2016
FinancialInterest expenses for 20172018 totaled Ps.6.2Ps.17.4 billion,, a 27.3%109.6% increase from Ps.4.9Ps.8.3 billion for 2016.2017. This increase was attributable to a 74.9%43.2% increase in the average balance of our interest-bearing liabilities, a 730 basis points increase in the average rate and partially offset by a 700 basis points decrease in the average nominal rate and by a 53.2%10.1% increase in low ornon-interest bearing deposits.
Other financial expenses in 20172018 totaled Ps.1.3Ps.219.5 billion,, compared to Ps.921.3Ps.171.2 million in 2016. This was mainly due to the increase in turnover tax expense resulting from higher financial income and the cost of forward transactions carried out to balance the foreign exchange position partially offset by a reduction in the monthly contribution rate that banks are required to pay to fund the Deposits Guarantee Fund.2017.
The following table sets forth our yields oninterest-bearing liabilities:
| Grupo Supervielle S.A. | ||||||||||||||||
| As of December 31, | ||||||||||||||||
| 2018 | 2017 | |||||||||||||||
| Interest-Bearing Liabilities | Average Balance | Average Nominal Rate | Average Balance | Average Nominal Rate | ||||||||||||
Special Checking Accounts | 22,123,994 | 23.0 | % | 9,111,677 | 11.1 | % | ||||||||||
PS.Savings Accounts | 16,894,587 | 30.0 | % | 7,483,676 | 13.4 | % | ||||||||||
Fx Savings Accounts | 5,229,407 | 0.4 | % | 1,628,001 | 0.3 | % | ||||||||||
Time Deposits | 28,046,710 | 23.2 | % | 25,117,980 | 15.0 | % | ||||||||||
PS.Time Deposits | 23,581,660 | 27.3 | % | 22,721,982 | 16.5 | % | ||||||||||
Fx Time Deposits | 4,465,050 | 1.2 | % | 2,395,998 | 0.6 | % | ||||||||||
Borrowings from Other Financial Instruments and Unsubordinated Negotiable Obligations | 24,117,675 | 22.7 | % | 16,209,827 | 19.4 | % | ||||||||||
Subordinated Loans and Negotiable Obligations | 1,363,196 | 6.4 | % | 2,384,695 | 8.9 | % | ||||||||||
|
|
|
|
|
|
|
| |||||||||
TotalInterest-Bearing Liabilities | 75,651,575 | 22.7 | % | 52,824,179 | 15.4 | % | ||||||||||
Low andNon-Interest Bearing Deposits | ||||||||||||||||
Savings Accounts | 25,694,934 | 0.2 | % | 23,212,489 | 0.0 | % | ||||||||||
PS.Savings Accounts | 14,282,003 | 0.3 | % | 16,255,353 | 0.0 | % | ||||||||||
| Grupo Supervielle S.A. | ||||||||||||||||
| As of December 31, | ||||||||||||||||
| 2018 | 2017 | |||||||||||||||
| Interest-Bearing Liabilities | Average Balance | Average Nominal Rate | Average Balance | Average Nominal Rate | ||||||||||||
Fx Savings Accounts | 11,412,931 | 0.0 | % | 6,957,136 | 0.0 | % | ||||||||||
Checking Accounts | 19,293,418 | 17,636,472 | ||||||||||||||
PS.Checking Accounts | 11,254,264 | 12,139,339 | ||||||||||||||
Fx Checking Accounts | 8,039,154 | 5,497,133 | ||||||||||||||
|
|
|
| |||||||||||||
Total Low andNon-Interest Bearing Deposits | 44,988,352 | 40,848,961 | ||||||||||||||
TotalInterest-Bearing Liabilities and Low andNon-Interest Bearing Deposits | 120,639,927 | 14.3 | % | 93,673,140 | 8.7 | % | ||||||||||
Average balance of our interest-bearing liabilities in 20172018 totaled Ps.28.5Ps.75.7 billion,, compared to Ps.16.3Ps.52.8 billion in 2016.2017. This increase was mainly due to (i) a Ps.5.3Ps.13.0 billion increase in average balance of interest-bearing special checking accounts which mainly grew since January 2017 when the Central Bank allowed banks to pay interest on the amounts deposited in these accounts,Ps.22.1 billion from Ps.9.1 billion, and a (ii) 212.3%48.8% increase to Ps.8.0Ps.24.1 billion, in the average balance of our borrowings from other financial institutions, and medium-term negotiable obligations reflecting the issuance of a Ps.4,768,170,000 global term note by the Bank in February 2017 along with medium-term bonds issuances(iii) 11.7% increase to Ps.28.0 billion, increase in the local capital markets by both the Bank and CCF.average balance of time deposits.
Average balance of our low ornon-interest-bearing deposits in 20172018 totaled Ps.22.3Ps.45.0 billion,, compared to Ps.14.6Ps.40.8 billion in 2016.2017. This increase was mainly due to (i) a 72.8%10.7% increase to Ps.12.8Ps.25.7 billion in the average balance of savings accounts, and (ii) a 32.8%9.4% increase to Ps.9.5Ps.19.3 billion innon-interest bearing checking accounts.
Out of our total average interest-bearing deposits of Ps.32.0Ps 75.9 billion in 2017, Ps.6.42018, Ps.21.1 billion were U.S. dollar-denominated deposits and Ps.25.7Ps.54.8 billion were Peso-denominated, compared to Ps.2.0Ps.11.0 billion and Ps.17.8Ps.46.5 billion, respectively, in 2016.2017.
Out of our total averagenon-interest-bearing deposits of Ps.9.5Ps.19.3 billion for 2017, Ps.2.82018, Ps.8.0 billion were U.S. dollar-denominated deposits and Ps.6.7Ps.11.3 billion were Peso-denominated, compared to Ps.601.8 millionPs.5.5 billion and Ps.6.5Ps.12.1 billion, respectively, in 2016.2017.
The average rate paid on interest-bearing liabilities and low ornon-interest-bearing deposits for 20172018 was 9.7%14.3%, 310560 basis points belowabove the 12.8%8.7% average rate for 2016.2018. For 2017,2018, Peso-denominated time deposits accrued interest at an average rate of 18.3%27.3%, 800 basis1,080basis points belowabove the 26.3%16.5% average interest rate accrued in 2016, which is consistent with the decrease in the average BADLAR in 2017 compared with 2016.2017. In 2017,2018, U.S. dollar-denominated time deposits accrued interest at an average rate of 0.6%1.2%, 7060 basis points belowabove the 1.3%0.6% average interest rate accrued in 2016.2017.
Our average balance of borrowings from other financial institutions and unsubordinated negotiable obligations in 2017,2018, was Ps.8.0Ps.24.1 billion, compared to Ps.2.6Ps.16.2 billion in 2016.2017. The average cost of borrowings from other financial institutions and unsubordinated negotiable obligations decreased 570increased 330 basis points to 23.4%22.7% in 2017,2018, from 29.1%19.4% in 2016. This was partially offset by a 53.2% increase in the average balance of our low cost savings accounts and non-interest-bearing checking accounts.2017.
Our average balance of subordinated loans and subordinated negotiable obligations in both 2018 and 2017 was Ps.1.4 billion and 2016 was Ps.1.3 billion.Ps.2.4 billion respectively. The average rate of subordinated negotiable obligations (denominated in U.S. dollars or U.S. dollar linked) was 9.7%6.4% in 2017,2018, compared to 10.0%8.9% in 2016.2017.
The following table sets forth interest bearing deposits by denomination:
| Grupo Supervielle S.A. | ||||||||||||||||||||||||
| As of December 31, | ||||||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||||||
| Average Balance | Interest Paid | Average Nominal Rate | Average Balance | Interest Paid | Average Nominal Rate | |||||||||||||||||||
Savings accounts | ||||||||||||||||||||||||
Pesos | 14,282,003 | 38,278 | 0.3 | % | 16,255,353 | 4,200 | 0.0 | % | ||||||||||||||||
Dollars | 11,412,931 | 3,025 | 0.0 | % | 6,957,136 | 1,826 | 0.0 | % | ||||||||||||||||
Total | 25,694,934 | 41,303 | 0.2 | % | 23,212,489 | 6,026 | 0.0 | % | ||||||||||||||||
Special checking accounts | ||||||||||||||||||||||||
Pesos | 16,894,587 | 5,067,303 | 30.0 | % | 7,483,676 | 1,005,378 | 13.4 | % | ||||||||||||||||
Dollars | 5,229,407 | 20,646 | 0.4 | % | 1,628,001 | 5,684 | 0.3 | % | ||||||||||||||||
Total | 22,123,994 | 5,087,949 | 30.0 | % | 9,111,677 | 1,011,062 | 0.0 | % | ||||||||||||||||
Time deposits | ||||||||||||||||||||||||
Pesos | 23,581,660 | 6,439,969 | 27.3 | % | 22,721,982 | 3,747,864 | 16.5 | % | ||||||||||||||||
Dollars | 4,465,050 | 55,176 | 1.2 | % | 2,395,998 | 13,430 | 0.6 | % | ||||||||||||||||
Total | 28,046,710 | 6,495,145 | 23.2 | % | 25,117,980 | 3,761,294 | 15.0 | % | ||||||||||||||||
Total by currency | ||||||||||||||||||||||||
Pesos | 54,758,250 | 11,545,550 | 21.1 | % | 46,461,011 | 4,757,442 | 10.2 | % | ||||||||||||||||
Dollars | 21,107,389 | 78,847 | 0.4 | % | 10,981,134 | 20,941 | 0.2 | % | ||||||||||||||||
Total Deposits | 75,865,639 | 11,624,397 | 15.3 | % | 57,442,145 | 4,778,383 | 8.3 | % | ||||||||||||||||
2016 Compared to 2015i) Net Income from financial instruments and Exchange rate differences
Financial expensesNet Income from financial instruments at fair value through profit or loss and Exchange rate differences for 20162018 totaled Ps.4.9Ps.7.4 billion, a 43.7%an 88.8% increase from Ps.3.4the Ps.3.9 billion for 2015.recorded in 2017. This increase was attributable to a 43.5%higher income from holdings of securities issued by the Central Bank due to higher volumes of these securities held for trading as well as the ones held as reserve requirements, the increase in the average balanceinterest rate of interest-bearing liabilitiessuch securities and low or non-interest bearing deposits, (including a 49.2%an increase in low cost savings accounts and non-interest bearing checking accounts) andIncome from financial instruments denominated in U.S.$..
| Grupo Supervielle S.A. | ||||||||
| As of December 31, | ||||||||
| 2018 | 2017 | |||||||
| Ps. | Ps. | |||||||
Net income from financial instruments at fair value through profit or loss | ||||||||
Income from government and corporate securities | 1,828,166 | 815,069 | ||||||
Term operations | (1,693,849 | ) | (108,225 | ) | ||||
Income from securities issued by the Central Bank | 6,176,054 | 2,838,803 | ||||||
Total | 6,310,371 | 3,545,647 | ||||||
Exchange rate difference on gold and foreign currency | 1,126,705 | 393,112 | ||||||
Total Income from U.S.$. operations for 2018 totaled Ps.1.3 billion, an 32.4% increase from the Ps.979.4 million recorded in 2017, mainly explained by higher trading gains from Fx transactions.
| Grupo Supervielle S.A. | ||||||||
| As of December 31, | ||||||||
| Net Financial Income from U.S.$.operations | 2018 | 2017 | ||||||
| Ps. | Ps. | |||||||
Total Financial Income from U.S.$.Operations | 170,227 | 586,248 | ||||||
NIFFI | (101,645 | ) | 586,248 | |||||
U.S.$.Government Securities | 1,592,204 | 694,473 | ||||||
Term Operations | (1,693,849 | ) | (108,225 | ) | ||||
Interest Income | 271,872 | — | ||||||
U.S.$.Government Securities | 271,872 | — | ||||||
Exchange rate differences on gold and foreign currency | 1,126,705 | 393,112 | ||||||
Net Financial Income from U.S.$.Operations | 1,296,932 | 979,360 | ||||||
ii) Result from exposure to changes in the purchasing power of money
Result from exposure to changes in the purchasing power of the currency for 2018 totaled a 10 basis pointsPs.6.0 billion loss, from the Ps.2.6 billion loss recorded in 2017. This reflects the loss in the purchasing power of the currency to which our net monetary assets are exposed as a result of the 47.6% increase in the average nominal rates of total interest-bearing liabilities and low or non-interest bearing deposits.
Other financial expensesconsumer price index in 2016 totaled Ps.921.3 million,2018, compared to Ps.651.5 milliona 24.8% increase in 2015. This2017.
Loan Loss Provisions
2018 Compared to 2017
Loan loss provisions totaled Ps.5.2 billion in 2018, a 28.4% increase wascompared to Ps.4.0 billion in 2017, mainly due to an increase in turnover taxdelinquency ratios from 3.1% in 2017 to Ps.698.5 million4.1% in 20162018 and cost of risk, which increased from Ps.431.9 million5.0% in 2015,2017 to 5.4% in 2018, mainly in the consumer finance and increasecorporate banking segments. Loan loss provisions include the expected losses for each portfolio and segment, based on premium on forward transactions to Ps.124.7 million from Ps.36.5 million. These increases were partially offset by a decrease in monthly payments to the deposit guarantee fund from 0.060% to 0.015%past performance and current conditions as of the monthly average of the daily deposits balance to Ps.87.6 million, compared to Ps.180.7 million in 2015, pursuant to Communication “A” 5943, as amended and supplemented by Communication “A” 6462.
Average balance of interest-bearing liabilities and low or non-interest bearing deposits totaled Ps.30.9 billion, compared to Ps.21.5 billion in 2015. This increase was mainly due to: (i) a 49.2%financial statements date. The increase in delinquency also requires expected losses to be measured for the average balancewhole life of low and non-interest bearing deposits to Ps.14.6 billion from Ps.9.8 billion, (ii)each loan, instead of accounting for expected losses during a 34.1% increase in12 month period. This increases significantly the average balanceprobability of time deposits (primarily Peso-denominated time deposits), to Ps.12.5 billion from Ps.9.3 billion (the average balancedefault for loans with a maturity of Pesos time deposits increased by 30.1% to Ps.11.6 billion and the average balance of U.S. dollar time deposits increased by 139.0% to Ps.806.7 million) (iii) a 54.4% increase in borrowings from other financial institutions and the issuance of unsubordinated negotiable obligations to Ps.2.6 billion from Ps.1.7 billion. The increases in low or non-interest bearing deposits together with lower increases in time deposits, reflects our ability to reduce certain high-interest bearing liabilities through the utilization of the IPO proceeds.
Out of our total average interest-bearing deposits of Ps.19.9 billion for 2016, Ps.2.0 billion were U.S. dollar-denominated deposits and Ps.17.8 billion were Peso-denominated, compared to Ps. 624.4 million and Ps.13.6 billion, respectively, in 2015.
Out of our total average non interest-bearing deposits of Ps.7.1 billion for 2016, Ps.601.8 million were U.S. dollar-denominated deposits and Ps.6.5 billion were Peso-denominated, compared to Ps.99.8 million and Ps.4.8 billion respectively in 2015.
The average rate paid on interest-bearing liabilities and low or non-interest bearing deposits was 12.8%, 10 basis points above the 12.7% average rate for 2015. Peso-denominated time deposits accrued interest at an average rate of 26.3%, 150 basis points above the 24.8% average interest rate accrued in 2015, which is consistent with the increase in the average BADLAR rate during 2016. U.S. dollar-denominated time deposits accrued interest at an average rate of 1.3%, 50 basis points above the 0.8% average interest rate accrued in 2015. Our average balance of borrowings from other financial institutions and unsubordinated negotiable obligations in 2016 was Ps.2.6 billion, compared to Ps.1.7 billion in 2015. The average cost of borrowings from other financial institutions and unsubordinated negotiable obligations increased 350 basis points to 29.1% from 25.6% in 2015. This was partially offset by a 49.2% increase in the average balance of low or non-interest bearing deposits.
Our average balance of subordinated loans and subordinated negotiable obligations in 2016 was Ps.1.3 billion, compared to Ps.800.1 million in 2015. The average rate of subordinated negotiable obligations (denominated in U.S. dollars or U.S. dollar linked) was 10.0% and 10.2% for 2016 and 2015, respectively.
Gross Financial Margin
2017 Compared to 2016
Gross financial margin for 2017 amounted to Ps.9.3 billion and the net interest margin was 19.1%, compared to Ps.5.9 billion and 20.6%, respectively, for 2016. Net financial margin ratio stood at 17.8% in 2017 compared to 19.2% in 2016.
Average interest spread for 2017 was 16.5%, compared to 16.8% for 2016.
This performance is further explained by the following factors: (i) higher average volumes in the loan portfolio surpassing the 42.1% growth in total loans to the private sector, (ii) the increase in average volumes of receivables from financial transactions due to the temporary investment of a portion of the funds from our equity follow-on to accelerate the use of tax loss carry-forwards from previous fiscal-years, (iii) higher volumes on trading investments, (iv) the reduction in cost of funds following the 520 basis points decrease in the average BADLAR rate to 20.6% in 2017 due to the strong retail deposit franchise (low or non-interest-bearing deposits increased 53.1%) and the utilization of follow-on proceeds rathermore than interest-bearing deposits to partially fund loan growth. These increases were partially offset by a reduction in interest earned on assets.
In addition, certain extraordinary events explain this performance: (i) non-recurring net gains from the sale of Viñas del Monte and other non-strategic properties and (ii) a Ps.50 million net loss due to impact of the appreciation of the Peso against the U.S. dollar between pricing and settlement of the Ps.4,768,170,000 global term note issued by the Bank in February 2017. In 2016, gross financial margin included a Ps.128.1 million gains from the termination of the Supervielle Renta Inmobiliaria Financial Trust.
The table below provides1 year. For further information, about NIM breakdown corresponding to the investment portfolio, loan portfolio excluding Foreign Trade and U.S.$ loans, and the loan portfolio.
|
| Year ended December 31, |
| ||
|
| 2017 |
| 2016 |
|
|
| (in percentages) |
| ||
Net Interest Margin breakdown |
|
|
|
|
|
Total NIM |
| 19.1 | % | 20.6 | % |
Ps. NIM |
| 21.8 | % | 22.4 | % |
U.S.$ NIM |
| 6.8 | % | 5.5 | % |
Loan Portfolio NIM |
| 20.0 | % | 21.0 | % |
Ps. NIM |
| 23.9 | % | 23.1 | % |
U.S.$ NIM |
| 3.1 | % | 0.7 | % |
Investment Portfolio NIM |
| 14.8 | % | 18.9 | % |
Ps. NIM |
| 13.0 | % | 18.8 | % |
U.S.$ NIM |
| 22.8 | % | 23.2 | % |
(1) Includes mainly U.S. dollar-denominated financial leases.
|
| Interest Rates |
| ||
|
| 2017 |
| 2016 |
|
BADLAR Interest Rate (eop) |
| 23.3 | % | 19.9 | % |
BADLAR Interest Rate (avg) |
| 20.6 | % | 25.8 | % |
TM20 (eop) |
| 23.7 | % | NA |
|
TM20 (avg) |
| 21.4 | % | NA |
|
NIM decreased 150 basis points year on year, with loan portfolio NIM decreasing 100 basis points. By contrast Pesos loan portfolio NIM increased 80 basis points, while higher share of U.S. dollar denominated loans within the loan and investment portfolios, explained part of the decrease.
2016 Compared to 2015
Gross financial margin for 2016 amounted to Ps.5.9 billion and the net interest margin was 20.6%, compared to Ps.3.4 billion and 18.1%, respectively, for 2015.
The improvement of gross financial margin for 2016 was mainly due to: (i) a 50.8% increase in the average balance of interest earning assets while average interest bearing liabilities including low or non-interest bearing deposits rose 42.5%, or Ps.9.4 billion (including a 49.2% increase or Ps.4.8 billion in low cost savings accounts and non-interest bearing checking accounts) and (ii) 195 basis points increase in the average interest rate earned on assets while interest paid on interest bearing liabilities and low or non-interest bearing deposits increased 10 basis points.
This performance is further explained by the following factors: (i) higher average volumes in the loan portfolio due to the deployment of the capital raised in IPO in May 2016, (ii) the removal by the Central Bank authorities in mid-December 2015 of interest rates caps and floors that had been in place during most of 2015, (iii) the replacement of certain high-interest bearing liabilities with IPO proceeds, (iv) a reduction commencing April 7, 2016, in the monthly contribution rate banks are required to pay to fund the Deposits Guarantee Fund from 0.06%, to 0.015% returning to the original monthly average of the daily deposits balance and (v) a Ps.128.1 million income from the termination of the Supervielle Renta Inmobiliaria Financial Trust. For an explanation of the termination of the Supervielle Renta Inmobiliaria Financial Trust and the related net gains, see “Item 4.D Property, Plants– Selected Statistical Information—Amounts past due loans and Equipment.other financing.” This was partially offset by (i) a significant rise in the BADLAR rate and the consequent increase in cost of funds, mainly for
In the consumer finance business, and (ii) higher regulatory reserve requirements set by the Central Bank in June 2016, up 3% for time deposits and 5% for current accounts.
Loan Loss Provisions
2017 Compared to 2016
Loan loss provisions totaled Ps.1.8 billion in 2017, a 72.1% increase compared to Ps.1.1 billion in 2016, mainly due to (i) an increase in the loan portfolio, including an increase in non-performing loans, (ii) our decision to increase our non-performing loan coverage ratio to 91.8% in December 2017 from 87.1% and (iii) the deterioration in the quality of assets mostly in the consumer finance segment. Asset quality deterioration in the consumer finance segment was due to salary adjustments resulting from collective bargaining agreements below the annual inflation rate in 2017 along with increases in public services tariffs, which impacted the population segment’s disposable income.
While higher delinquency rates experienced in the first months of the year arehave been typically expected to improve throughout the year as the beginning of the year salary bargaining agreements catch up with inflation improving consumers’ disposable income and their ability to pay their bills, thisbills. This behavior has been changing since 2016 and improvement has not been as fast as in previous years, changing the pattern and seasonality observed in prior years. Salary adjustments resulting from collective bargaining agreements below the annual inflation rate which accelerated in 2016,2018, along with additional increases in public services tariffs in 2016 and 2017,2018, further impacted the disposable income of the population in the Consumer Finance Segmentconsumer finance segment causing additional deterioration in asset quality. Taking a more conservative stance, during the first quarter of 2018, we tightened credit scoring standards and slowed origination in the consumer sentimentfinance segment. Those measures, despite the increasingly challenging environment, started to lag behind economic recovery as consumers remain more cautious about resilient inflation levels and higher tariffs. In turn, consumers in this segment are repaying loans at a slower pace.
Notwithstanding the above, these increases come alongshow some signs of improvement, with a higher gross intermediation marginsharp decrease innon-performing loans (“NPL”) creation levels in third quarter of 2018 compared to the second quarter of 2018. However very high levels of inflation in the Consumer Finance Segment.
fouth quarter of 2018 caused NPL creation to increase above the third quarter of 2018 levels but remaining below the second quarter of 2018 peak.
The percentage of the irregulardeliquent loan portfolio in both 20162018 and 2017 was 2.8%. NPL ratios improved in the retail segment4,1% and remained stable in the corporate segment. Combined, these segments accounted for 88.0% of the total loan portfolio as of December 31, 2017.
3,1%, respectively.
The consumer finance segment NPL ratio increased to 15.4%19.4% in December 20172018 from 10.7%14.7% in 20162017 mainly as a result of an increase in the personal loans NPL ratio to 21.4%26.0% as of December 31, 20172018 from 14.6%18.7% as of December 31, 2016.
2017.
Retail loans showed an NPL ratio of 2.6%3.3% as of December 31, 2017, decreasing2018, increasing from 3.7%2.8% as of December 31, 2016.2017. This was mainly driven by a decreasean increase in the personal loans NPL ratio to 2.5%3.5% in December 2018, from 2.9% in December 2017 from 3.7% in December 2016, along with a 30 basis points decreaseand an increase in the credit cards NPL ratio to 3.4%3.8% in December 2017.2018, from 3.4%
2016 Compared to 2015
Loan loss provisions totaled Ps.1.1 billion in 2016, a 94.5% increase compared to Ps.543.8 million in 2015,Corporate loans showed an NPL ratio of 1.1% as of December 31, 2018, increasing from 0.2% as of December 31, 2017, mainly due to the growth of the loan portfolio and the deterioration in asset quality experienced in the second quarter of 2016, mostly in our Consumer Finance Segment when the business was impacted by the challenging and volatile economy which resulted in a significant contraction of consumers’ disposable income. The increase in the allowance of loan losses due to this deterioration was partially offset by the increase in the Corporate loan portfolio which has lower delinquency rates. Allowances as a percentage of non-performing loans decreased to 87.1% from 89.7% in the previous year. The NPL ratio decreased to 2.8% in 2016 from 3.2% in 2015 due to the growth of the Corporate Loan portfolio. In March 2016, the Bank changed its write-off policy, in the retail segment moving to write-off at 270 days delinquency from 360 days.
Asset quality in the consumer finance customers deteriorated in the second quarter of 2016 although our conservative credit scoring standards remained unchanged. This segment was impacted in that quarter by the challenging and volatile economy which significantly contracted consumers’ disposable income. The increases in public service tariff and in transportation fares caused a spike in inflation in April and May 2016, while unions’ salary increase agreements were delayed towards the end of the quarter,macroeconomic conditions which impacted consumers’ ability to pay their loan installments.
In an effort to mitigate the seasonal increase in delinquency rates in the first half of every year, which then tends to decline as salary bargaining agreements catch up with inflation, we quickly strengthened our collection practicesnegatively SME and implemented preventive actions while maintaining our conservative credit scoring standards. As a result, lagged delinquency in 2016 began to decrease in July but remained at a higher level than the previous year. Lagged delinquency measures the real delinquency of the portfolio, without taking into account disbursements made in recent months. The delinquency on any one bucket is matched with the portfolio that originated such delinquency. Thus, the delinquency ratio for the portfolio in the 30-180 delinquency bucket as of December 2017, is calculated using in the denominator the portfolio outstanding as of June 2017.
middle-market companies’ profits and cash flows.
The following tables show the changes in our loan loss provisions for the periods indicated:
|
| Year ended December 31, |
| Change December 31, |
| ||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2017/2016 |
| 2016/2015 |
|
|
| (in thousands of Pesos) |
| (in percentages) |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the beginning of the year |
| 920,208 |
| 638,648 |
| 429,358 |
| 44.1 | % | 48.7 | % |
Provisions charged to income |
| 1,820,169 |
| 1,057,637 |
| 543,844 |
| 72.1 | % | 94.5 | % |
Write-offs and reversals(1) |
| (1,194,018 | ) | (776,077 | ) | (334,554 | ) | 53.9 | % | 132.0 | % |
Other adjustments |
| 23,575 |
| — |
| — |
| 100.0 | % | 0.0 | % |
Balance at the end of year |
| 1,569,934 |
| 920,208 |
| 638,648 |
| 70.6 | % | 44.1 | % |
Percentage of provisions net of write-offs and reversals |
| 1.5 | % | 1.1 | % | 1.2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions charged to income |
|
|
|
|
|
|
|
|
|
|
|
|
| Year ended December 31, |
| Change December 31, |
| ||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2017/2016 |
| 2016/2015 |
|
|
| (in thousands of Pesos) |
| (in percentages) |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
Promissory notes(2) |
| 63,519 |
| 58,557 |
| 2,228 |
| 8.5 | % | 2,528.2 | % |
Unsecured corporate loans |
| 37,305 |
| 34,929 |
| 31,089 |
| 6.8 | % | 12.4 | % |
Overdrafts |
| 40,755 |
| 67,737 |
| 27,392 |
| (39.8 | )% | 147.3 | % |
Mortgage loans |
| 14,253 |
| 2,348 |
| 58 |
| 507.0 | % | 3,948.3 | % |
Automobile and other secured loans |
| 3,499 |
| 1,512 |
| 941 |
| 131.4 | % | 60.7 | % |
Personal loans |
| 1,091,171 |
| 542,792 |
| 265,770 |
| 101.0 | % | 104.2 | % |
Credit cards loans |
| 403,312 |
| 231,421 |
| 185,849 |
| 74.3 | % | 24.5 | % |
Foreign Trade Loans |
| 59,942 |
| 67,737 |
| 1,820 |
| (11.5 | )% | 3,621.8 | % |
Other financings |
| 46,363 |
| 14,943 |
| 8,507 |
| 210.3 | % | 75.7 | % |
Other receivables from financial transactions |
| 42,750 |
| 11,453 |
| 5,957 |
| 273.3 | % | 92.3 | % |
Receivables from financial leases |
| 17,300 |
| 24,208 |
| 14,233 |
| (28.5 | )% | 70.1 | % |
Total |
| 1,820,169 |
| 1,057,637 |
| 543,844 |
| 72.1 | % | 94.5 | % |
Write-offs and reversals |
|
|
|
|
|
|
|
|
|
|
|
Promissory notes |
| (22,167 | ) | (40,049 | ) | (6,858 | ) | (44.7 | )% | 484.1 | % |
Unsecured corporate loans |
| (13,019 | ) | (39,488 | ) | (4,403 | ) | (67.0 | )% | 796.8 | % |
Overdrafts |
| (23,682 | ) | (32,948 | ) | (10,895 | ) | (28.1 | )% | 202.4 | % |
Mortgage loans |
| — |
| — |
| (294 | ) | 0.0 | % | (100.0 | )% |
Automobile and other secured loans |
| (1,098 | ) | (2,636 | ) | (2,608 | ) | (58.3 | )% | 1.1 | % |
Personal loans |
| (759,000 | ) | (372,784 | ) | (186,248 | ) | 103.6 | % | 100.2 | % |
Credit cards loans |
| (311,091 | ) | (254,072 | ) | (108,206 | ) | 22.4 | % | 134.8 | % |
Foreign Trade Loans |
| — |
| — |
| — |
| 0.0 | % | 0.0 | % |
Other financings |
| (19,208 | ) | (14,393 | ) | (3,852 | ) | 33.5 | % | 273.6 | % |
Other receivables from financial transactions |
| (38,893 | ) | (7,291 | ) | (5,234 | ) | 433.4 | % | 39.3 | % |
Receivables from financial leases |
| (5,860 | ) | (12,416 | ) | (5,956 | ) | (52.8 | )% | 108.5 | % |
Total |
| (1,194,018 | ) | (776,077 | ) | (334,554 | ) | 53.9 | % | 132.0 | % |
| ECL Allowance | ||||||||||||||||
| Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||
Balance at the beginning of the year 2018 | 1,691,344 | 1,002,757 | 1,931,510 | 4,625,611 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Transfers | ||||||||||||||||
1 to 2 | (72,358 | ) | 424,159 | — | 351,801 | |||||||||||
1 to 3 | (73,906 | ) | — | 1,045,830 | 971,924 | |||||||||||
2 to 3 | — | (152,605 | ) | 281,957 | 129,352 | |||||||||||
2 to 1 | 23,057 | (94,117 | ) | — �� | (71,060 | ) | ||||||||||
3 to 2 | — | 17,780 | (76,002 | ) | (58,222 | ) | ||||||||||
3 to 1 | 2,874 | — | (36,858 | ) | (33,984 | ) | ||||||||||
Net changes of financial assets | (139,216 | ) | (53,642 | ) | 1,812,007 | 1,619,149 | ||||||||||
Write-Offs | — | — | (2,611,824 | ) | (2,611,824 | ) | ||||||||||
Exchange Differences and Others | 6,308 | 1,688 | 5,532 | 13,528 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross carrying amount at December 30 2018 | 1,438,103 | 1,146,020 | 2,352,152 | 4,936,275 | ||||||||||||
(1) Consists of decreases in the allowance for loan losses when the loan for which the allowance was created is no longer in our balance sheet because it has been written-off, or because it has been collected, in which case the allowance is reversed. Loans are always 100% provisioned before being written off.
(2) Consists of unsecured checks and accounts receivable deriving from factoring transactions.
| ECL Allowance | ||||||||||||||||
| Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||
Balance at the beginning of the year 2017 | 1,086,336 | 785,34 | 1,573,131 | 3,444,807 | ||||||||||||
Transfers | ||||||||||||||||
1 to 2 | (43,917 | ) | 343,391 | — | 299,474 | |||||||||||
1 to 3 | (36,608 | ) | — | 825,86 | 789,252 | |||||||||||
2 to 3 | — | (94,572 | ) | 262,639 | 168,067 | |||||||||||
2 to 1 | 22,113 | (98,791 | ) | — | (76,678 | ) | ||||||||||
3 to 2 | — | 17,963 | (68,160 | ) | (50,197 | ) | ||||||||||
3 to 1 | 3,969 | — | (62,859 | ) | (58,890 | ) | ||||||||||
Net changes of financial assets | 652,14 | 48,704 | 1,237,979 | 1,938,823 | ||||||||||||
Write-Offs | — | — | (1,837,941 | ) | (1,837,941 | ) | ||||||||||
Exchange Differences and Others | 7,311 | 722 | 861 | 8,894 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross carrying amount at December 31, 2017 | 1,691,344 | 1,002,757 | 1,931,510 | 4,625,611 | ||||||||||||
Troubled debt restructured loans, which typically have a higher probability of delinquency, did not represent a significant share of our total loan portfolio and, therefore, did not have a material impact on our total allowances for loan losses in these periods.
Net Services Fee Income
Our net services fee income was comprised of:
|
| Year ended |
| Change |
| ||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2017/2016 |
| 2016/2015 |
|
|
| (in thousands of Pesos) |
| (in percentages) |
| ||||||
Income from |
|
|
|
|
|
|
|
|
|
|
|
Deposit Accounts |
| 1,434,344 |
| 925,300 |
| 683,888 |
| 55.0 | % | 35.3 | % |
Loan Related |
| 182,025 |
| 151,331 |
| 125,625 |
| 20.3 | % | 20.5 | % |
Credit and Debit Cards |
| 1,514,963 |
| 1,188,288 |
| 772,865 |
| 27.5 | % | 53.8 | % |
Insurances |
| 231,572 |
| 234,573 |
| 399,790 |
| (1.4 | )% | (41.3 | )% |
Check Administration Commission |
| 252,491 |
| 178,644 |
| 122,601 |
| 41.3 | % | 45.7 | % |
Safe Deposit Box |
| 128,431 |
| 91,062 |
| 74,760 |
| 41.0 | % | 21.8 | % |
Receivables from financial leases |
| 126,741 |
| 78,213 |
| 67,369 |
| 62.0 | % | 16.1 | % |
Financial agent for the Province of San Luis(1) |
| 671 |
| 49,888 |
| 72,839 |
| (98.7 | )% | (31.5 | )% |
Payments to retirees |
| 30,544 |
| 27,892 |
| 25,572 |
| 9.5 | % | 9.1 | % |
Mutual funds management |
| 204,818 |
| 139,941 |
| 80,234 |
| 46.4 | % | 74.4 | % |
Foreign transactions commissions |
| 173,535 |
| 123,036 |
| 69,547 |
| 41.0 | % | 76.9 | % |
Other |
| 693,137 |
| 339,348 |
| 340,618 |
| 104.3 | % | (0.4 | )% |
Total income(2) |
| 4,973,272 |
| 3,527,516 |
| 2,835,708 |
| 41.0 | % | 24.4 | % |
Expenses from |
|
|
|
|
|
|
|
|
|
|
|
Commissions paid(3) |
| 768,386 |
| 532,282 |
| 450,857 |
| 44.4 | % | 18.1 | % |
Turnover tax |
| 375,447 |
| 274,927 |
| 129,857 |
| 36.6 | % | 111.7 | % |
Promotions related to credit cards |
| 257,715 |
| 212,730 |
| 148,882 |
| 21.1 | % | 42.9 | % |
Exports and foreign currency transactions |
| 19,039 |
| 11,782 |
| 9,016 |
| 61.6 | % | 30.7 | % |
Other |
| 75,261 |
| 48,939 |
| 39,880 |
| 53.8 | % | 22.7 | % |
Total expenses(2) |
| 1,495,848 |
| 1,080,660 |
| 778,492 |
| 38.4 | % | 38.8 | % |
Net services fee income |
| 3,477,424 |
| 2,446,856 |
| 2,057,216 |
| 42.1 | % | 18.9 | % |
| As of December 31, | Change | |||||||||||
| 2018 | 2017 | 2018/2017 | ||||||||||
| (In thousands of Pesos, except percentages) | ||||||||||||
Deposit Accounts | 2,209,321 | 2,334,411 | (5.4 | )% | ||||||||
Loan Related | 290,587 | 255,322 | 13.8 | % | ||||||||
Foreign transactions commissions | — | — | 0.0 | % | ||||||||
Credit cards commissions | 2,185,031 | 2,339,449 | (6.6 | )% | ||||||||
Leasing commissions | 100,594 | 97,913 | 2.7 | % | ||||||||
Other commissions | 1,142,156 | 1,036,624 | 10.2 | % | ||||||||
(1) On January 17, 2017, the Province of San Luis notified Banco Supervielle of its decision to terminate, as of February 28, 2017, the Amended Financial Agency Agreement. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
(2) Includes fees related to securitization transactions, foreign trade and miscellaneous commissions, among others.
(3) Includes marketing costs, ATM insurance and charges related to payment services and credit and debit cards, among others.
| As of December 31, | Change December 31, | |||||||||||
| 2018 | 2017 | 2018/2017 | ||||||||||
| (In thousands of Pesos, except percentages) | ||||||||||||
Total Services fee income | 5,927,689 | 6,063,719 | (2.2 | )% | ||||||||
Services fee paid | 1,364,684 | 1,178,993 | 15.7 | % | ||||||||
Exports and foreign currency transactions | 53,496 | 41,434 | 29.1 | % | ||||||||
Total Services fee expenses | 1,418,180 | 1,220,427 | 16.2 | % | ||||||||
Income from insurance activities | 848,665 | 899,491 | (5.7 | )% | ||||||||
NET SERVICES FEE INCOME | 5,358,174 | 5,742,783 | (6.7 | )% | ||||||||
20172018 Compared to 20162017
Net services fee income totaled Ps.3.5 Ps.5.4 billion in 2017,2018, a 42.1% increase6.7% decrease compared to Ps.2.4Ps.5.7 billion in 2016.2017.
The increasedecrease in our services fee income was driven mainly by (i) an increasea decrease in deposit account commissions, (ii) an increasea decrease in incomefees from credit and debit cards and (iii)partially offset by an increase in other fees. These increases were partially offset by a decrease in fees paid to us for services provided as financial agent for the Province of San Luis.
Service charges on deposit accounts are comprised principally of maintenance and transaction fees on checking and savings accounts. These fees increaseddecreased to Ps.1.4Ps.2.2 billion in 20172018 from Ps.925.3 millionPs.2.3 billion in 2016, as a result of the increase in the volume of checking accounts and savings accounts, products packages, as well as an increase in fees charged per account after the deregulation of the commissions by the Central Bank.2017.
Credit and debit card fees increaseddecreased to Ps.1.5Ps.2.2 billion in 2018, from Ps.2.3 billion in 2017, from Ps.1.2 billion in 2016, reflecting higher businesslower average volumes of credit and debit cards as well as an increase in fee pricing of certain items (excluding MDR (as defined below)) as per current Central Bank regulations, which offset the reduction in credit card and debit card merchant discounted rates (“MDR”). MDR are commissions charged by the issuer of credit and debit cards on the amount of credit and debit card transactions. The maximum MDR for 2018 and 2017 was 1.85% and 2.0%, compared to 3% for 2016,respectively, and the maximum debit card sales commissions for 2018 and 2017 was 1.0% and 0.9%, compared to 1.5% for 2016.
On March 21, 2016, the Central Bank eliminated prior authorization requirements to charge fees for new products and other fee increases. As part of a transition schedule, a 20.0% increase in all banking charges was authorized starting on June 1, 2016. Since September 2016, further increases in banking charges may be implemented without requiring the prior authorization of the Central Bank.
respectively.
Pursuant to Communication “A” 6212, effective as of April 1, 2017, the Central Bank issued a program to gradually reduce MDR on an annual basis. In this regard, the maximum MDR for 2017 and 2018 was 2.0%, decliningand 1.85% since January 1, 2018, respectively, and droppingexpected to drop, to 1.65%, 1.50% and 1.30% in 2019, 2020 and 2021 and after, respectively. The maximum debit card sales commissions for 2017 and 2018 was 1.0%, and has been 0.90% since January 1, 2018, declining, respectively, and expected to drop to 0.80%, 0.70% and 0.60%, in 2019, 2020 and 2021 and after, respectively.
Other commissions increased to Ps.693.1 millionPs.1.1 billion in 2017,2018, from Ps.339.3 millionPs.1.0 billion in 2016,2017, mainly due to higher commissions charged on health plans and higherthe sales of products offered byand services of Espacio Cordial.
During 2017, our check administration commissions increased to Ps.252.5 million compared to Ps.178.6 million during 2016. This increase was mainly due to an increase in our level of activity.
Insurance fees decreased to Ps.231.6 million in 2017 from Ps.234.6 million in 2016. The following regulations issued by the Central Bank have impacted on this decrease in insurance fees: (i) Communication “A” 5795 issued on August 21, 2015, reinforcing regulations prohibiting financial institutions from charging fees and commissions related to insurance products purchased by clients as accessories of other financial services. As of November 13, 2015, financial institutions are prohibited from receiving fees from insurance companies as the result of the sale of such insurance products. (ii) Communication “A” 5927 issued by Central Bank on March 21, 2016, and effective as of September 1, 2016, prohibits financial institutions from charging clients charges resulting from credit-related insurance policies. This regulation also states that financial institutions must purchase life insurance on debit
balances or alternatively, self-insure the risk of death or permanent disability of their clients. Since then, both the Bank and CCF self-insure these risks and only contract new credit-related insurances for mortgages loans.
Financial agent fees charged to the Province of San Luis declined to Ps.671.0 thousand in 2017 from Ps.49.9 million in 2016. On October 10, 2016, the Bank relinquished its right to receive an “agency” fee from the Province of San Luis, followed by the termination by the Province of San Luis of the Financial Agency Agreement, effective as from February 28, 2017.
Services fee expense increased 38.4%16.2%, to Ps.1.5Ps.1.4 billion in 2018 from Ps.1.2 billion in 2017, from Ps.1.1 billion in 2016, primarily due to (i) higher commissions paid due to higher business volume, (ii) a 36.6%29.1%, or Ps.100.5Ps.12.1 million increase in turnover tax,exports and (iii)foreign currency transactions.
Income from insurance activities
In 2018 Income from Insurance activities amounted to Ps.848.7 million in 2018, reflecting a 21.1%, or Ps.45.05.7% decrease from the Ps.899.5 million increaserecorded in promotions related2017 due to credit cards issued by the bank and CCF.
2016 Compared to 2015
Net services fee income totaled Ps.2.4 billion in 2016, a 18.9% increase compared to Ps.2.1 billion in 2015.
The increase in our services fee income was driven mainly by an increase in income from credit and debit cards and deposit account commissions and was partially offset by a decrease in insurance fees.
Service charges on deposit accounts are comprised principally of maintenance and transaction fees on checking and savings accounts. These fees increased to Ps.925.3 million in 2016 from Ps.683.9 million in 2015, as a result ofcredit related policies following Central Bank regulations that offset the increase in the volume of checking accounts and savings accounts, bundling of products as well as an increase in fees charged per account, following the fees deregulation by the Central Bank.
Credit and debit card fees increased to Ps.1.2 billion in 2016 from Ps.772.9 million for 2015, mainly due to increased activity in the use of credit cards, as well as an increase in fee pricing. On March 21 2016, the Central Bank eliminated prior authorization requirements to charge fees for new products and other fee increases. As a transition, a 20% increase in all banking charges was authorized starting June 1, 2016, and eliminated from September onwards.
Insurance fees decreased to Ps.234.6 million in 2016 from Ps.399.8 million in 2015, primarily as a result of the following regulatory changes introduced by the Central Bank:
· Central Bank Communication ‘‘A’’ 5795 issued on August 21, 2015 reinforcing regulations that prohibit financial institutions from charging fees and commissionsnoncredit related to insurance products that financial services customers purchase as accessories to financial services, regardless of whether it is a customer request or a condition set by the financial institution to access the financial service. As a result, since 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.
· Central Bank resolution issued in March, 2016 and effective September 1, 2016, prohibiting 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 Banco Supervielle and CCF self-insure these risks and no longer contract new credit related insurances.
Financial Agent fees charged to the Province of San Luis declined to Ps.49.9 million in 2016 from Ps. 72.8 million in 2015. In the third quarter of 2016, Banco Supervielle relinquished its right to receive an “agency” fee from the Province of San Luis for any services rendered as financial agent of the Province commencing July 1, 2016.
Services fee expense increased 38.8%, to Ps.1.1 billion in 2016 from Ps.778.5 million in 2015, primarily due to higher commissions paid, an increase in expenses and promotions related to credit cards of the Bank and higher turnover taxes.
Income from insurance activities
This line item includes insurance premiums, net of insurance reserves and production costs, from our insurance company’s operations.costs. Supervielle Seguros began issuingissued 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 year endAt year-end 2015, itSupervielle Seguros 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 portfolio previously booked in a third partythird-party insurance company. However, due to the regulatory matters describedfollowing a Central Bank Regulation issued in the “Net Service Fee Income” section,2016, since September 1, 2016 both Banco Supervielle and CCF are self-insuring against these risks and and only contract new credit related insurances for mortgages loans.loans Even though Supervielle Seguros launched new products in the period, such as Home Insurance, Technology Insurance and ATMs insurance and the Integral Insurance product for Entrepreneurs and SMEs, the new premiums could not offset the decrease in credit related premiums.
AdministrativePersonnel and Administration Expenses
The following table sets forth the components of our administrative expenses:
|
| Year ended December 31, |
| Change December 31, |
| ||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2017/2016 |
| 2016/2015 |
|
|
| (in thousands of Pesos, except percentages) |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Personnel expenses |
| 5,475,680 |
| 3,859,525 |
| 2,767,111 |
| 41.9 | % | 39.5 | % |
Directors’ and statutory auditors’ fees |
| 80,862 |
| 73,894 |
| 59,475 |
| 9.4 | % | 24.2 | % |
Other professional fees(1) |
| 426,204 |
| 286,507 |
| 186,586 |
| 48.8 | % | 53.6 | % |
Advertising and publicity |
| 272,769 |
| 226,350 |
| 165,413 |
| 20.5 | % | 36.9 | % |
Taxes(2) |
| 615,896 |
| 452,081 |
| 268,520 |
| 36.2 | % | 68.4 | % |
Depreciation of premises and equipment |
| 118,594 |
| 81,558 |
| 56,637 |
| 45.4 | % | 44.0 | % |
Amortization of other intangibles |
| 128,875 |
| 111,284 |
| 92,431 |
| 15.8 | % | 20.4 | % |
Other(3) |
| 1,271,742 |
| 969,082 |
| 665,229 |
| 31.2 | % | 47.5 | % |
Total |
| 8,390,622 |
| 6,060,281 |
| 4,261,402 |
| 38.5 | % | 42.2 | % |
(1) Includes audit, legal and other professional services.
(2) Includes tax on debits and credits, safety and hygiene tax and stamp tax.
(3) Includes leases, security service expenses, maintenance, insurance, electricity, among others.
| As of December 31 | Change December 31 | |||||||||||
| 2018 | 2017 | 2018/2017 | ||||||||||
| (In thousands of Pesos, except percentages) | ||||||||||||
Salaries and social charges | 6,506,885 | 6,668,299 | (2.4 | )% | ||||||||
Other personnel expenses | 2,271,695 | 2,067,939 | 9.9 | % | ||||||||
|
|
|
|
|
| |||||||
Total Personnel expenses | 8,778,580 | 8,736,238 | 0.5 | % | ||||||||
Directors’ and statutory auditors’ fees | 163,507 | 129,523 | 26.2 | % | ||||||||
Other professional fees | 1,651,977 | 1,098,685 | 50.4 | % | ||||||||
Advertising and publicity | 411,692 | 437,572 | (5.9 | )% | ||||||||
Taxes | 1,071,587 | 1,087,403 | (1.5 | )% | ||||||||
Other | 2,301,745 | 2,165,348 | 6.3 | % | ||||||||
|
|
|
|
|
| |||||||
Total Administration Expenses | 5,600,508 | 4,918,531 | 13.9 | % | ||||||||
|
|
|
|
|
| |||||||
Total Personnel and Administration Expenses | 14,379,088 | 13,654,769 | 5.3 | % | ||||||||
20172018 Compared to 20162017
In 2017, administrative2018 personnel administration expenses totaled Ps.8.4amounted to Ps.8.8 billion in 2018, reflecting a 38.5%0.5% increase compared to Ps.6.1from the Ps.8.7 billion recorded in 2016. This increase was primarily due to an increase in personnel expenses, which grew by 41.9% to Ps.5.5 billion in 2017 from Ps.3.9 billion in 2016, and non-personnel expenses, which grew by 32.5% in 2017 to Ps.2.9 billion from Ps.2.2 billion in 2016.
Personnel administrative expenses amounted to Ps.5.5 billion in 2017, reflecting a 41.9% increase fromas the Ps.3.9 billion recorded in 2016. This increase was due to (i) a 23.5% increasedecrease in the average salarynumber of the Bank’s personnel, resulting from the collective bargaining agreement between Argentine banks and the labor union reachedemployees in the first quarter of 2017, this agreement determined a 19.5% increase for expected inflation during 2017, an additional increase of approximately 4.0% as a recognition of inflation during 2016; (ii) a 5.3% additional rise in the average salary applied retroactively since January 2017, as catch up for 2017 inflation and (iii) salary increases, (not at the same level as the banking labor union) implemented at CCF, Tarjeta, Supervielle Seguros, SAM and Espacio Cordial during last twelve months.consumer finance segment was offset by inorganic growth from acquisitions.
The number of the our employees increasedwas 5,307 compared to 5,320 as of December 31, 2017, from 4,982 as of December 31, 2016.2017. See “Item 6. Directors, Senior Management and Employees—Employees—Compensation.”
Non-personnel administrativeAdministration expenses amountedtotaled Ps.5.6 billion, a 13.9% increase compared to Ps.2.9 billion in 2017, reflecting a 32.5% increase from the Ps.2.2Ps.4.9 billion recorded in 2016.2017. This increase was mainly associated withprimarily due to (i) an increase in taxes reflecting higher taxes on real estate, security service expenses and maintenance as well as higher tax charge on debit and credit accounts, (ii) an increase in other professional fees (including audit, legal and other professional fees) to Ps.426.2 millionPs.1.7 billion in 2018 from Ps.1.1 billion in 2017, from Ps.286.5 million in 2016, and (iii)(ii) a 31.2%6.3%, or Ps.302.7Ps.136.4 million increase in other expenses
including leases, security service expenses, maintenance, insurance and electricity, among others, which amounted to Ps.1.3 billion in 2017.
2016 Compared to 2015
In 2016, administrative expenses totaled Ps.6.1 billion, a 42.2% increase compared to Ps.4.3 billion recorded in 2015. This increase was primarily due to an increase in personnel expenses, which grew by 39.5% to Ps.3.9Ps.2.3 billion in 2016 from Ps. 2.8 billion in 2015.2018. This increase was mainly the result of the combination of (i) an increase in average salary of 33.0% for the Bank’s personnel, in line with the collective bargaining agreement between Argentine banks and the labor union and salary increases by our other subsidiaries during 2016, but with lower increases than the banking labor union, (ii) the payment of an extraordinary amount in December 2016 under the agreement reached between Argentine banks and the labor unions and the payment of higher performance bonuses in connection with higher loan origination.
The number of our employees increased to 4,982 in 2016 from 4,843 in 2015 due to the growth of our subsidiaries, mainly the Bank. See “Item 6. Directors, Senior Management and Employees—Employees—Compensation.”
Non-personnel administrative expenses amounted to Ps.2.2 billion in 2016, reflecting a 47.3% increase from the Ps.1.5 billion recorded in 2015. This increase was mainly associated with an increase in taxes to Ps. 452 million in 2016 from Ps. 269 million in 2015, reflecting higher turnover tax and a one-time tax charge on debit and credit account transfers on the IPO proceeds and an increase in other professional fees (including audit, legal and other professional fees) to Ps.286.5 million in 2016 from Ps.186.6 million in 2015.
Other expenses, including leases, security service expenses, maintenance, insurance and electricity, among others, amounted to Ps.969 million in 2016 reflecting a 47.5% increase from the Ps. 665 million recorded in 2015.
Miscellaneous Income/(Loss), Net
2017 Compared to 2016
We had miscellaneous income, net of Ps.169.4 million for 2017, compared to miscellaneous loss, net of Ps.29.1 million in 2016. This was due to the sale of non-core properties and lower expenses related to the agreement with the ANSES related to senior citizen payments.
2016 Compared to 2015
We had miscellaneous loss, net of Ps.29.1 million for 2016, compared to miscellaneous gains, net of Ps.153.7 million in 2015. This decrease was mainly due to higher charges derived from the agreement with the ANSES related to senior citizen payments and was partially offset by higher loan recovery(i) a 5.9% or Ps.25.9 million decrease in advertising and disaffected provisions (provisions reversedpublicity which amounted Ps.411.7 million in 2018 and (ii) a 1.5% or disaffectedPs.15.8 million decrease in taxes which amounted Ps.1.1 billion in 2018.
Other Income/(Expenses), Net
2018 Compared to 2017
We had other expenses, net of Ps.1.8 billion for 2018, compared to Ps.2.3 billion in 2017. This was due to the recovery or payment of the past due loan). Additionally, other income included a non-recurring Ps.85.9 million gainto higher turnover taxes which were more than offset by higher commissions earned from the sale of non-core properties in the Province of Mendoza.
guarantee lines and higher gains from investment properties.
Other Comprehensive Income, Taxnet of tax
Other comprehensive income, net of tax totaled Ps.241.3 million compared to Ps.46.9 million in 2017. This reflects mainly the revaluation of real estate properties together with the difference between the amortized cost and the market value of financial instruments held for investments.
Income Tax
The corporate income tax rate in Argentina for fiscal years 2018 and 2017 2016was 30% and 2015 was 35%. As per the Central Bank’s accounting regulations until December 2017, Grupo Supervielle did not recognize deferred tax credits or liabilities in its main subsidiaries (the Bank and CCF). Accordingly, the effective tax rate could vary from quarter to quarter not only for non-taxable income or non-deductible expenses, but also due to the timing in which those results are recognized for tax purposes., respectively. As per the tax reform passed by Congress in December 2017, the corporate tax rate will be 30% for fiscal years 2018 and 2019 declined to 30% from 35% and will decline to 25% starting in fiscal year 2020. In addition, through the adoption of International Financial Reporting Standards effective January 1, 2018, we will start recording income tax recognizingbegan to recognize deferred tax assets and liabilities, which should result in an effective tax rate closer to the statutory tax rate.
Additionally, as income tax is paid by each subsidiary on an individual basis, tax losses in one legal entity cannot be offset by tax gains in another legal entity. For example, at the holding company, financial expenses could not be
offset with taxable income while having debt securities outstanding and no material source of taxable income. Income from proceeds from equity offerings temporarily retained at the holding company, may allow Grupoallowed Supervielle to more than offset financial expenses paid through this vehicle and use tax credits still existing from previous years, whichyears.
Income tax law in turn are expectedArgentina doesn’t allow the deduction of losses arising from exposures to lowerchanges in the effectivepurchasing power of the currency. As a consequence, the income tax rate.
could be payable even with net losses in the Income statement.
20172018 Compared to 20162017
The income tax charge in 20172018 was Ps.772.5 millionPs.1.0 billion compared to Ps.500.6 millionPs.1.2 billion charged in 2016.2017. The increasedecrease was due to an increasea lower income tax rate in pre-taxeffect for 2018, which is applied to the taxable income which was partially offset by a lower effective tax rate dueamong other adjustments does not include the loss from exposure to the deduction of higher provisions for loan losses. The effective tax rate could vary in interim periods not only for non-taxable income or non-deductible expenses, but also due to the time during which those results are recognized for tax purposes.
2016 Compared to 2015
The income tax charge for 2016 was Ps.500.6 million compared to Ps.247.2 million charged in 2015. The increase was due to higher pre-tax income, and the increasechanges in the effective tax rate (which is equal to income tax charge divided by pre-tax income). This increase was mainly the result of having fewer financial trusts effective during 2016, which pay income tax at the trust level and reduce the income tax paid at the company level.
On December 14, 2016, the Bank acquired at market price, allpurchasing power of the properties from the Supervielle Renta Inmobiliaria 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. For an explanation of the termination of the Supervielle Renta Inmobiliaria Financial Trust and the related net gains, see “Item 4.D Property, Plants and Equipment.”currency.
Argentine Banking GAAP and U.S. GAAP Reconciliation
Our audited consolidated financial statements are prepared in accordance with Argentine Banking GAAP, which differ in certain significant respects from U.S. GAAP. Note 35 to our audited consolidated financial statements included elsewhere in this annual report provides a description of the significant 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.
The principal differences between Argentine Banking GAAP and U.S. GAAP as they relate to us, are the following:
· the accounting for loan origination fees and expenses;
· differences in the accounting of business combinations;
· the accounting for computer software obtained or developed for internal use;
· the accounting for loan loss reserves;
· the accounting for transfers of financial assets;
· the accounting for certain investments in marketable securities;
· the accounting for vacations;
· the accounting for derivative instruments;
· the accounting of customers loyalty programs;
· the accounting for deferred income taxes;
· the accounting of financial guarantees;
· the accounting of special termination arrangements;
· the accounting of credit card loans-imputed interest; and
· the effect on non-controlling interest of the foregoing reconciling items.
Net income under Argentine Banking GAAP for the years ended December 31, 2017 and 2016 was approximately Ps.2,437.1 million and Ps.1,311.3 million, respectively, as compared to net income of approximately Ps.1,697.5 million and Ps.1,025.9 million, respectively, under U.S. GAAP.
Shareholders’ equity under Argentine Banking GAAP as of December 31, 2017 and 2016 was Ps.15.1 billion and Ps.6.9 billion, respectively, as compared to Ps.13.9 billion and Ps.6.5 billion, respectively, under U.S. GAAP.
See Note 35 to our audited consolidated financial statements as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015 for a discussion of these differences, the effect on our results of operations and financial position and certain other disclosures required under U.S. GAAP.
Results by Segments
Our results by segments for the years ended December 31, 2017, 20162018 and 20152017 are shown in Note 35.e) to our audited consolidated financial statements.
The table below sets forth information regarding the financial statements and the results of our retail banking, corporate banking, treasury, consumer finance, insurance and asset management &and other services business segments for the years ended December 31, 2017, 20162018 and 2015.2017.
|
| As of December 31, 2017 |
| ||||||||||||||
|
| (in thousands of Pesos) |
| ||||||||||||||
|
| Retail |
| Corporate |
| Bank |
| 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. | ||||||||||||||||||||||||||||||||
| For the year ended December 31, 2018 | ||||||||||||||||||||||||||||||||
| (in thousands of Pesos) | ||||||||||||||||||||||||||||||||
| Retail Banking | Corporate Banking | Bank Treasury | Consumer Finance | Insurance | Asset Management and Other Services | Adjustments | Consolidated Total | |||||||||||||||||||||||||
Interest income | 13,131,593 | 10,736,816 | 1,805,457 | 5,265,312 | 39,149 | 297,551 | (859,636 | ) | 30,416,242 | |||||||||||||||||||||||
Interest expenses | (3,896,708 | ) | (1,326,316 | ) | (10,891,110 | ) | (1,947,948 | ) | — | (226,343 | ) | 875,065 | (17,413,360 | ) | ||||||||||||||||||
Distribution of Income (Expense) for Treasury Funds (1) | 746,366 | (4,287,089 | ) | 3,540,723 | — | — | — | — | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net interest income | 9,981,251 | 5,123,411 | (5,544,930 | ) | 3,317,364 | 39,149 | 71,208 | 15,429 | 13,002,882 | |||||||||||||||||||||||
Net income from financial instruments (NIFFI) at fair value through profit or loss | 45,603 | — | 5,607,007 | (584,895 | ) | 172,338 | 55,090 | 1,015,228 | 6,310,371 | |||||||||||||||||||||||
Exchange rate difference on gold and foreign currency | 826,135 | 80,067 | 215,047 | 4,451 | (5 | ) | 23,032 | (22,022 | ) | 1,126,705 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
NIFFI and Exchange Rate Differences | 871,738 | 80,067 | 5,822,054 | (580,444 | ) | 172,333 | 78,122 | 993,206 | 7,437,076 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net Financial Income | 10,852,989 | 5,203,478 | 277,124 | 2,736,920 | 211,482 | 149,330 | 1,008,635 | 20,439,958 | ||||||||||||||||||||||||
Services fee income | 3,522,097 | 540,213 | 26,331 | 1,440,166 | — | 440,723 | (41,841 | ) | 5,927,689 | |||||||||||||||||||||||
Services fee expense | (801,044 | ) | (67,045 | ) | (55,342 | ) | (492,776 | ) | — | (20,899 | ) | 18,926 | (1,418,180 | ) | ||||||||||||||||||
Income from insurance activities | — | — | — | — | 666,954 | — | 181,711 | 848,665 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net Service Fee Income | 2,721,053 | 473,168 | (29,011 | ) | 947,390 | 666,954 | 419,824 | 158,796 | 5,358,174 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Subtotal | 13,574,042 | 5,676,646 | 248,113 | 3,684,310 | 878,436 | 569,154 | 1,167,431 | 25,798,132 | ||||||||||||||||||||||||
Result from exposure to changes in the purchasing power of money | (1,192,909 | ) | (1,537,428 | ) | (1,015,651 | ) | (575,725 | ) | (259,689 | ) | (121,061 | ) | (1,312,538 | ) | (6,015,001 | ) | ||||||||||||||||
Other operating income | 966,474 | 920,204 | 76,165 | 528,138 | 4,314 | 91,902 | (113,639 | ) | 2,473,558 | |||||||||||||||||||||||
Loan loss provisions | (1,662,584 | ) | (865,972 | ) | (16,248 | ) | (2,557,571 | ) | — | (76,658 | ) | — | (5,179,033 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net Operating Income | 11,685,023 | 4,193,450 | (707,621 | ) | 1,079,152 | 623,061 | 463,337 | (258,746 | ) | 17,077,656 | ||||||||||||||||||||||
Personnel expenses | (5,722,747 | ) | (1,023,583 | ) | (353,169 | ) | (1,164,882 | ) | (111,685 | ) | (191,674 | ) | (210,840 | ) | (8,778,580 | ) | ||||||||||||||||
Administration expenses | (3,674,773 | ) | (474,633 | ) | (184,528 | ) | (934,095 | ) | (151,893 | ) | (195,517 | ) | 14,931 | (5,600,508 | ) | |||||||||||||||||
Depreciations and impairment ofnon-financial assets | (258,912 | ) | (83,085 | ) | (18,364 | ) | (45,519 | ) | (4,890 | ) | (1,700 | ) | (19,919 | ) | (432,389 | ) | ||||||||||||||||
Other operating expenses | (2,312,340 | ) | (1,020,900 | ) | (285,678 | ) | (626,069 | ) | (664 | ) | (53,348 | ) | (12,941 | ) | (4,311,940 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Subtotal | (283,749 | ) | 1,591,249 | (1,549,360 | ) | (1,691,413 | ) | 353,929 | 21,098 | (487,515 | ) | (2,045,761 | ) | |||||||||||||||||||
Income for subsidiaries and joint ventures | — | — | — | (4,473 | ) | — | — | 4,473 | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
| Grupo Supervielle S.A. | ||||||||||||||||||||||||||||||||
| For the year ended December 31, 2018 | ||||||||||||||||||||||||||||||||
| (in thousands of Pesos) | ||||||||||||||||||||||||||||||||
| Retail Banking | Corporate Banking | Bank Treasury | Consumer Finance | Insurance | Asset Management and Other Services | Adjustments | Consolidated Total | |||||||||||||||||||||||||
Income/(loss) before taxes | (283,749 | ) | 1,591,249 | (1,549,360 | ) | (1,695,886 | ) | 353,929 | 21,098 | (483,042 | ) | (2,045,761 | ) | |||||||||||||||||||
Income tax | (219,356 | ) | (413,415 | ) | (90,217 | ) | 235,248 | (153,460 | ) | (38,152 | ) | (331,536 | ) | (1,010,888 | ) | |||||||||||||||||
Net loss for the year | (503,105 | ) | 1,177,834 | (1,639,577 | ) | (1,460,638 | ) | 200,469 | (17,054 | ) | (814,578 | ) | (3,056,649 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net income (loss) for the year attributable to owners of the parent company | (476,637 | ) | 1,177,834 | (1,639,577 | ) | (1,460,638 | ) | 200,469 | (17,054 | ) | (812,400 | ) | (3,028,003 | ) | ||||||||||||||||||
Net income (loss) for the year attributable tonon-controlling interest | (26,468 | ) | — | — | — | — | — | (2,178 | ) | (28,646 | ) | |||||||||||||||||||||
Other Comprehensive Income | (16,157 | ) | 123,287 | 121,040 | 207 | (1,078 | ) | — | 14,274 | 241,573 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Other comprehensive income attributable to parent company | (16,157 | ) | 123,287 | 121,040 | 207 | (1,078 | ) | — | 14,023 | 241,322 | ||||||||||||||||||||||
Other comprehensive income attributable tonon-controlling interest | — | — | — | — | — | — | 251 | 251 | ||||||||||||||||||||||||
Comprehensive Income (Loss) | (519,262 | ) | 1,301,121 | (1,518,537 | ) | (1,460,431 | ) | 199,391 | (17,054 | ) | (800,304 | ) | (2,815,076 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Comprehensive income (loss) for the year attributable to owners of the parent company | (492,794 | ) | 1,301,121 | (1,518,537 | ) | (1,460,431 | ) | 199,391 | (17,054 | ) | (798,377 | ) | (2,786,681 | ) | ||||||||||||||||||
Comprehensive income (loss) for the year attributable tonon-controlling interest | (26,468 | ) | — | — | — | — | — | (1,927 | ) | (28,395 | ) | |||||||||||||||||||||
(1) These amounts are calculated based on the funds that segments use or provide and net to zero in the consolidation process.
|
| As of December 31, 2016 |
| ||||||||||||||
|
| (in thousands of Pesos) |
| ||||||||||||||
|
| Retail |
| Corporate |
| Bank |
| Consumer |
| Insurance |
| Asset Mgmt |
| 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) |
| 1,307,621 |
| (1,918,789 | ) | 611,168 |
| — |
| — |
| — |
| — |
| — |
|
Gross financial margin |
| 3,873,585 |
| 627,291 |
| 496,970 |
| 741,244 |
| 51,850 |
| 69,676 |
| 67,438 |
| 5,928,054 |
|
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 |
|
Net Revenue |
| 5,183,741 |
| 1,123,685 |
| 534,402 |
| 1,238,605 |
| 528,199 |
| 330,229 |
| 42,192 |
| 8,981,053 |
|
Loan Loss Provisions |
| (550,715 | ) | (153,078 | ) | (9,265 | ) | (338,869 | ) | — |
| (5,710 | ) | — |
| (1,057,637 | ) |
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 |
| 254,133 |
| 60,478 |
| 388,972 |
| 95,906 |
| 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 |
| 251,160 |
| 68,655 |
| 388,972 |
| 189,896 |
| 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 |
| 162,902 |
| 67,682 |
| 252,402 |
| 124,773 |
| 3,809 |
| 1,311,304 |
|
| Retail Banking | Corporate Banking | Bank Treasury | Consumer Finance | Insurance | Asset Management and Other Services | Adjustments | Consolidated Total | |||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Cash and due from banks | 4,706,116 | 325,248 | 28,505,898 | 61,414 | 3,135 | 582,102 | (496,360 | ) | 33,687,553 | |||||||||||||||||||||||
Debt Securities at fair value through profit or loss | — | — | 14,941,290 | — | 100,041 | 70,784 | — | 15,112,115 | ||||||||||||||||||||||||
Loans and other financing | 30,785,552 | 38,850,543 | 2,824,590 | 6,411,427 | 459,404 | 602,207 | (2,725,259 | ) | 77,208,464 | |||||||||||||||||||||||
Other assets | 1,141,320 | 80,182 | 5,663,252 | 1,735,186 | 372,487 | 630,880 | 6,102,557 | 15,725,864 | ||||||||||||||||||||||||
Total Assets | 36,632,988 | 39,255,973 | 51,935,030 | 8,208,027 | 935,067 | 1,885,973 | 2,880,938 | 141,733,996 | ||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Deposits | 51,679,015 | 9,420,938 | 32,906,386 | 1,667,995 | — | — | (768,320 | ) | 94,906,014 | |||||||||||||||||||||||
Financing received from the Argentine Central Bank and other financial institutions | 10,828 | 7,212,869 | 786,362 | 2,542,577 | — | 184,546 | (2,704,345 | ) | 8,032,837 | |||||||||||||||||||||||
Unsubordinated negotiable Obligations | — | — | 7,418,947 | 1,304,004 | — | 51,116 | 533,104 | 9,307,171 | ||||||||||||||||||||||||
Other Liabilities | 3,192,162 | 1,010,667 | 1,938,464 | 1,725,794 | 387,267 | 1,128,369 | 3,137,177 | 12,519,900 | ||||||||||||||||||||||||
Total Liabilities | 54,882,005 | 17,644,474 | 43,050,159 | 7,240,370 | 387,267 | 1,364,031 | 197,616 | 124,765,922 | ||||||||||||||||||||||||
| (1) |
|
| For the year ended December 31, 2017 | ||||||||||||||||||||||||||||||||
| (in thousands of Pesos) | ||||||||||||||||||||||||||||||||
| Retail Banking | Corporate Banking | Bank Treasury | Consumer Finance | Insurance | Asset Mgmt and Other Services | Adjustments | Consolidated Total | |||||||||||||||||||||||||
Interest income | 10,066,299 | 5,976,487 | 1,397,697 | 5,453,694 | — | — | (629,346 | ) | 22,264,831 | |||||||||||||||||||||||
Interest expenses | (2,429,498 | ) | (293,503 | ) | (4,547,332 | ) | (1,721,411 | ) | — | (19 | ) | 682,098 | (8,309,665 | ) | ||||||||||||||||||
Distribution of Income (Expense) for Treasury Funds (1) | 1,730,815 | (3,415,120 | ) | 1,684,305 | — | — | — | — | — | |||||||||||||||||||||||
Net interest income | 9,367,616 | 2,267,864 | (1,465,330 | ) | 3,732,283 | — | (19 | ) | 52,752 | 13,955,166 | ||||||||||||||||||||||
Net income from financial instruments (NIFFI) at fair value through profit or loss | (18,791 | ) | — | 2,876,573 | (412,659 | ) | 153,099 | 42,195 | 905,230 | 3,545,647 | ||||||||||||||||||||||
Exchange rate difference on gold and foreign currency | 237,560 | (67,938 | ) | 211,820 | 5,432 | — | 1,190 | 5,048 | 393,112 | |||||||||||||||||||||||
NIFFI and Exchange Rate Differences | 218,769 | (67,938 | ) | 3,088,393 | (407,227 | ) | 153,099 | 43,385 | 910,278 | 3,938,759 | ||||||||||||||||||||||
Net Financial Income | 9,586,385 | 2,199,926 | 1,623,063 | 3,325,056 | 153,099 | 43,366 | 963,030 | 17,893,925 | ||||||||||||||||||||||||
Service fee income | 3,719,832 | 734,603 | 27,297 | 1,118,895 | — | 333,620 | 129,472 | 6,063,719 | ||||||||||||||||||||||||
Service fee expense | (812,597 | ) | (38,732 | ) | (28,615 | ) | (115,779 | ) | — | — | (224,704 | ) | (1,220,427 | ) | ||||||||||||||||||
Income from insurance activities | — | — | — | — | 639,524 | — | 259,967 | 899,491 | ||||||||||||||||||||||||
Net Service Fee Income | 2,907,235 | 695,871 | (1,318 | ) | 1,003,116 | 639,524 | 333,620 | 164,735 | 5,742,783 | |||||||||||||||||||||||
Subtotal | 12,493,620 | 2,895,797 | 1,621,745 | 4,328,172 | 792,623 | 376,986 | 1,127,765 | 23,636,708 | ||||||||||||||||||||||||
Result from exposure to changes in the purchasing power of money | (616,471 | ) | (749,946 | ) | (305,043 | ) | (171,901 | ) | (141,417 | ) | (26,325 | ) | (580,152 | ) | (2,591,255 | ) | ||||||||||||||||
Other operating income | 1,174,305 | 393,281 | 94,700 | 896,005 | 3,179 | (2,451 | ) | (720,995 | ) | 1,838,024 | ||||||||||||||||||||||
Loan loss provisions | (1,407,882 | ) | (289,347 | ) | (6,874 | ) | (2,324,630 | ) | — | — | (4,454 | ) | (4,033,187 | ) | ||||||||||||||||||
Net Operating Income | 11,643,572 | 2,249,785 | 1,404,528 | 2,727,646 | 654,385 | 348,210 | (177,836 | ) | 18,850,290 | |||||||||||||||||||||||
Personnel expenses | (5,801,979 | ) | (1,074,860 | ) | (397,063 | ) | (1,227,028 | ) | (109,876 | ) | (60,539 | ) | (64,893 | ) | (8,736,238 | ) | ||||||||||||||||
Administration expenses | (3,516,643 | ) | (444,892 | ) | (210,404 | ) | (1,116,313 | ) | (139,651 | ) | (15,940 | ) | 525,312 | (4,918,531 | ) | |||||||||||||||||
Depreciations and impairment of non-financial assets | (383,239 | ) | (84,659 | ) | (99,302 | ) | (49,988 | ) | (4,566 | ) | (173 | ) | (61 | ) | (621,988 | ) | ||||||||||||||||
Other operating expenses | (2,596,100 | ) | (668,837 | ) | (228,784 | ) | (626,902 | ) | (1,689 | ) | (13,510 | ) | (21,002 | ) | (4,156,824 | ) | ||||||||||||||||
Subtotal | (654,389 | ) | (23,463 | ) | 468,975 | (292,585 | ) | 398,603 | 258,048 | 261,520 | 416,709 | |||||||||||||||||||||
Income for subsidiaries and joint ventures | — | — | — | 6,768 | — | — | (6,768 | ) | — | |||||||||||||||||||||||
Income / (Loss) before Taxes | (654,389 | ) | (23,463 | ) | 468,975 | (285,817 | ) | 398,603 | 258,048 | 254,752 | 416,709 | |||||||||||||||||||||
Income tax | (120,218 | ) | (144,883 | ) | (379,043 | ) | (258,905 | ) | (159,238 | ) | (98,045 | ) | (11,637 | ) | (1,171,969 | ) | ||||||||||||||||
Net income (loss) for the year | (774,607 | ) | (168,346 | ) | 89,932 | (544,722 | ) | 239,365 | 160,003 | 243,115 | (755,260 | ) | ||||||||||||||||||||
Net income (loss) for the year attributable to owners of the parent company | (775,453 | ) | (168,346 | ) | 89,932 | (544,722 | ) | 239,365 | 160,003 | 244,851 | (754,370 | ) | ||||||||||||||||||||
Net loss for the year attributable tonon-controlling interest | 846 | — | — | — | — | — | (1,736 | ) | (890 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Other Comprehensive Income | 4,549 |
| 5,122 |
|
| 1,878 |
|
| (72 | ) |
| 37,648 |
|
| — |
|
| (2,243 | ) |
| 46,882 |
| ||||||||||
Other comprehensive income attributable to the parent company | 4,549 | 5,122 | 1,878 | (72 | ) | 37,648 | — | (2,256 | ) | 46,869 | ||||||||||||||||||||||
Other comprehensive income attributable tonon-controlling interest | — | — | — | — | — | — | 13 | 13 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Comprehensive Income (Loss) | (770,058 | ) | (163,224 | ) |
| 91,810 |
|
| (544,794 | ) |
| 277,013 |
|
| 160,003 |
|
| 240,872 |
|
| (708,378 | ) | ||||||||||
Comprehensive income (loss) for the year attributable to owners of the parent company | (770,904 | ) | (163,224 | ) | 91,810 | (544,794 | ) | 277,013 | 160,003 | 242,595 | (707,501 | ) | ||||||||||||||||||||
Comprehensive income (loss) for the year attributable tonon-controlling interest | 846 | — | — | — | — | — | (1,723 | ) | (877 | ) | ||||||||||||||||||||||
| Retail Banking | Corporate Banking | Bank Treasury | Consumer Finance | Insurance | Asset Mgmt and Other Services | Adjustments | Consolidated Total | |||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Cash and due from banks | 4,132,699 | 384,037 | 11,769,085 | 107,691 | 4,447 | 352 | -13,387 | 16,384,924 | ||||||||||||||||||||||||
Debt Securities at fair value through profit or loss | — | — | 16,285,616 | 111,979 | — | — | 440,330 | 16,837,925 | ||||||||||||||||||||||||
| For the year ended December 31, 2017 | ||||||||||||||||||||||||||||||||
| (in thousands of Pesos) | ||||||||||||||||||||||||||||||||
| Retail Banking | Corporate Banking | Bank Treasury | Consumer Finance | Insurance | Asset Mgmt and Other Services | Adjustments | Consolidated Total | |||||||||||||||||||||||||
Loans and other financing | 31,805,596 | 44,801,483 | 3,336,981 | 9,824,802 | 140,953 | 25,564 | 2,826,709 | 87,108,670 | ||||||||||||||||||||||||
Other assets | 623,355 | 17,877 | 7,741,867 | 2,113,635 | 750,829 | 283,211 | 3,367,857 | 14,898,631 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Assets | 36,561,650 | 45,203,397 | 39,133,549 | 12,158,107 | 896,229 | 309,127 | 968,091 | 135,230,150 | ||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Deposits | 52,021,850 | 6,814,206 | 23,662,029 | 1,040,635 | — | — | (253,737) | 83,284,983 | ||||||||||||||||||||||||
Financing received from the Argentine Central Bank and other financial institutions | 9,618 | 4,064,831 | 909,178 | 285,637 | — | — | (63,498 | ) | 5,205,766 | |||||||||||||||||||||||
Unsubordinated negotiable Obligations | — | — | 9,499,207 | 2,822,175 | — | — | 359,855 | 12,681,237 | ||||||||||||||||||||||||
Other Liabilities | 5,053,328 | 1,266,538 | 7,412,959 | 6,198,430 | 360,637 | 132,543 | (6,658,039) | 13,766,396 | ||||||||||||||||||||||||
Total Liabilities | 57,084,796 | 12,145,575 | 41,483,373 | 10,346,877 | 360,637 | 132,543 | (6,615,419) | 114,938,382 | ||||||||||||||||||||||||
|
| As of December 31, 2015 |
| ||||||||||||||
|
| (in thousands of Pesos) |
| ||||||||||||||
|
| Retail |
| Corporate |
| Bank |
| Consumer |
| Insurance |
| Asset Mgmt |
| 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(1) |
| 664,487 |
| (1,119,721 | ) | 455,234 |
| — |
| — |
| — |
| — |
| — |
|
Gross financial margin |
| 2,067,011 |
| 435,979 |
| 227,931 |
| 521,635 |
| 22,520 |
| 40,475 |
| 40,143 |
| 3,355,694 |
|
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 |
|
Net Revenue |
| 3,438,813 |
| 786,523 |
| 245,696 |
| 823,341 |
| 153,127 |
| 166,024 |
| (24,667 | ) | 5,588,857 |
|
Loan Loss Provisions |
| (299,135 | ) | (72,108 | ) | — |
| (166,326 | ) | — |
| (6,275 | ) | — |
| (543,844 | ) |
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 |
|
(1) These amounts are calculated based on the funds that
| (1) | These amounts are calculated based on tunds segments use or provide and net |
Below is a discussion of our results of operations by segments for the years ended December 31, 2017, 20162018 and 2015.
2017.
Retail Banking
Attributable Comprehensive Income in 2018 recorded a Ps.398.6 million loss, compared to a Ps.770.9 million loss in 2017.
Net income attributableThe main factors explaining the decrease were: (i) Ps.1.2 billion loss from exposure to changes in the Retail Banking segmentpurchasing power of money compared to a Ps.616.5 million loss in 2017, was Ps.681.0(ii) a Ps.254.7 million a 87.8% increase from the Ps.362.6 million in 2016, which in turn was Ps.140.8 million or 63.5% higher than the Ps.221.8 million in 2015. The increase in 2017 resulted mainly from (i) a 43.1% orloan loss provisions to Ps.1.7 billion increasefrom Ps.1.4 billion in gross intermediation margin, (ii)2017, (iii) a 26.6% or Ps.348.6Ps.186.2 million increasedecrease in net services fee income, and (iii) net miscellaneous income of Ps.98.9 million
compared to net miscellaneous loss of Ps.130.4 million in 2016. This was partially offset byPs.2.7 billion from Ps.2.9 billion, (iv) a 39.1% or Ps.1.6Ps.99.1 million increase in administrative expensesincome tax, to Ps.219.4 million from Ps.120.2 million and (v) a 33.9% or Ps.186.6Ps.16.2 million loss recorded in Other Comprehensive Income from Ps.4.5 million gain in 2017 mainly due to the revaluation of real estate properties. These factors were partially offset by: (i) a Ps.1.3 billion increase in loanNet Financial Income to Ps.10.9 billion from Ps.9.6 billion, (ii) a Ps.45.4 million decrease in Personnel and Administration expenses, to Ps.9.7 billion, and (iii) a Ps.75.9 million decrease in Other Expenses, net, to Ps.1.3 billion from Ps.1.4 billion
Result from exposure to changes in the purchasing power of money for 2018 totaled a Ps.1.2 billion loss, provisions.
Net revenues attributable to the Retail Banking segment in 2017 were Ps.7.2 billion, a 38.9% increase from the Ps.5.2Ps.616.5 million loss recorded in 2017. This reflects the loss in the purchasing power of the currency to which our net monetary assets are exposed as a result of the 47.6% increase in consumer price index in 2018, compared to a 24.8% increase in 2017.
Loan loss provisions totals Ps.1.7 billion from Ps.1.4 billion in 2016, which in turn was Ps.1.7 billion or 50.7% higher than2017. Loan loss provisions include the Ps.3.4 billion in 2015.expected losses for each portfolio and segment, based on past performance and current conditions as of the financial statements date. The increase in delinquency also requires expected losses to be measured for the whole life of each loan, instead of accounting for expected losses during a 12 month period. This increases significantly the probability of default for loans with a maturity of more than 1 year.
Retail loans showed an NPL ratio of 3.3% as of December 31, 2018, increasing from 2.8% as of December 31, 2017. This was mainly driven by an increase in the personal loans NPL ratio to 3.5% in December 2018, from 2.9% in December 2017 isand an increase in the credit cards NPL ratio to 3.8% in December 2018, from 3.4%
In 2018 Net Financial Income totaled Ps.10.9 billion, a 13.2% increase from Ps.9.6 billion in 2017. This increase was mainly explained bydue to (i) a 43.1% growth6.6% increase to Ps.10.0 billion in gross financial margin,Net Interest Income, as a consequenceresult of the combination of increases in loanhigher volumes and interest rates on personal loans and mortgages, coupled with lower cost deposits,of Mortgages (ii) a Ps.45.6 million in Net Income from financial instruments at fair value through profit or loss compared to Ps.18.8 million loss in 2017 and (ii) a 26.6%247.8% increase to Ps.826.1 million in netExchange rate differences.
Net services fee income duetotaled Ps.2.7 billion in 2018, a 6.4% decrease compared to higher fees onPs.2.9 billion in 2017. This reflects lower average volumes of credit and debit cards reflecting higher business volumes as well as an increase in fee pricing which more than offset the reduction in credit card and debit card discount rates.merchant discounted rates (“MDR”). MDR are commissions charged by the issuer of credit and debit cards on the amount of credit and debit card transactions. The maximum MDR in the fourth quarter offor 2018 and 2017 was 1.85% and 2.0%, respectively and the maximum debit card sales commissions in the fourth quarter offor 2018 and 2017 was 1.0%. and 0.9% respectively.
Pursuant to Communication “A” 6212, effective as of April 1, 2017, the Central Bank issued a program to gradually reduce MDR on an annual basis. In this regard, the maximum MDR for 2017 and 2018 was 2.0%, and 1.85% since January 1, 2018 respectively and dropping to 1.65%, 1.50% and 1.30% in 2019, 2020 and 2021 and after, respectively. The maximum debit card sales commissions for 2017 and 2018 was 1.0%, and 0.90% since January 1, 2018 respectively and declining to 0.80%, 0.70% and 0.60%, in 2019, 2020 and 2021 and after, respectively.
Loan loss provisionsIn 2018, the retail banking segment’s loan and financing portfolio totaled approximately Ps.30.8 billion compared to Ps.31.8 billion in 2017. In 2018, retail deposits amounted to Ps.737.3Ps.51.7 billion, a 0.7% decrease from the Ps.52.0 billion in 2017.
Corporate Banking
Attributable Comprehensive Income in 2018 was Ps.1.3 billion, compared to a Ps.163.2 million loss in 2017.
The main factors explaining the increase were: (i) a Ps.3.0 billion increase in Net Financial Income to Ps.5.2 billion from Ps.2.2 billion, (ii) a Ps.23.1 million decrease in Personnel and Administration expenses, to Ps.1.6 billion, (iii) a Ps.174.9 million decrease in Other Expenses, net, to Ps.100.7 million from Ps.275.6 million, and (iv) a Ps.123.3 million in Other Comprehensive Income from Ps.5.1 million in 2017 Ps.186.6mainly due to the revaluation of real estate properties. These factors were partially offset by (i) a Ps.1.5 billion loss from exposure to changes in the purchasing power of money compared to Ps.749.9 million higher than the Ps.550.7loss in 2017, (ii) a Ps.576.6 million in 2016, which in turn was Ps.251.6 million higher than the Ps.299.1 million in 2015. The increase in loan loss provisions to Ps.866.0 million from Ps.289.3 million in 2017, (iii) a Ps.222.7 million decrease in net services fee income, to Ps.473.2 million from Ps.695.9 million, and (iv) a Ps.268.5 million increase in income tax, to Ps.413.4 million from Ps.144.9 million.
In 2018 Net Financial Income totaled Ps.5.2 billion, a 136.5% increase from Ps.2.2 billion in 2017. This increase was mainly due to (i) a 125.9% increase to Ps.5.1 billion in Net Interest Income, (ii) an Ps.80.1 million gain in in Exchange rate differences compared to a loss of Ps.67.9 million in 2017.
Result from exposure to changes in the purchasing power of money for 2018 totaled a Ps.1.5 billion loss, from the Ps.749.9 million loss recorded in 2017. This reflects the loss in the purchasing power of money to which our net monetary assets are exposed as a result of the 47.6% increase in consumer price index in 2018, compared to a 24.8% increase in 2017.
Loan loss provisions totals Ps.866.0 million from Ps.289.3 million in 2017. This is explained as a result of an increase in delinquency ratios. The delinquency ratio increase is mainly explained by the growtheconomic downturn in Argentina, with GDP contracting 2.5%, and inflation reaching 46.7% which also led to a high interest rate environment with average BADLAR increasing 1,370 basis points in 2018 to 34.3% compared to 20.6% in 2017 and reaching and average of 50.2% in the loanfourth quarter. The corporate segment has had a historically low NPL ratio, being 0.2% as of December 31, 2017. However, as macroeconomic conditions worsened and interest rates rose throughout the year, the NPL ratio increased to 1.1% as of December 31, 2018 leading some companies to restraints in their cash flow and impairing their ability to repay their loans. Loan loss provisions include the expected losses for each portfolio and an increase insegment, based on past performance and current conditions as of the coverage ratio.
Direct costs increased 41.0% or Ps.1.1 billion to Ps.3.9 billion in 2017, compared to Ps.2.8 billion in 2016, which was in turn 34.4% higher or Ps.713.8 million than in 2015.financial statements date. The increase in 2017 was duedelinquency also requires expected losses to higher personnel and operational expenses, asbe measured for the whole life of each loan, instead of accounting for expected losses during a consequence12 month period. This increases significantly the probability of vendors’ and unions’ adjustmentdefault for loans with a maturity of rates and salaries to inflation.more than 1 year.
In 2017, the retail banking segment’s loan portfolio totaled approximately Ps.21.3 billion (U.S.$1.1 billion), and Ps.21.9 billion (U.S.$1.2 billion) including the securitized loan portfolio. RetailCorporate loans postedshowed an NPL ratio of 2.6% in 2017, improving1.1% as of December 31, 2018, increasing from 3.7% in 2016. This was mainly driven by a decrease in the Personal Loans NPL ratio to 2.5% along with a 30 basis points decrease in the credit cards NPL ratio to 3.4%. In March 2016, the Bank changed its write-off policy, moving to write-off at 270 days delinquency from 360 days.
In 2017, retail deposits amounted to Ps.37.9 billion (U.S.$2.0 billion), a 45.8% increase from the Ps.26.0 billion in 2016. In 2017, retail deposits represented 67.0% of total deposits.
As0.2% as of December 31, 2017, the Bank maintained approximately 2.5 million savings accountsmainly due to deteriorated macroeconomic conditions which impacted negatively SME and 88,000 checking accounts. middle-market companies’ profits and cash flows.
In 2017, the Bank also serviced more than 791,000 product bundles for senior citizens, over 173,000 Plan Sueldo (“Payroll”) accounts and more than 49,000 product bundles for high net worth customers.
The following graph shows the total loan portfolio (with and without the securitized portfolio) breakdown of the Retail Banking segment for each of the quarters indicated.
Corporate Banking
Net income attributable to2018, the corporate banking segmentsegment’s loan and financing portfolio totaled Ps.39.0 billion compared to Ps.44.8 billion in 2017 was Ps.538.2reflecting lower credit demand following the recession recorded in 2018.
In 2018, corporate deposits amounted to Ps.9.4 billion, a 38.3% increase from the Ps.6.8 billion in 2017.
Treasury
Attributable Comprehensive Income in 2018 recorded a Ps.1.5 billion loss, compared to Ps.91.8 million Ps.201.0gain in 2017. The Ps.1.6 billion decline in attributable comprehensive income in 2018 is explained by (i) a 82.9% or Ps.1.3 billion decrease in net financial income, (ii) a Ps.1.0 billion loss from exposure to changes in the purchasing power of money, and (iii) a Ps.29.0 million higher than Ps.337.2loss in Net Fee Income. These factors were partially offset by: (i) a Ps.150.7 million decrease in Personnel and Administration expenses to Ps.556.1 million in 2016, which in turn was Ps.48.7 million higher than Ps.288.42018 compared to Ps.706.8 million in 2015. The increase in 2017, resulted mainly from (i) higher gross intermediation margin (52.5% or Ps.329.6 million), (ii) a 41.8% or Ps.207.3Ps.208.8 million increasedecrease in net service fee income, (iii) miscellaneous income of Ps.28.6Income Tax to Ps.90.2 million from Ps.379.0 million in 2017.
In 2018 Net Financial Income totaled Ps.277.1 million, an 82.9% decrease from Ps.1.6 billion in 2017. This decrease was mainly due to (i) a Ps.5.5 billion loss in Net Interest Income compared to a Ps.24.5 million incomePs.1.5 billion loss in 2016 and (iv) loan loss provisions of Ps.153.3 million as compared to Ps.153.1 million in 2016.2017. This was partially offset by (i) a 47.7%94.9% or Ps.292.4 millionPs.2.7 billion increase in administrative expenses to support business growth and (ii) a 104.8% or Ps.47.3 million increase in income tax.
Net revenues attributable to the corporate banking segment in 2017 were Ps.1.7 billion, 47.8% or Ps.536.9 million higher than Ps.1.1Ps.5.6 billion in 2016, which in turn was 42.9% or Ps.337.2 million higher than Ps.786.5 million in 2015. The increase in 2017 was primarily due to the 52.5% increase in gross financial margin reflecting (i) higher loan volume and (ii) a 41.8% growth in net services fee income, largely driven by deposit account commissions and check administration commission.
Loan loss provisions amounted to Ps.153.3 million in 2017, as compared to Ps.153.1 million recorded in 2016, which in turn was 112.3% higher than the Ps.72.1 million recorded in 2015.
Direct costs increased 68.1% or Ps.145.6 million to Ps.359.2 million in 2017, compared to Ps.213.6 million in 2016, which in turn was 34.8% higher compared to Ps.158.4 million in 2015. The increase in 2017 was due to higher personnel and operational expenses, as a consequence of vendors’ and unions’ adjustment of rates and salaries to inflation.
In 2017, the corporate banking segment’s loan portfolio (including loans and receivablesNet Income from financial leasing) totaled approximately Ps.29.7 billion (U.S.$1.6 billion), as we leveraged our higher capital base to increase the average loan size per client. Including the securitized portfolio, total loans amounted to Ps.29.7 billion (U.S.$1.6 billion), a 62.5% increase compared to 2016.
The corporate banking segment’s total deposits in 2017 amounted to Ps.5.0 billion (U.S.$264.2 million), a 68.5% increase from Ps.3.0 billion in 2016 to fund loan growth together with the utilization of the funds received from the equity offering. Corporate deposits decreased to 8.8% of total deposits in 2017 from 21.0% in 2016.
The following graph shows the total loan portfolio (with and without the securitized portfolio) breakdown of the corporate banking segment for each of the quarters indicated.
Treasury
Net income attributable to the Treasury Segment in 2017 was Ps.47.7 million, Ps.115.2 million lower than the Ps.162.9 million recorded in 2016, which in turn was Ps.111.6 million higher than the Ps.51.3 million recorded in
2015. The 70.7% decline in net income in 2017 is explained by a 22.7%instruments at fair value through profit or Ps.112.8 million decrease in gross intermediation margin and a 30.9% or Ps.83.7 increase in administrative expenses while net service fee income increased 12.1% or a Ps.4.5 million.
Net revenues attributable to the treasury segment in 2017 were Ps.426.1 million, Ps.108.3 million lower than the Ps.534.4 million recorded in 2016, which in turn was Ps.288.7 million higher than the Ps.245.7 million recorded in 2015. This decrease in 2017 was due to the 22.7% decrease in gross financial margin driven by a year-end negative mark-to-market of a LEBAC time deposit from the holding company in the Bank. This negative impact in the Treasury segment nets out in the consolidated financial statements of the holding company as a result of corresponding a positive mark-to-market impact at the holding company. In addition, in 2016 net income registered a net gain from the termination of the Supervielle Renta Inmobiliaria Financial Trust.
loss.
The treasury segment’s government and corporate securities portfolioat fair value through profit or loss amounted to Ps.15.3Ps.14.9 billion in 2017,2018, a 578.8%8.3% increase from Ps.2.2Ps.16.3 billion recorded in 20162017 reflecting higher holdings of securities issued by the Central Bank. Direct costsThe treasury segment’s cash and due from banks amounted to Ps.116.8Ps.28.5 billion in 2018, a 142.2% increase from Ps.11.8 billion recorded in 2018 reflecting the increase in minimum cash reserve requirements.
Consumer Financing
Attributable Comprehensive Income in 2018 recorded a Ps.1.5 billion loss, compared to a Ps.544.8 million loss in 2017.
The main factors explaining the decrease were: (i) a Ps.588.1 million decrease in Net Financial Income to Ps.2.7 billion compared to Ps.3.3 billion in 2017, (ii) a Ps.575.7 million loss from exposure to changes in the purchasing power of money compared to Ps.94.3Ps.171.9 million in 2016, compared to Ps.57.7 million in 2015.
Consumer Financing
Net income attributable to the consumer financing segmentloss in 2017, was Ps.179.4 (iii) a Ps.232.9 million Ps.111.8 million higher than the Ps.67.7 million in 2016, which in turn was Ps.8.0 million higher than the Ps.59.7 million recorded in 2015. The increase in 2017 was mainly driven by the 87.3% increase in net revenues, which in turn offset higher loan loss provisions followingto Ps.2.6 billion from Ps.2.3 billion in 2017, (iv) a Ps.55.7 million decrease in net services fee income, to Ps.947.4 million from Ps.1.0 billion, and (v) a Ps.97.9 million loss in Other Expenses, net, compared to Ps.269.1 million gain in 2017. These factors were partially offset by: (i) a Ps.248.8 million decrease in Personnel and Administration expenses, to Ps.2.1 billion from Ps.2.4 billion mainly due to the asset quality deteriorationdecrease in thisthe number of employees in the segment, and (ii) a Ps.235.2 million tax loss carry forward recorded in 2018 compared to an income tax of Ps.258.9 million in 2017.
In 2018 Net Financial Income totaled Ps.2.7 billion, a 17.7% decrease from Ps.3.3 billion in 2017. This decrease was mainly due to (i) a 11.1% decrease to Ps.3.3 billion in Net Interest Income as a result of the decrease in average volumes reflecting the tightening of credit scoring metrics in the segment and the increase the coverage ratio in the non-performing loan portfoliocost of fund as a result of the increase in market interest rates, and (ii) a Ps.584.9 million losses from financial instruments at fair value through profit or loss compared to 65.2% as of December 31, 2017 compared with 58.6% as of December 31,2016.
Net revenues attributable to the consumer finance segment in 2017 were Ps.2.3 billion, Ps.1.1 billion higher than the Ps.1.2 billion in 2016, which in turn was Ps.415.3Ps.412.7 million higher than the Ps.823.3 million recorded in 2015. Annual increases of 124.1% in gross intermediation margin and 32.5% in net service fee income were the main drivers behind the growth in net revenuesloss in 2017.
Result from exposure to changes in the purchasing power of money for 2018 totaled a Ps.575.7 million loss, from the Ps.171.9 million loss recorded in 2017. This reflects the loss in the purchasing power of the currency to which our net monetary assets are exposed as a result of the 47.6% increase in consumer price index in 2018,
Loan loss provisions amounted to Ps.924.5 milliontotaled Ps.2.6 billion from Ps.2.3 billion in 2017, Ps.585.6 million higher than the Ps.338.9 million in 2016, which was in turn Ps.172.5 million higher than the Ps.166.3 million for 2015. The increase in 2017 was2017. This is explained mainly due to the growth of the loan portfolio, which included an increase in non-performing loans, (ii) our decision to increase our non-performing loan coverage ratio from 58.6% in 2016 to 65.2% in 2017 and (iii) the deterioration in asset quality due to salarydelinquency ratios. Salary adjustments resulting from collective bargaining agreements below the annual inflation rate which even accelerated in 20172018, along with additional increases in public services tariffs both in 2016 and 2017, which2018, further impacted the consumers’ disposable income.
Direct costs increased 36.9% or Ps.310.0 millionincome of the population in the Consumer Finance Segment causing additional deterioration in asset quality, which was also affected by an increase in unemployment (rising from 7.2% at the beginning of the year to Ps.1.1 billion in 2017, compared to Ps.839.3 million in 2016, which in turn were 31.4% higher than9.1% as ofyear-end). Loan loss provisions include the Ps.638.5 million recorded in 2015.expected losses for each portfolio and segment, based on past performance and current conditions as of the Financial Statements date. The increase in delinquency also requires expected losses to be measured for the whole life of each loan, instead of accounting for expected losses during a 12 month period. This increases significantly the probability of default for loans with a maturity of more than 1 year.
The consumer finance segment NPL ratio increased to 19.4% in December 2018 from 14.7% in 2017 was due to higher personnel and operational expensesmainly as a consequenceresult of vendors’an increase in the personal loans NPL ratio to 26.0% as of December 31, 2018 from 18.7% as of December 31, 2017.
In the Consumer Finance Segment higher delinquency rates experienced in the first months of the year have been typically expected to improve throughout the year as the beginning of the year salary bargaining agreements catch up with inflation improving consumers’ disposable income and unions’ adjustmenttheir ability to pay their bills. This behavior has been changing since 2016 and improvement has not been as fast as in previous years, changing the pattern and seasonality observed in prior years. Salary adjustments resulting from collective bargaining agreements below the annual inflation rate which accelerated in 2018, along with additional increases in public services tariffs in 2018, further impacted the disposable income of ratesthe population in the Consumer Finance Segment causing additional deterioration in asset quality. Taking a more conservative stance, during the first quarter of 2018, we tightened credit scoring standards and salariesslowed origination in the consumer finance segment. Those measures, despite the increasingly challenging environment, started to inflation.
show some signs of improvement, with a sharp decrease in NPL creation levels in 3Q18 compared to 2Q18. However very high levels of inflation in 4Q18 caused NPL creation to increase above the 3Q18 levels but remaining below the 2Q18 peak.
The consumer financing segment’s loan and other financings portfolio totaled approximately Ps.6.1Ps.6.4 billion (U.S.$324.6 million) at December 31, 2018 decreasing 34.8% from 2017. IncludingThis reflects the securitized loan portfolio, total loans amounted Ps.6.8 billion (U.S.$364.3 million) increasing 49.0%tightening of credit scoring metrics in 2017,the segment following the sudden changes in key macroeconomic variables together with lower consumer credit demand due to high interest rates and lower consumer sentiment.
Insurance
Attributable Comprehensive Income totaled Ps.199.4 million in 2018 compared to Ps.277.0 million in 2017. This was due to (i) the decrease in credit related policies following Central Bank regulations that offset the increase in non credit related policies, (ii) a 5.6% increase to Ps.263.6 million in personnel and administrative expenses and (iii) a Net loss from Ps.4.6 billion registeredexposure to changes in 2016.
The following graph shows the total loan portfolio (with and without the securitized portfolio) breakdownpurchasing power of the consumer dinancing segment for eachcurrency of the quarters indicated.
Insurance
Net income attributable to the insurance segment in 2017 was Ps.205.6-Ps.259.7 million compared to Ps.252.4a net loss of Ps.26.3 million in 2016 and Ps.54.12017. This was partially offset by a 38.1% increase to Ps.211.5 million in 2015.Net Financial Income due to investments in financial instruments
Net revenues attributable toFollowing the insurance segment in 2017 were Ps.469.7 million, compared to Ps.528.2 millionCentral Bank Regulation issued in 2016, and Ps.153.1 million in 2015. 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. However, since September 1, 2016 both Banco Supervielle and CCFCordial Compañia Financiera are self-insuring theseagainst credit related risks and andBanco Supervielle is only contractcontracting new credit related insurances for mortgages loans. We intendThe Company expects to continue to expandexpanding this business and launchlaunching new insurance products previously offered to ourits customers by other Insurance Companies. As part of this strategy, Supervielle Seguros launched new products including; Home Insurance, Technology Insurance and ATMs insurance companies.and an Integral Insurance product for Entrepreneurs and SMEs.
Asset Management and Other Services
Attributable Comprehensive Income from insurance activities amounted to Ps.375.4recorded a Ps.17.1 million loss in 2017,2018 compared to Ps.476.3Ps.160.0 million gain in 2016 and Ps.130.6 million in 2015.
Direct costs were Ps.154.4 million in 2017, compared to Ps.139.2 million in 2016 and Ps.68.2 million in 2015.
Asset Management & Other Services
Until March 31, 2017, we offered microcredit financing through Cordial Microfinanzas. On March 31, 2017, we and the Bank sold our shares of Cordial Microfinanzas to Ciudad Microempresas.
Net income attributable to the asset management & other services segment in 2017 was Ps.223.6 million, Ps.98.8 million higher than the Ps.124.8 million recorded in 2016, which was in turn Ps.65.2 million higher than the Ps.59.5 million recorded in 2015.
Net revenues attributable to the asset management & other services segment in 2017 were Ps.601.6 million, Ps.271.4 million or 82.2% higher than Ps.330.2 million in 2016, which was in turn 99% higher than Ps.166.0 million in 2015.
2017.
The increasedecrease in net revenues in 20172018 was mainly driven by (i) the 407.3% or Ps.312.2 million increase in net services fee income, which amounted to Ps.553.3 million in 2017, 112.4% higher than the Ps.260.6 million recorded in 2016, which in turn was 107.5% higher than the Ps.125.6 million recorded in 2015. The increase in service fee income in 2017 was mainly driven by increased volume in mutual fund managementpersonnel and in Espacio Cordial fee income. This increase reflects the successful cross-selling initiatives to leverage our compelling financial product offering both through the asset management business and the non-financial products and services sold by Espacio Cordial.
Direct costs increased 15.7% or Ps.35.9 million in 2017, compared Ps.228.6 million in 2016, which in turn increased 61.0% or Ps.86.7 million compared to Ps.142.0 million in 2015. The increase in 2017 and 2016 was mainlyAdministration expenses due to inflationthe higher employee base as a result of the acquisition of MILA and an increaseIOL in salaries due to an increase in the number of employees. 2018,
See “Item 4.B Business Overview.”
, (ii) a Ps.121.1 million loss from exposure to changes in the purchasing power of the currency compared to Ps.26.3 million loss in 2017 and (iii) a Ps.76.7 million recorded in Loan Loss Provision as a result of the residual portfolio of Mila held at the moment of the acquisition. These were partially offset by (i) a Ps.106.0 million increase in Net Financial Income to Ps.149.3 million from Ps.43.4 million in 2017 (ii) Ps.38.6 million gain recorded in Other operating Income, net compared to a net loss of Ps.16.0 million in 2017 and (iii) Ps.25.8% or Ps.86.2 million increase in Net Service Fee Income to Ps.419.8 million in 2018.
Adjustments
Financial expenses and other results incurred by Grupo Supervielle at the holding level, and transactions between segments, are not allocated to any particular segment for internal reporting purposes, and are disclosed under “Adjustments” to reconcile the total of each line item with the amounts appearing in our statement of income. Inter-segment transactions offset each other and do not impact total direct earnings on a consolidated basis. Other results not allocated to segments totaled gains of Ps.561.5an attributable comprehensive income recorded a Ps.755.8 million loss in 2017, gains of Ps.3.82018, and Ps.244.8 million gain in 2016, and losses of Ps.60.7 million in 2015.2017.
Financial income of Grupo Supervielle at the holding level in 2017 were higher than in 2016 mainly due to the investment of the funds retained at the holding level after the IPO in May 2016.
Financial expenses of Grupo Supervielle at the holding level in 2017 were lower than in 2016 mainly due to a significant decrease in the amount outstanding of debt.
Below we present a summary of items recorded by Grupo Supervielle at the holding level, as well as by Sofital, excluding inter-segment transactions, as of December 31, 2017 and 2016:
|
| As of December 31, 2017 |
| As of December 31, 2016 |
| ||||
|
| (in thousands of Pesos) |
| ||||||
|
| Grupo Supervielle |
| Sofital |
| Grupo Supervielle |
| Sofital |
|
Financial income |
| 642,305 |
| 2,024 |
| 188,345 |
| 399 |
|
Financial expenses |
| (26,045 | ) | — |
| (129,642 | ) | (69 | ) |
Gross financial margin |
| 616,260 |
| 2,024 |
| 58,703 |
| 330 |
|
|
|
|
|
|
|
|
|
|
|
Services Fee Income |
| 62,906 |
| — |
| 45,941 |
| — |
|
Services Fee Expenses |
| 3,145 |
| — |
| — |
| — |
|
Net Service Fee Income |
| 59,761 |
| — |
| 45,941 |
| — |
|
|
|
|
|
|
|
|
|
|
|
Net Revenue |
| 676,021 |
| 2,024 |
| 104,644 |
| 330 |
|
|
|
|
|
|
|
|
|
|
|
Loan Loss Provisions |
| — |
| (1,432 | ) | — |
| — |
|
Direct costs |
| (125,255 | ) | (1,615 | ) | (63,912 | ) | (681 | ) |
Income from financial transactions |
| 550,766 |
| (1,023 | ) | 40,733 |
| (351 | ) |
Consolidated Assets
The structure and main components of our consolidated assets as of the dates indicated were as follows:
|
| As of December 31, |
| ||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| ||||||
|
| Amount |
| % |
| Amount |
| % |
| Amount |
| % |
|
|
| (in thousands of Pesos, except percentages) |
| ||||||||||
Cash and due from banks |
| 11,129,475 |
| 11.8 | % | 8,166,132 |
| 15.3 | % | 6,808,591 |
| 20.6 | % |
Investment Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
Government and corporate securities |
| 1,734,409 |
| 1.8 | % | 945,991 |
| 1.8 | % | 240,635 |
| 0.7 | % |
Participation in our securitization trusts |
| 570,207 |
| 0.6 | % | 631,251 |
| 1.2 | % | 1,371,889 |
| 4.2 | % |
Securities issued by the Central Bank |
| 13,611,627 |
| 14.5 | % | 1,414,053 |
| 2.7 | % | 691,246 |
| 2.1 | % |
Loans and financing portfolio |
| 60,054,796 |
| 63.9 | % | 38,037,051 |
| 71.5 | % | 22,293,826 |
| 67.5 | % |
Other assets (1) |
| 6,870,764 |
| 7.3 | % | 4,011,564 |
| 7.5 | % | 1,639,630 |
| 5.0 | % |
Total |
| 93,971,278 |
| 100.0 | % | 53,206,042 |
| 100.0 | % | 33,045,817 |
| 100.0 | % |
(1) Includes mainly other receivables from financial transactions, equity investments, miscellaneous receivables, bank premises and equipment, miscellaneous assets, and intangible assets.
| As of December 31, | As of January 1st, | |||||||||||||||||||||||
| 2018 | 2017 | 2017 | ||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||
| (in thousands of Pesos, except percentages) | ||||||||||||||||||||||||
Cash and due from banks | 33,687,553 | 23.8 | % | 16,384,924 | 12.1 | % | 14,795,794 | 14.8 | % | |||||||||||||||
Debt Securities at fair value through profit or loss | 15,112,115 | 10.7 | % | 16,837,925 | 12.5 | % | 782,547 | 0.8 | % | |||||||||||||||
Loans and other financing | 77,208,464 | 54.5 | % | 87,108,670 | 64.4 | % | 69,996,876 | 69.9 | % | |||||||||||||||
Other assets (1) | 15,725,864 | 11.1 | % | 14,898,631 | 11.0 | % | 14,545,522 | 14.5 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | 141,733,996 | 100.0 | % | 135,230,150 | 100.0 | % | 100,120,739 | 100.0 | % | |||||||||||||||
| (1) | Includes mainly other receivables from financial transactions, equity investments, miscellaneous receivables, bank premises and equipment, miscellaneous assets, and intangible assets. |
Of our Ps.94.0Ps.141.7 billion total assets as of December 31, 2017, Ps.92.32018, Ps.139.7 billion, equivalent to 98.2%96.2% of the total, corresponded to the Bank and CCF. As of December 31, 2017,2018, our total direct exposure to thenon-financial public sector amounted to Ps.1.8Ps.19.4 billion. Our exposure to the non financial public sector is primarily composed of our holdings of government securities, which as of December 31, 20172018 amounted to Ps.1.7Ps.19.3 million.
| Item 5.B |
Our main source of liquidity is the Bank’s deposit base. The Bank CCF and TarjetaCCF also securitize portions of their loan portfolios to generate liquidity for their operations. CCF also receives deposits and interbank calls and issuesshort-term debt securities in the Argentine capital markets for financing. Additionally,long-term financing and capital contributions enable us to cover most of our liquidity requirements.
Consolidated Cash Flows
The table below summarizes the information from our consolidated statements of cash flows for the threetwo years ended December 31, 2017, 20162018 and 2015,2017, which is also discussed in more detail below:
|
| Year ended December 31, |
| ||||
|
| 2017 |
| 2016 |
| 2015 |
|
|
| (in thousands of Pesos) |
| ||||
|
|
|
|
|
|
|
|
Funds at the beginning of the financial year |
| 9,688,554 |
| 7,616,502 |
| 4,046,180 |
|
|
|
|
|
|
|
|
|
Funds provided by (used in) Operating activities |
| 6,961,692 |
| (294,347 | ) | 2,449,838 |
|
Government and corporate securities |
| 1,811,290 |
| (947,998 | ) | 744,287 |
|
Net increase in loans |
| (10,134,238 | ) | (5,136,826 | ) | (568,136 | ) |
Net increase in deposits |
| 17,593,799 |
| 9,105,413 |
| 4,612,863 |
|
Net operating income from services |
| 4,014,670 |
| 3,156,633 |
| 2,138,642 |
|
Administrative expenses |
| (7,537,254 | ) | (5,340,482 | ) | (3,608,264 | ) |
Other |
| 1,213,425 |
| (1,131,087 | ) | (869,554 | ) |
|
|
|
|
|
|
|
|
Funds provided by (used in) investing activities |
| (4,099,484 | ) | (477,264 | ) | (188,834 | ) |
Net payments in bank premises and equipment and miscellaneous assets |
| (320,981 | ) | (458,733 | ) | (184,545 | ) |
Payments for purchases of equity interests in other companies |
| 33,112 |
| (21 | ) | — |
|
Other |
| (3,811,615 | ) | (18,510 | ) | (4,289 | ) |
|
|
|
|
|
|
|
|
Funds provided by financing activities |
| 11,869,581 |
| 2,387,086 |
| 870,687 |
|
Funds provided (used in) by unsubordinated negotiable obligations |
| 5,288,294 |
| 371,069 |
| 638,722 |
|
Funds (used in) subordinated negotiable obligations |
| (1,058,813 | ) | (123,811 | ) | (74,684 | ) |
Funds provided by (used in) banks and international entities |
| 1,871,168 |
| (1,116,049 | ) | 330,650 |
|
Capital increase |
| 5,841,688 |
| 3,301,137 |
| — |
|
Payment of dividends |
| (65,500 | ) | (25,503 | ) | (7,385 | ) |
Other |
| (7,256 | ) | (19,757 | ) | (16,616 | ) |
|
|
|
|
|
|
|
|
Effect of exchange rate on cash and cash equivalents |
| 1,001,522 |
| 456,577 |
| 438,631 |
|
|
|
|
|
|
|
|
|
Funds at the end of the financial year |
| 25,421,865 |
| 9,688,554 |
| 7,616,502 |
|
| Grupo Supervielle S.A. | ||||||||
| As of December 31, | ||||||||
| 2018 | 2017 | |||||||
Net loss for the year | (3,056,649 | ) | (755,260 | ) | ||||
Adjustments to obtain flows from operating activities: | ||||||||
Income tax | 1,010,888 | 1,171,969 | ||||||
Depreciation and impairment of property and equipment | 432,389 | 621,988 | ||||||
| Grupo Supervielle S.A. | ||||||||
| As of December 31, | ||||||||
| 2018 | 2017 | |||||||
Loan loss provisions | 5,179,033 | 4,033,187 | ||||||
Results from exposure to changes in the purchasing power of money | 9,327,946 | 11,441,536 | ||||||
Exchange rate difference on gold and foreign currency | (1,126,705 | ) | (393,112 | ) | ||||
(Increases) / decreases from operating assets: | ||||||||
Debt securities at fair value through profit or loss | (5,979,152 | ) | (5,820,127 | ) | ||||
Derivatives | 23,816 | 12,412 | ||||||
Repo transactions | 4,945,864 | (4,945,864 | ) | |||||
Loans and other financing | ||||||||
To thenon-financial public sector | 15,341 | (40,209 | ) | |||||
To the other financial entities | 187,807 | 124,440 | ||||||
To thenon-financial sector and foreign residents | 4,526,249 | (21,229,212 | ) | |||||
Other debt securities | (3,781,204 | ) | 3,272,856 | |||||
Financial assets in guarantee | (85,998 | ) | 778,173 | |||||
Investments in equity instruments | 58,477 | (62,684 | ) | |||||
Other assets | 2,033,926 | (651,037 | ) | |||||
Increases / (decreases) from operating liabilities: | ||||||||
Deposits | ||||||||
Non-financial public sector | 1,993,292 | 4,345,037 | ||||||
Financial sector | 2,053 | 2,281 | ||||||
Privatenon-financial sector and foreign residents | 9,625,687 | 12,861,955 | ||||||
Derivatives | 94,222 | — | ||||||
Repo operations | — | (1,088,747 | ) | |||||
Liabilities at fair value with changes in results | 268,086 | — | ||||||
Other liabilities | (1,729,887 | ) | 1,114,879 | |||||
Income Tax paid | (1,323,633 | ) | (1,313,394 | ) | ||||
NET CASH PROVIDED BY / (USED IN) OPERATING ACTIVITIES (A) | 3,985,956 | (18,099,931 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Net payments related to: | ||||||||
Purchase of PPE, intangible assets and other assets | (1,263,758 | ) | (961,388 | ) | ||||
Purchase of liabilities and equity instruments issued by other entities | (208,252 | ) | (109,082 | ) | ||||
Purchase of investments in subsidiaries | (1,838,080 | ) | — | |||||
Collections: | ||||||||
Disposals related to PPE, intangible assets and other assets | 213,403 | 689,922 | ||||||
NET CASH USED IN INVESTING ACTIVITIES (B) | (3,096,687 | ) | (380,548 | ) | ||||
CASH FLOW OF FINANCING ACTIVITIES | ||||||||
Payments: | ||||||||
Changes in investments in subsidiaries that do not result in control loss | (436 | ) | — | |||||
Financing received from local financial institutions | (68,373,253 | ) | (63,870,306 | ) | ||||
Unsubordinated negotiable obligations | (7,553,375 | ) | (1,731,483 | ) | ||||
Subordinated negotiable obligations | (12,985 | ) | (1,527,772 | ) | ||||
Dividends | (328,363 | ) | (110,758 | ) | ||||
Collections: | ||||||||
Unsubordinated negotiable obligations | 4,179,312 | 10,637,195 | ||||||
| Grupo Supervielle S.A. | ||||||||
| As of December 31, | ||||||||
| 2018 | 2017 | |||||||
Financing received from Argentine Financial Institutions | 71,200,324 | 65,914,745 | ||||||
Contributions from shareholders | — | 9,168,249 | ||||||
NET CASH (USED IN)/ PROVIDED BY FINANCING ACTIVITIES (C) | (888,776 | ) | 18,479,870 | |||||
EFFECTS OF EXCHANGE RATE CHANGES AND EXPOSURE TO CHANGES IN THE PURCHASING POWER OF MONEY ON CASH AND CASH EQUIVALENTS (D) | 15,342,947 | 14,032,791 | ||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS (A+B+C+D) | 15,343,440 | 14,032,182 | ||||||
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR | 31,633,118 | 17,600,936 | ||||||
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR | 46,976,558 | 31,633,118 | ||||||
Management believes that cash flows from operations and available cash and cash equivalent balances will be sufficient to fund our financial commitments and capital expenditures for 2018.2019.
Cash Flows from Operating Activities
2017 Compared to 2016
In 2017,2018, operating activities provided Ps.7.0Ps.4.0 billion of net cash, compared to Ps.294.3 millionPs.18.1 billion of net cash used in 2016.2017. Net increasedecrease in loans amounted to Ps.10.1Ps.4.7 billion in 2017,2018, compared to an increase of Ps.5.1Ps.21.1 billion in 2016.2017. Net operating income from servicesdebt securities and derivatives increased to Ps.4.0Ps.4.8 billion in 20172018 from Ps.3.2Ps.7.5 billion in 2016.2017. Net increase in deposits amounted to Ps.17.6Ps.11.6 billion in 2017,2018, compared to a net increase of Ps.9.1Ps.17.2 billion in 2016. Administrative expenses increase to Ps.7.5 billion in 2017, compared to Ps.5.3 billion in 2016. Our holding of marketable securities provided Ps.1.8 billion in 2017 compared to Ps. 948.0 million used in 2016.
2016 Compared to 2015
In 2016, operating activities used Ps.2.4 billion of net cash, compared to Ps.2.3 billion of net cash provided in 2015. Net increase in loans increased to Ps.6.7 billion in 2016 from Ps.683.9 million in 2015. Net operating income from services increased to Ps.2.2 billion in 2016 from Ps.1.8 billion in 2015. Net increase in deposits increased to Ps.9.1 billion in 2016 from Ps.4.6 billion in 2015. Administrative expenses increased to Ps.4.9 billion in 2016 compared to Ps.3.4 billion in 2015 and our holding of marketable securities used Ps.918.4 million in 2016 from Ps.787.8 million provided in 2015.
2017.
Cash Flows from Investing Activities
2017 Compared to 2016
In 2017,2018, we used Ps.4.1 millionPs.3.1 billion of net cash in our investing activities, compared to Ps.477.0Ps.380.5 million of net cash used in 2016.2017. In 2017,2018, funds used in investing activities for purchase of investments in subsidiaries were partially offset by the sale of four office units and parking spaces located at Avenida L. N. Alem 1035, the sale of a non-core property for Ps.30.2 million and, to a lesser extent, the sale of Cordial Microfinanzas in the first quarter of 2017. While in 2016, funds used in investing activities were mainly explained by the acquisition at market price all of the propertiesPs.1.8 billion.
Cash Flows from the financial trust, given their franchise value, for a total amount of Ps.329.8 million.
2016 Compared to 2015Financing Activities
In 2016, we used Ps.477.3 million of net cash in our investing activities, compared to Ps.188.8 million of2018, net cash used in 2015. The increase in investmentfinancing activities in 2016 is primarily explained by the increase in payments for bank premises, equipment and miscellaneous assets to Ps.458.7was Ps.888.8 million, in 2016 (the Bank acquired at market price, all of the properties from the financial trust, given their franchise value, for a total amount of Ps.329.8 million), compared to the Ps.184.5 millionPs.18.5 billion in 2015 (including the acquisition for a total2017.
In 2018, funds used to make payments of Ps.165 million of four office units and parking spaces located at Avenida L. N. Alem 1035 and Ps.85.9 million from the sale of properties not related to our core business in the Province of Mendoza).
For an explanation of the acquisition of the properties from the financial trust and the subsequent cancellation of the trust, see “Item 4.D Property, Plants and Equipment.”
Cash Flows from Financing Activities
2017 Compared to 2016
In 2017, net cash provided by financing activities totaled Ps.11.9unsubordinated negotiable obligations was Ps.3.4 billion, compared to Ps.2.4 billion of net cashPs.8.9 million provided for financing activities in 2016.
In 2017, funds used to make payments under unsubordinated2017. Funds provided by subordinated negotiable obligations totaled Ps.5.3 billion due to the placement of the Ps.4,768,170,000 global bond,was Ps.13.0 million in 2018, compared to Ps.371.1 millionPs.1.5 billion used for financing activities in 2016. Funds used to make payments under subordinated negotiable obligations totaled Ps.1.1 billion in 2017, compared to Ps.123.8 million used for financing activities in 2016.2017. Funds borrowed from foreign financial institutions to increase
our financing with respect to foreign exchange related loans totaled Ps.1.9 millionwas Ps.2.8 billion in 2017,2018, compared to Ps.1.1 million used in 2016.
2016 Compared to 2015
In 2016, net cash provided by financing activities totaled Ps.2.4Ps.2.0 billion compared to Ps.870.7 million of net cash provided for financing activities in 2015.2017. In 2016, funds2018 and 2017, net cash used to makein dividends payments on our unsubordinated negotiable obligations totaled Ps.371.1was Ps.328.4 million compared to Ps.638.7and Ps.110.8 million, that were usedrespectively. In 2017 we received contributions from shareholders for financing activities in 2015; we used Ps.123.8 million to make payments under subordinated negotiable obligations compared to Ps.74.7 million used for financing activities in 2015; and funds used by banks and international entities totaled Ps.1.1 billion compared to Ps.330.7 million provided in 2015.
Ps.9.2 billion.
Funding
Deposits
Our major source of funding is the Bank’s significant deposit base comprised of checking and savings accounts and time deposits. The following table presents the composition of our consolidated deposits as of December 31, 2018 and 2017, 2016 and 2015:January 1, 2017:
|
| As of December 31, |
| As of December 31, | As of January 1st, | ||||||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2018 | 2017 | 2017 | |||||||||
|
| (in thousands of Pesos) |
| (in thousands of Pesos, except percentages) | |||||||||||||||
From the non-financial public sector |
| 6,171,661 |
| 2,587,253 |
| 1,182,559 |
| 11,105,477 | 9,112,185 | 4,767,148 | |||||||||
% of deposits |
| 10.9 | % | 7.2 | % | 5.0 | % | 11.7 | % | 10.9 | % | 7.2 | % | ||||||
From the financial sector |
| 15,702 |
| 9,326 |
| 250,981 |
| 25,236 | 23,183 | 20,902 | |||||||||
% of deposits |
| 0.0 | % | 0.0 | % | 1.1 | % | 0.0 | % | 0.0 | % | 0.0 | % | ||||||
From the non-financial private sector and foreign residents |
|
|
|
|
|
|
| ||||||||||||
Checking accounts |
| 5,679,805 |
| 4,361,405 |
| 3,042,376 |
| ||||||||||||
% of deposits |
| 10.1 | % | 12.1 | % | 12.8 | % | ||||||||||||
Savings accounts |
| 18,239,186 |
| 10,783,229 |
| 6,465,123 |
| ||||||||||||
% of deposits |
| 32.3 | % | 30.0 | % | 27.3 | % | ||||||||||||
Special checking accounts |
| 11,339,808 |
| 2,422,708 |
| 1,288,573 |
| ||||||||||||
% of deposits |
| 20.1 | % | 6.7 | % | 5.4 | % | ||||||||||||
Time deposits |
| 13,014,886 |
| 11,677,322 |
| 10,034,025 |
| ||||||||||||
% of deposits |
| 23.0 | % | 32.5 | % | 42.3 | % | ||||||||||||
Investment accounts |
| 255,000 |
| 375,000 |
| 664,900 |
| ||||||||||||
% of deposits |
| 0.5 | % | 1.0 | % | 2.8 | % | ||||||||||||
Others |
| 1,328,837 |
| 3,510,701 |
| 567,477 |
| ||||||||||||
% of deposits |
| 2.4 | % | 9.8 | % | 2.4 | % | ||||||||||||
Interest and differences in exchange rates payable |
| 442,142 |
| 170,920 |
| 220,563 |
| ||||||||||||
% of deposits |
| 0.8 | % | 0.5 | % | 0.9 | % | ||||||||||||
Total |
| 56,487,027 |
| 35,897,864 |
| 23,716,577 |
| ||||||||||||
| As of December 31, | As of January 1st, | |||||||||||
| 2018 | 2017 | 2017 | ||||||||||
| (in thousands of Pesos, except percentages) | ||||||||||||
From thenon-financial private sector and foreign residents | ||||||||||||
Checking accounts | 6,687,156 | 8,385,982 | 7,944,769 | |||||||||
% of deposits | 7.0 | % | 10.1 | % | 12.0 | % | ||||||
Savings accounts | 25,121,674 | 27,536,021 | 20,730,965 | |||||||||
% of deposits | 26.5 | % | 33.1 | % | 31.4 | % | ||||||
Special checking accounts | 21,737,965 | 16,136,060 | 3,579,702 | |||||||||
% of deposits | 22.9 | % | 19.4 | % | 5.4 | % | ||||||
Time deposits | 25,794,300 | 19,215,905 | 21,556,972 | |||||||||
% of deposits | 27.2 | % | 23.1 | % | 32.6 | % | ||||||
Investment accounts | 1,390,000 | 376,496 | 690,957 | |||||||||
% of deposits | 1.5 | % | 0.5 | % | 1.0 | % | ||||||
Others | 2,192,556 | 1,846,348 | 6,468,648 | |||||||||
% of deposits | 2.3 | % | 2.2 | % | 9.8 | % | ||||||
Interest and differences in exchange rates payable | 851,650 | 652,803 | 315,646 | |||||||||
% of deposits | 0.9 | % | 0.8 | % | 0.5 | % | ||||||
|
|
|
|
|
| |||||||
Total | 94,906,014 | 83,284,983 | 66,075,709 | |||||||||
20172018 Compared to 20162017
Total deposits increased 57.4%14.0% in 2017. The Bank’s2018. Total deposits from thenon-financial public private sector increased 138.5%13.0% to represent 11%88% of our total deposits as of December 31, 2017. As of December 31, 2017, CCF had deposits of Ps.704.8 million.
As a result of the importance of our sizeable deposit network franchise, retail branch deposits plus senior citizen deposits continued to represent a high share of total deposits. As of December 31, 2017, retail branch deposits plus senior citizen deposits represented 53.8% of total deposits compared to 59.6% as of December 31, 2016.
2018. Total deposits from the private sector increased 51.0% in 2017, above the 26.7% increase in deposits from the private sector in the Argentine financial system as a wholenon-financial in 2017. Private sector deposits in savings accounts, time deposits, checking accounts and special checking accounts increased 69.1%, 11.5%, 30.2% and 368.1% respectively, in 2017.
As of December 31, 2017, savings accounts denominated in Pesos, which represented 68% of total savings accounts (excluding special checking accounts) increased 67.4% when compared to savings accounts denominated in Pesos as of December 31, 2016. The remaining 32% was represented by U.S. dollar-denominated savings accounts, which increased 73.7% when compared to savings accounts denominated in U.S. dollars.
2016 Compared to 2015
Total deposits increased 51.4% in 2016 accompanying higher loan origination due to the capital deployment after the IPO. The Bank’s deposits from the non-financial public sector increased 118.8%,21.9% to represent 7.2%12% of our total deposits as of December 31, 2016.2018.
Private sector deposits in savings accounts and checking accounts decreased 8.8% and 20.3%, respectively. Time deposits and special checking accounts increased 34.2% and 34.7%, respectively, in 2018.
As a result of the importance of our sizeable deposit network franchise, retailRetail branch deposits continued to represent a high portion of total deposits. As of December 31, 2016, retailplus senior citizens deposits represented 60%44% of total deposits as of December 2018, compared towith 54% as of December 31, 2015.
Total deposits from2017, mainly reflecting the private sector increased 49.4% in 2016, above the 43.9% increase in wholesale and institutional deposits fromto fund investments in Central Bank7-day LELIQS.
Financings
Banco Supervielle S.A.
On April 25, 2013, the private sector inShareholders of the Argentine financial system asBank, approved the creation of a whole.Global Program for the Issuance of Notes (the “Program”) for up to a maximum amount of Ps.500 million, which was subsequently increased by the shareholders’ of the Bank, for up to Ps.2.5 billion.
Global Program for the Issuance of Medium-Term Notes for up to U.S.$.800,000,000
On September 22, 2016, the Shareholders of the Bank approved the creation of a Global Program for the Issuance of Notes for up to a maximum amount of U.S.$800 million. The Program was authorized by the CNV through Resolution No.18,376 dated November 24, 2016.
On March 6, 2018, the Shareholders of the Bank approved the increase of the amount of the Program for up to a maximum amount of U.S.$.2.3 billion. The Program was authorized by the CNV Resolution No.19,470 dated April 16, 2018.
On December 21, 2018, the Board of Directors approved the issuance of notes under the aforementioned Program for an amount of up to Ps.3 billion. Here are the main terms and conditions of the issue:
Series: F
Amount: Ps.3,899,161,779
Due date: November 4, 2019
Interest rate: Floating Badlar of Private sector deposits grew in savings accounts and time deposits, which increased 70.3% and 16.4%, respectively, in 2016.Banks + 4.85%
The performance in private sector deposits was due to (i) 179.2% increase in sight deposits denominated in U.S. dollars, mainly resulting fromInterest payment date: Interest accrued by the notes will be paid on a three-month basis making the first tranchepayment on May 4, 2019.
Amortization: bullet.
Applicable law and jurisdiction: Argentina.
Cordial Compañía Financiera S.A: Program for the Issuance of notes
On April 25, 2013, the Shareholders of CCF approved the creation of a Global Program for the Issuance of Notes (the “CCF Program”) for up to a maximum amount of up to Ps.500 million. The Program was authorized by the CNV through Resolution No. 17,165 dated August 15, 2013. On April 18, 2016, the Shareholders of CCF approved the Increase of the Tax Amnesty Program which totaled the equivalenttotal amount of Ps.2.7 billion asthe Program to a nominal value of December 2016, or near U.S.$170 million, comparedup to Ps.90 million, or U.S.$6 million asPs.1 billion. That increase was authorized by the CNV Board through Resolution No. 18,296 dated October 27, 2016. On March 22, 2017, the shareholders of September 2016, (ii) 70.3%, or Ps.5.5 billionCCF approved the increase in savings accounts, (iii) 43.4%, or Ps.1.3 billion in checking accounts, and (iv) 16.4%, or Ps.1.6 billion in time deposits.
of the maximum amount of the CCF Program for up to Ps.2.5 billion. The CNV’s Board approved the program’s grow up by Resolution No. 18,608 on April 12, 2017.
As of December 31, 2016, savings accounts denominated in Ps., which represent 78% of total savings accounts, increased 45.8% compared2018, 2017 and January 1, 2017, the amounts outstandings and the terms corresponding to 2015. The remaining 22% was represented by U.S. dollar denominated savings accounts, which increased 239.4%.outstanding unsubordinated negotiable obligations were as follows (in Ps.million):
Class Grupo Supervielle Series XIII Grupo Supervielle Series XX Banco Supervielle Series V Banco Supervielle Series VI Banco Supervielle Series VI Banco Supervielle Series A Banco Supervielle Series B Banco Supervielle Series C Banco Supervielle Series D Banco Supervielle Series E Cordial Compañía Financiera Series IX Cordial Compañía Financiera Series X Cordial Compañía Financiera Series XI Cordial Compañía Financiera Series XII Cordial Compañía Financiera Series XIII Cordial Compañía Financiera Series XIV Cordial Compañía Financiera Series XV Cordial Compañía Financiera Series XVI Micro Lending Series IISecuritization Transactions Issue Date Maturity Date Annual Interest Rate 12/31/2018 12/31/2017 01/01/2017 01/31/2014 01/31/2019 Badlar + Spread 6,25% 28.0 37.8 46.9 07/28/2015 01/28/2017 Mixed — — 249.2 11/20/2015 05/20/2017 Badlar + Spread 4,5% — — 643.9 10/12/2016 10/12/2016 Badlar + Spread 3,5% — 658.0 817.3 11/17/2016 11/17/2017 Badlar + Spread 3,5% — — 510.0 02/09/2017 08/09/2020 Badlar + Spread 4,5% 4,200.6 7,256.6 — 12/22/17 12/22/2019 Floating TM20 + Spread 3,25% 600.2 930.6 — 12/22/17 12/22/2021 Badlar + Spread 4,25% 667.2 976.1 — 02/14/18 08/14/2019 Badlar + Spread 3,5% 768.9 — — 02/14/18 02/14/2023 Badlar + Spread 4,05% 1,687.2 — — 10/06/2015 04/06/2017 Badlar + Spread 5,95% — — 174 05/19/2016 11/19/2017 Badlar + Spread 5,5% — — 377.8 10/25/2016 04/24/2018 Badlar + Spread 3,57% — 309.7 386.9 12/23/2016 12/23/2017 Fixed 24,90% — — 287.3 12/23/2016 06/23/2018 Badlar + Spread 4% — 225.1 282.1 05/11/2017 05/11/2019 Badlar + Spread 3,5% 397.6 850.7 — 08/24/2017 02/23/2019 Badlar + Spread 3,75% 365.4 625.2 — 11/22/2017 11/21/2019 Floating TM20 + Spread 4,25% 541.0 811.5 — 08/16/2016 08/16/2019 Badlar + Spread 5% 20.0 — —
Class | Issue Date | Maturity Date | Annual Interest Rate | 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||||||||||
Micro Lending Series III | 10/04/2017 | 10/05/2020 | Badlar + Spread 7 | % | 31.1 | — | — | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total |
| 9,307.2 | 12,681.3 | 3,775.4 | ||||||||||||||||||||
In 2017,During 2018, the Bank and CCF transferred loanshave made partial repurchases of their outstanding negotiable obligations. On October 18, 2018 and January 24, 2019 the Banks reduced Ps.618.0 million and Ps.254.9 million respectively of the total amount outstanding of the negotiable obligations Class A, BADLAR Private Banks + 4.50% with maturity on 2020.
a. Subordinated notes
Program for the issuance of notes for up to securitization trusts in an aggregate amount of Ps.2.5 billion and these trusts issued trust securities for an aggregate amount of Ps.2.5 billion. nominal value Ps.750 million (increased to Ps.2 billion)
As of December 31, 2017, CCF andMarch 25, 2013, the Bank held shares in trusts through senior debt securities and certificates of participation for Ps.45.1 million and Ps.466.6 million, respectively.
As a result of these securitizations, CCF and the Bank retained interests in the trusts through senior bonds and participation certificates in the amount of Ps.45.1 million and Ps.466.6 million as of December 31, 2017, respectively. CCF and the Bank retained interests in the trusts through senior bonds, subordinated bonds and participation certificates in the amount of Ps.100.6 million, Ps.0 million and Ps.530.6 million as of December 31, 2016 and Ps.509.7 million, Ps.36.3 million and Ps.707.0 million as of December 31, 2015, respectively.
Our holdings of participation certificates issued by trusts in Pesos are valued at their equity value estimated at the end of each fiscal year, following each trust’s audited consolidated financial statements. Our holdings of debt securities issued by trusts are valued based on principal plus accrued interest. Each trust records allowances for loan losses for the securitized loan portfolio in accordance with Central Bank regulations. Although historically we have not experienced losses on our participation certificates in, or subordinated debt securities issued by, financial trusts created to securitize loans, we cannot assure you that we will not incur such losses in the future.
Financings
Grupo Supervielle - Global Corporate Notes
At our ordinary and extraordinary shareholders’ meeting held on April 19, 2016, ourBank’s shareholders approved the creation of a new global notes program for the issuance of short, medium and/or long-term notes of up to a total outstanding amount of Ps. 1,000,000,000 (or its equivalent in other currencies).
As of December 31, 2017, Grupo Supervielle had one series of notes outstanding under its short, medium and/or long-term global notes program. This series was our Series XIII Peso-denominated notes due January 31, 2019. These notes were issued on January 31, 2014 in the aggregate principal amount of Ps. 23.1 million. The Series XIII notes earn interest at a floating rate of BADLAR — Private Banks plus 6.25%. As of December 31, 2017, Ps.22.9 million was outstanding under the notes.
The proceeds from the placement of the notes were used in accordance with Article 36 of the Law of Negotiable Obligations for the payment of financial liabilities and working capital needs in Argentina.
Bank —Peso-denominated Notes
At the Bank’s April 15, 2016 ordinary shareholders’ meeting, the Bank’s shareholders voted to increase its Peso-denominated global notes program from Ps.750.0 million to Ps.2.0 billion (or its equivalent in foreign currency).
On October 12, 2016, the Bank issued unsubordinated “Series VI” notes in an aggregate principal amount of Ps.422.0 million at a floating rate of BADLAR — Private Banks plus 3.50% that were repaid in October 2017.
Bank — Foreign currency-denominated Notes
On November 11, 2010, the Bank issued 11.375% U.S.$50 million “Series I” subordinated notes due November 11, 2017. Interest payments on the Series I notes are payable twice a year. These notes are governed by New York law. On November 13, 2017, the notes matured and were repaid in full.
On August 20, 2013, the Bank issued 7.0% U.S.$22.5 million “Series III” subordinated notes due August 20, 2020. Interest payments on the Series III notes are payable biannually and payments commenced on February 20, 2014. These notes are governed by Argentine law. As of December 31, 2017, the Series III notes were recorded in the “Subordinated Negotiable Obligations” line item in an amount outstanding of Ps.431.7 million.
On November 18, 2014, the Bank issued 7.0% U.S.$13.4 million “Series IV” subordinated notes due November 18, 2021. Interest payments on the Series IV notes are payable biannually and payments commenced on May 18, 2015. These notes are governed by Argentine law. As of December 31, 2017, the Series IV notes were recorded in the “Subordinated Negotiable Obligations” line item in an amount outstanding of Ps.254.2 million.
On November 15, 2016, the Bank issued 3.5% Ps.269.1 million “Series VII” unsubordinated notes due November 17, 2017. Interest payments on the Series VII notes are payable biannually and payments commenced on February 17, 2017. These notes are governed by Argentine law. On November 17, 2017, the notes matured and were repaid in full.
Global Program for the Issuance of Medium Term Securities for up to U.S.$2.3 billion (previously, U.S.$800 million)
On September 22, 2016, the Bank’s general ordinary and extraordinary shareholders’ meeting approved the creation of a global program for the issuance of notes for an outstanding maximum amount of U.S.$800,000,000. The program was authorized by the CNV on November 24, 2016, through Resolution No. 18,376.
On November 23, 2016, the Bank issued Series “A” notes issued for Ps. 4.8 billion at a BADLAR plus 450 basis points interest rate due 2020, with interest payable on a quarterly basis. As of December 31, 2017, the abovementioned notes were recorded in the “Other receivables from financial transactions — Unsubordinated Notes” line item in an amount of Ps.4.7 billion.
On November 29, 2017, the Bank issued Series “B” notes issued for Ps.629.0 million at a TM20 plus 325 basis points interest rate due 2019, with interest payable on a quarterly basis. As of December 31, 2017, the abovementioned notes were recorded in the “Other receivables from financial transactions — Unsubordinated Notes” line item in an amount of Ps.625.3 million.
On November 29, 2017, the Bank issued Series “C” notes issued for Ps.659.7 million at a BADLAR plus 425 basis points interest rate due 2021, with interest payable on a quarterly basis. As of December 31, 2017, the
abovementioned notes were recorded in the “Other receivables from financial transactions — Unsubordinated Notes” line item in an amount of Ps.655.8 million.
On February 14, 2018, the Bank issued two new series of notes under the program, in accordance with the following:
(i) “Series D” notes in an aggregate principal amount of Ps.748.9 million at a quarterly rate of BADLAR Private Banks Rate plus a nominal annual 3.50% due August 14, 2019. However, during the first interest payment period, the series D notes will pay a minimum annual interest rate of 26.75%.
(ii) “Series E” notes in an aggregate principal amount of Ps.1.6 billion at a quarterly interest rate of BADLAR Private Banks Rate plus a nominal annual 4.05% due February 14, 2023. However, during the first, second, and third interest payment periods, the series E notes will pay a minimum annual interest rate of 26.25%.
On March 6, 2018, the Bank’s shareholders’ meeting resolved, among other things,up to increase the amount of the program from U.S.$800.0 million (or its equivalent in other currencies) to U.S.$2.3 billion (or its equivalent in other currencies) and to modify the program’s general terms and conditions to allow specifically for the issuance within its framework of series of notes denominated in UVI or in UVA.
Bank - Foreign Trade Programs
On April 25, 2007, we entered into a trade facility with the IFC for a maximum amount of U.S.$10 million, which entitles usPs.750 million. On April 15, 2016, the Shareholders of the Bank approved the increase the maximum amount of the Program to request IFC guarantees to secure certainPs.2 billion or its equivalent in foreign currency, passed by Resolution No. 18,224 from the CNV on September 22, 2016.
The following chart provides the main terms and conditions of our trade-related obligations and trade-related obligations of third parties, suchissuances underway as stand-by letters of credit. In May 2014, the amount under the facility was increased to U.S.$20 million and in November 2015 it was increased again to U.S.$30 million. As of December 31, 2018, 2017 our obligations, including principal and interests, under this facility totaled U.S.January 1, 2017 (in US.$19.3 million. million):
| Issuance date | Currency | Denomination | Amount | Amortization | Term | Maturity date | Rate | Book Value | ||||||||||||||||||||||||||||||
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||||||||||||||||||||||||||||
11/11/2010 | U.S.$ | I | 50.0 | 100% at mat, | 84 Months | 11/11/2017 | 11,375 | % | — | — | 1,475.3 | |||||||||||||||||||||||||||
08/20/2013 | U.S.$ | III | 22.5 | 100% at mat, | 84 Months | 08/20/20 | 7 | % | 871.6 | 637.4 | 670.0 | |||||||||||||||||||||||||||
11/18/2014 | U.S.$ | IV | 13.4 | 100% at mat, | 84 Months | 11/18/21 | 7 | % | 512.2 | 375.3 | 395.2 | |||||||||||||||||||||||||||
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Total |
| 1,383.8 | 1,012.7 | 2,540.5 | ||||||||||||||||||||||||||||||||||
In addition, on May 27, 2009, we entered into an Issuing Bank AgreementOn August 6, 2018, the Board of Directors resolved to request the CNV the Bank’s registration as a frequent issuer of negotiable obligations, and a Confirming Bank Agreement with the Inter-American Development Bank,it’s consequent authorization to issue negotiable obligations under the IDB’s Trade Finance Facilitation Program for a maximum amount of U.S.$10 million. Pursuant to these agreements, we may request IDB credit guarantees and confirm IDB credit guarantees received by third parties. In September 2012, the amount under the facility was increased to U.S.$15 million. Our aggregate current exposure under the facilities may not exceed U.S.$15 million, which will be used to cover the risks inherentaforementioned regime, in the confirmation of letters of credit, promissory notes, bid performance bonds and other similar instruments used in foreign trade operations. As of December 31, 2017, there were no operations with coverage of the IDB under the Issuing Bank Agreement.
Obligations under the Issuing Bank Agreement and the Confirming Bank Agreement include the preparation of reports at regular intervals and abiding by certain financial ratios related to solvency, credit risk, restricted assets, and exposure to foreign currency and interest rate risk.
CCF — Notes
As of December 31, 2017, CCF had the following series of notes outstanding under its Ps.500 million Global Program:
|
| Date of |
| Currency |
| Amount |
| Amount outstanding as |
| Rate |
| Maturity |
|
Series XI |
| October 25, 2016 |
| Pesos |
| 200,000,000 |
| 200,000 |
| Floating + 3.57% |
| April 25, 2018 |
|
Series XIII |
| December 23, 2016 |
| Pesos |
| 151,428,571 |
| 151,429 |
| Floating + 4% |
| June 23, 2018 |
|
|
| Date of |
| Currency |
| Amount |
| Amount outstanding as |
| Rate |
| Maturity |
|
Series XIV |
| May 11, 2017 |
| Pesos |
| 558,000,000 |
| 555,396 |
| Floating + 3.50% |
| May 11, 2019 |
|
Series XV |
| August 24, 2017 |
| Pesos |
| 413,500,000 |
| 411,410 |
| Floating + 3.75% |
| February 23, 2019 |
|
Series XVI |
| November 22, 2017 |
| Pesos |
| 535,500,000 |
| 532,308 |
| Floating + 4.25% |
| November 22, 2019 |
|
As of December 31, 2017, we held in our portfolio negotiable obligations: (i) Class XI issued by CCF for the amount of Ps.200 million, (ii) Class XIII issued by CCF for the amount of Ps.151.4 million, (iii) Class XIV issued by CCF for the amount of Ps.555.4 million, (iv) Class XV issued by CCF for the amount of Ps.411.4 million and (v) Class XVI issued by CCF for the amount of Ps.532.3 million.
As of December 31, 2017, outstanding unsubordinated negotiable obligations of CCF totaled Ps.1.9 billion.
CCF — Syndicated Loans
On June 22, 2015, CCF entered into a loan contract called “Syndicated Loan IV” with the banksterms set forth in the table belowResolution and submitting before said body all the necessary documentation for Ps.110.0 million bearing interest at a floating rate of BADLAR — Private Banks + 5.5 basis points. The loan was paid in December 12, 2016, after 12 installments. Interest payments are made monthly. Banco de Servicios y Transacciones S.A. is administrative agent under this loan.such purposes.
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On May 18, 2016, CCF entered into a loan contract called “Syndicated Loan V” with the banks set forth in the table below for Ps.335.0 million bearing interest at a floating rate of BADLAR — Private Banks + 5.5 basis points. On April 3, 2017, the loan was repaid in full. Banco Santander Río S.A. was administrative agent under this loan.
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Consolidated Capital
The table below shows information on our shareholders’ equity as of the dates indicated.
|
| Year ended December 31, |
| ||||||||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| Grupo Supervielle S.A. | |||||||||||
|
| (in thousands of Pesos, except percentages) |
| As of December 31, | As of January 1st, | ||||||||||||||
Shareholders’ equity |
| 15,144,798 |
| 6,931,551 |
| 2,373,710 |
| ||||||||||||
Average shareholders’ equity(1) |
| 9,580,785 |
| 4,986,499 |
| 2,094,750 |
| ||||||||||||
Shareholders’ equity as a percentage of total assets |
| 16.1 | % | 13.0 | % | 7.2 | % | ||||||||||||
| 2018 | 2017 | 2017 | |||||||||||||||||
| (in thousands of Pesos, except percentages) | |||||||||||||||||||
Shareholders’ equity attributable to owner of the parent company | 16,953,987 | 20,069,467 | 11,719,477 | ||||||||||||||||
Average shareholders’ equity(1) | 19,150,644 | 16,214,538 | 12,504,925 | ||||||||||||||||
Shareholders’ equity attributable to owner of the parent company as a percentage of total assets | 12.0 | % | 14.8 | % | 11,7 | % | |||||||||||||
Average shareholders’ equity as a percentage of average total assets |
| 13.8 | % | 12.0 | % | 7.8 | % | 12.3 | % | 12.8 | % | 12,0 | % | ||||||
Total liabilities as a multiple of total shareholders’ equity |
| 5.2 | x | 6.7 | x | 12.9 | x | 7.4x | 5.7x | 7,5x | |||||||||
Tangible shareholders’ equity(2) as a percentage of Total Tangible Assets |
| 15.8 | % | 12.6 | % | 6.5 | % | ||||||||||||
Tangible shareholders’ equity(2) as a percentage of Total Tangible Assets | 10.2 | % | 14.6 | % | 11,1 | % | |||||||||||||
| (1) |
|
| (2) | Tangible shareholders’ equity represents shareholders’ equity minus intangible assets. |
(2) Tangible shareholders’ equity represents shareholders’ equity minus intangible assets.
The table below shows information on the Bank and CCF’s consolidated computable regulatory capital, and minimum capital requirements as of the dates indicated.
| Grupo Supervielle S.A. | |||||||||||||||||||
| As of December 31, (3) | |||||||||||||||||||
|
| As of December 31, |
| 2018 | 2017 | 2016 | |||||||||||||
Total Capital |
| 2017 |
| 2016 |
| 2015 |
| ||||||||||||
Tier 1 Capital |
|
|
|
|
|
|
| ||||||||||||
Paid in share capital common stock |
| 744,386 |
| 638,283 |
| 456,140 |
| 771,965 | 744,386 | 638,283 | |||||||||
Share premiums |
| 4,647,818 |
| 2,058,921 |
| 8,064 |
| 5,481,234 | 4,647,818 | 2,058,921 | |||||||||
Disclosed reserves and retained earnings |
| 3,173,755 |
| 2,248,406 |
| 1,630,958 |
| 4,602,483 | 3,173,755 | 2,248,406 | |||||||||
Non-controlling interests |
| 78,582 |
| 32,743 |
| 14,199 |
| 63,044 | 78,582 | 32,743 | |||||||||
IFRS Adjustments | (472,796 | ) | — | — | |||||||||||||||
100% of results |
| 1,088,388 |
| 531,223 |
| 358,898 |
| 1,133,354 | 1,088,388 | 531,223 | |||||||||
50% of positive results |
| 170,170 |
| 197,063 |
| 129,275 |
| 268,581 | 170,170 | 197,063 | |||||||||
Sub-Total: Gross Tier I Capital |
| 9,903,099 |
| 5,706,639 |
| 2,597,534 |
| 11,847,865 | 9,903,099 | 5,706,639 | |||||||||
Tier 2 Capital | |||||||||||||||||||
General provisions/generalloan-loss reserves 50% | 784,727 | 588,073 | 389,142 | ||||||||||||||||
Subordinated term debt | 379,212 | 325,183 | 389,743 | ||||||||||||||||
Sub-Total: Tier 2 Capital | 1,163,939 | 913,256 | 778,885 | ||||||||||||||||
Deduct: |
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All Intangibles |
| 312,589 |
| 281,112 |
| 249,375 |
| 406,460 | 312,589 | 281,112 | |||||||||
Pending items |
| 40,798 |
| 30,693 |
| 23,488 |
| 96,480 | 40,798 | 30,693 | |||||||||
Other deductions |
| 32,805 |
| 26,866 |
| 18,790 |
| 364,858 | 32,805 | 26,866 | |||||||||
Total Deductions |
| 386,192 |
| 338,671 |
| 291,653 |
| 867,798 | 386,192 | 338,671 | |||||||||
Sub-Total: Tier I Capital |
| 9,516,907 |
| 5,367,968 |
| 2,305,881 |
| ||||||||||||
Tier 2 Capital |
|
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|
|
| ||||||||||||
General provisions/general loan-loss reserves 50% |
| 588,073 |
| 389,142 |
| 221,563 |
| ||||||||||||
Subordinated term debt |
| 325,183 |
| 389,743 |
| 441,116 |
| ||||||||||||
Sub-Total: Tier 2 Capital |
| 913,256 |
| 778,885 |
| 662,679 |
| ||||||||||||
Total Capital |
| 10,430,163 |
| 6,146,853 |
| 2,968,560 |
| 12,144,006 | 10,430,163 | 6,146,853 | |||||||||
Credit Risk weighted assets(1) |
| 60,939,300 |
| 39,678,311 |
| 25,248,691 |
| ||||||||||||
Risk weighted assets(2) |
| 75,301,392 |
| 49,168,958 |
| 34,314,613 |
| ||||||||||||
Credit Risk weighted assets(1) | 79,580,781 | 60,939,300 | 39,678,311 | ||||||||||||||||
Risk weighted assets(2) | 101,933,777 | 75,301,392 | 49,168,958 | ||||||||||||||||
Tier 1 Capital / Credit risk weighted assets | 13.8 | % | 15.6 | % | 13.5 | % | |||||||||||||
Tier 1 Capital / Risk weighted assets |
| 12.6 | % | 10.9 | % | 6.7 | % | 10.8 | % | 12.6 | % | 10.9 | % | ||||||
Regulatory Capital / Credit risk weighted assets | 15.3 | % | 17.1 | % | 15.5 | % | |||||||||||||
Regulatory Capital / Risk weighted assets |
| 13.9 | % | 12.5 | % | 8.7 | % | 11.9 | % | 13.9 | % | 12.5 | % | ||||||
(1) Credit risk weighted assets is calculated by applying the respective credit risk-weights to our assets, following Central Bank regulations. It does not include market risk or operational risk.
(2) Risk weighted assets is calculated by multiplying the operational risk and market risk by 12,5 and adding the credit risk weighted assets.
| (1) | Credit Risk weighted assets is calculated by applying the respective credit risk-weights to our assets, following Central Bank regulations. It does not include market risk or operation al risk. |
| (2) | Risk weighted assets is calculated by multiplying the operational risk and market risk by 12.5 and adding the credit risk weighted assets. |
| (3) | Nominal value without inflation adjustment. |
Capital Expenditures
In the course of our business, our capital expenditures are mainly related to infrastructure and organizational and IT system development. In general terms, our capital expenditures are not significant when compared to our total assets.
We expect that capital expenditures in 2018 will be related to infrastructure, IT systems development and properties. We anticipate to fund such capital expenditures with cash flow from operating activities.
| Item 5.C | Research and Development, patents and licenses, etc. |
Item 5.CResearch and Development, patents and licenses, etc.
Other than our technology program, we do not have any significant policies or projects relating to research and development, and we own no patents or licenses. See “Item 4.B Business Overview—Technology” in our 2016 2018Form 20-F.
Item 5.D
| Item 5.D |
We believe that the macroeconomic environment and the following trends in the Argentine financial system and in our business have affected and will, for the foreseeable future, continue to affect our results of operations and profitability. Our continued success and ability to increase our value to our shareholders will depend upon, among other factors, economic growth in Argentina and the corresponding growth of the market forlong-term private sector lending and access to financial products and services by a larger segment of the population.
The analysis should be read in conjunction with the discussion in “Item 3.D Risk Factors” and taking into consideration that the Argentine economy has been historically volatile, which has negatively affected the volume and growth of several sectors, including the financial system.
Related to Argentina
As regards the international economic scenario, one of the risks is deceleration of world growth. The outlook is not favorable as the world economy is expected to grow in 2019 by 3.5% (revised downwards in January as compared to IMF estimates of October) which would imply a deceleration of the growth estimated for this year. What could mitigate the deceleration of the world growth rate and, mainly of the United States, is the decline in the market expectations with respect to the rise in interest rates by the U.S. Federal Reserve Bank in 2019. As for Brazil, Argentina’s main trade partner, an acceleration is expected in growth of approximately 2.5% (as compared to 1.3% growth in 2018), which will be beneficial, in particular, for those industry-related activities. Finally, the expectations regarding international interest rates, unlike what happened in 2018, could favor emerging bonds in general and those of Argentina in particular.
Economic consulting firms gathered in the Central Bank’s Market Expectations Survey as of March 2019 expect for Argentina negative economic growth rate in 2019 of 1.2% while a null growth is expected for the first quarter(quarter-on-quarter level, deseasonalized). As from the second quarter a positive rate of 1.0% is expected, resuming the growth dynamics.
Likewise, the inflation rate is expected to fall from 47.6% (at the end of the year) to 36.0% (December-Decemberyear-on-year variation). The economic and financial environment going forward in Argentinamonthly average of the Nominal Exchange Rate is expected to be significantly influenced by$50.0, i.e. ayear-on-year depreciation of 32.0%, representing a deceleration as compared to the presidential elections held on November 22, 2015, which resulted in Mr. Mauricio Macri being elected President of Argentina. The Macri administration is expected2018 devaluation.
Nevertheless, we expect the macro environment to adjust longstanding fiscal and monetary policies that have resulted in recurrent public sector deficits, inflation and pervasive foreign exchange controls and limited foreign investment. Sustainable economic growth and improved employmentremain challenging in the short and medium term will depend upon the manner in which the above-mentioned issues are addressed and may develop adversely if the issues are not addressed adequately.
A negative growth performancefirst half of the Brazilian economy (Brazil is Argentina’s main trade partner) may have a negative impact on Argentine exportsyear and then gradually improving. Adding further uncertainty will be the overall level of economic and industrial activity (particularly with respect to the automotive industry). The international financial environment may also resultupcoming Presidential elections in a devaluation of regional currencies and exchange rates, including the Peso, which would likely also cause volatility in Argentina.
Going forward, our ability to maintain positive nominal growth rates will remain a challenge for as long as the current level of foreign exchange controls and restrictions affecting capital flows remain in place.
October.
Related to the Argentine Financial System
We expect thatDuring 2018 the economy was characterized by high inflation and sharp peso inflation and high devaluation. Nevertheless, in this context the financial system liquidity increased due to the increase in deposits well above loans.
Following the aforementioned, in 2019 the macro environment will continue growing, strongly supportedbe further challenged due to the presidential elections and more cautious scenario while the international markets are marked by an increase of savings into bank depositshigh volatility. The recovery is expected to be used for loans toslow, and impacted by the private sector, with positive real interest rates intended to encourage savings over consumption. These greater savings will be used mainly for loans to finance productioncontractionary monetary and this will materially increase investment rates at country level which will allow a sustained long-term growth.
On December 17, 2015, the Central Bank repealed regulations related to interest rate ceilings for personal loans, pledge loans and credit card loans and minimum interest rates on time deposits. As of the date of this annual report, interest rates for personal loans, pledge loans and credit card loans and time deposits may be freely agreed upon
among financial institutions and their customers. For more information, see “Item 4.B Business overview—Argentine Banking Regulation—Liquidity and Solvency Requirements—Interest rate and fee regulations.”
Financial institutions are expected to continue working to improve efficiency and keep administrative expenses under control.
Related to Us
fiscal policy.
We expect the levelrecovery of activitythe financial system by the end of all2019 or beginning of our subsidiaries2020, as the economy starts to reflect any improvementgrow and the inflation goes down in the economic context.context of lower volatility and grater confidence in the local currency.
Related to Us
We intend to maintain prudent financial risk management policies and to continue improving our operating efficiency.
We will pursue increased optimization and diversification of the Bank’s deposit base, in particular by giving priority to new demand savings and deposit accounts. The Bank will also seek to increase loan volumes in the retail banking market by offering innovative products and services tailored to the needs of different socioeconomic and income
segments, in particular high net worth andupper-middle-income individuals, senior citizens, entrepreneurs and small businesses. Our corporate banking will remain focused on SMEs andlarge-sized companies, prioritizing secured lending and maintaining a diversified corporate loan portfolio by continuing to limit exposure to each company.
In 2018 we streamlined our consumer finance business to align it to the new macro environment in Argentina. With these changes, we aim to accelerate the offering of a wide range of consumer products tailored to each target segment, enhance customer experience through digital transformation, and increase cross selling to drive higher efficiency and profitability. Our consumer financing segment will seek to increase loans and credit cards volumes through its main channels, Walmart Argentina and Hipertehuelche. Supervielle Seguros will seek to continue growing and introducing new products.is comprised by CCF, Espacio Cordial is expected to continue offering its productsde Servicios S.A., Tarjeta Automática S.A., and services to more of the Bank’s customers and increasing the number of products and services it offers. car lending business Micro Lending S.A.U.
SAM will seek to continue growing in terms of assets under management and in terms of its funds family.
available funds. IOL specializes in “Online Trading” and its mission is the “Democratization of Financial Services”, based on the following pillars: technology, innovation and scalability.
We will also continue seeking opportunities to further increase our business through acquisitions of banking and insurance assets.
Off-balance Ouroff-balance sheet risk mainly arises from the Bank’s activities. We The table below identifies the principal amounts of our main Amounts due by period(1) Maturity Annual Less than 1 - 3 3 - 5 After Total at (in thousands of Pesos) Deposits 2018-2019 60,796,603 373 — — 60,796,976 Central Bank 2018 6,514 — — — 6,514 International banks and institutions 2,803,801 5,409 — — 2,809,210 Short Term Financial Loans (U.S.$) 2016 2,803,801 5,409 — — 2,809,210 Medium Term Financial Loans (U.S.$) 2017 — — — — — Financing received from Argentine financial institutions 353,416 350,049 207,718 — 911,183 Short Term Financial Loans (Pesos) 2018 27.0% 131,719 — — — 131,719 Long Term Financial Loans (Pesos) 2014-2022 19.0%-27.0% 221,697 350,049 207,718 — 779,464 Unsubordinated corporate bonds 3,010,018 9,913,653 621,265 — 13,544,936 Negotiable Obligation (Pesos) Class XIII 2019 BADLAR + 6,25% — 26,214 — — 26,214 Negotiable Obligation (Pesos) Class VI 2018 BADLAR + 3.5% 534,885 — — — 534,885 Negotiable Obligation (Pesos) Class A 2020 BADLAR + 4.50% 1,323,167 6,754,733 — — 8,077,900 Negotiable Obligation (Pesos) Class B 2019 BADLAR + 3.25% 166,685 795,685 — — 962,370 Negotiable Obligation (Pesos) Class C 2021 BADLAR + 4.25% 181,431 583,276 621,265 — 1,385,972 Negotiable Obligation (Pesos) Class XI 2018 BADLAR + 3.57% 226,747 — — — 226,747 Negotiable Obligation (Pesos) Class XIII 2018 BADLAR + 4.00% 172,005 — — — 172,005 Negotiable Obligation (Pesos) Class XIV 2019 BADLAR + 3.50% 149,265 632,019 — — 781,284 Negotiable Obligation (Pesos) Class XV 2019 BADLAR + 3.75% 111,645 441,641 — — 553,286 Negotiable Obligation (Pesos) Class XVI 2019 BADLAR + 4.25% 144,189 680,085 — — 824,274 Subordinated loan 47,889 518,330 270,253 — 836,473 2017 Fixed 7% 47,889 518,330 270,253 — 836,473 Others 2,911,748 — — — 2,911,748 Total 69,929,990 10,787,814 1,099,236 — 81,817,040 Deposits Liabilities at fair value thorugh profit and loss Derivatives Central Bank International banks and institutions Short-Term Financial Loans (U.S.$) 6,966,198 75,553 7,041,751 Mid-Term Financial Loans (U.S.$) Financing received from Argentine Short-Term Financial Loans (Pesos) 1,153,813 Mid-Term Financial Loans (Pesos) Long-Term Financial Loans (Pesos)Guidelines Towards Conversion to IFRSItem 5.E 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.According to such convergence process, IFRS have been adopted for the fiscal year beginning on January 1, 2018. IFRS transition date pursuant to IFRS 1 “First-time Adoption of IFRS” was scheduled for January 1, 2017.In accordance with our consolidated financial statements as of December 31, 2017, the estimated effect that the conversion to IFRS will have on our reported equity is a decrease of approximately 4.8%. See Note 33 to our consolidated financial statements.The figures shown in that note may be subject to change and may only be considered definitive when audited financial statements for fiscal year 2018 are released.In the normal course of its business, the Bank is a party to financial instruments with off-balance sheet risk which are entered into in order to meet the financing needs of its customers. These instruments expose us to credit risk in addition to the amounts recognized on our consolidated balance sheets. These financial instruments include stand-by letters of credit and guarantees granted.also haveoff-balance sheet commercial commitments arising from our lease agreements for our administrative buildings and offices (including our headquarters), branches, senior citizens dedicated branches, sales and collection centers and storage properties. See “Stand-by Letters of Credit and Guarantees Granted” and “Commitments under Lease Agreements sections” in Item 5.F.5.F to this Annual Report.Item 5.F on-balance sheet contractual obligations, their currency of denomination, remaining maturity and interest rate and the breakdown of payments due, as of December 31, 20172018
Interest Rate
1 year
years
years
5 years
December 31,
2017 Amounts due by period Maturity Annual
Interest Rate Less than
1 year 1 - 3
years 3 - 5
years After
5 years Total at
December 31,
2018 (in thousands of Pesos) 96,801,718 131,515 — — 96,933,233 2019 1.25 - 4 % 1,200,816 — — — 1,200,816 2019 94,222 — — — 94,222 11,225 — — — 11,225 6,966,198 75,553 — — 7,041,751 — — — — —
financial institutions 1,153,813 1,207,687 276,853 — 2,638,353 833 — — 1,154,646 1,206,854 — — 1,206,854 — — 276,853 — 276,853 (1) Reflects penalties payable to the Central Bank in connection with the Bank’s clients’ bounced checks.
| Amounts due by period | ||||||||||||||||||||||||||||
| Maturity | Annual Interest Rate | Less than 1 year | 1- 3 years | 3- 5 years | After 5 years | Total at December 31, 2018 | ||||||||||||||||||||||
| (in thousands of Pesos) | ||||||||||||||||||||||||||||
Unsubordinated corporate bonds | 4,907,434 | 12,245,676 | 2,128,544 | — | 19,281,654 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Negotiable Obligation (Pesos) Class XIII | 2019 | | BADLAR + 6.25 | % |
| 28,023 |
| — | — | — |
| 28,023 |
| |||||||||||||||
Negotiable Obligation (Pesos) Class A | 2020 | | BADLAR + 450 bps | | — | 8,633,915 | — | — | 8,633,915 | |||||||||||||||||||
Negotiable Obligation (Pesos) Class B | 2019 | | BADLAR + 325 bps | | 960,798 | — | — | — | 960,798 | |||||||||||||||||||
Negotiable Obligation (Pesos) Class C | 2021 | | BADLAR + 425 bps | | 354,616 | 1,369,952 | — | — | 1,724,568 | |||||||||||||||||||
Negotiable Obligation (Pesos) Class D | 2019 | | BADLAR + 3.5 | % | 1,042,956 | — | — | — | 1,042,956 | |||||||||||||||||||
Negotiable Obligation (Pesos) Class E | 2023 | | BADLAR + 4.05 | % | 844,025 | 2,226,251 | 2,128,544 | — | 5,198,820 | |||||||||||||||||||
Negotiable Obligation (Pesos) Class XIV | 2019 | | BADLAR + 3.5 | % | 467,244 | — | — | — | 467,244 | |||||||||||||||||||
Negotiable Obligation (Pesos) Class XV | 2019 | | BADLAR + 3.75 | % | 391,873 | — | — | — | 391,873 | |||||||||||||||||||
Negotiable Obligation (Pesos) Class XVI | 2019 | | TM20 + 4.25 | % | 782,341 | — | — | — | 782,341 | |||||||||||||||||||
Negotiable Obligation Class II | 2019 | | BADLAR + 5 | % | 20,004 | — | — | — | 20,004 | |||||||||||||||||||
Negotiable Obligation Class III | 2020 | | BADLAR + 7 | % | 15,554 | 15,558 | — | — | 31,112 | |||||||||||||||||||
Subordinated corporate bonds | 96,441 | 1,491,642 | — | — | 1,588,083 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Subordinated negotiable obligations – Class III and IV | 2020-2021 | 7.0 | % |
| 96,441 |
|
| 1,491,642 |
| — | — | 1,588,083 | ||||||||||||||||
Others | 4,026,335 | 234,330 | 3,014 | 4,263,679 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total | 115,258,202 | 15,386,403 | 2,408,411 | — | 133,053,016 | |||||||||||||||||||||||
Stand-by Letters of Credit and Guarantees Granted
Stand-by letters of credit and guarantees granted are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Guarantees granted are surety guarantees in connection with transactions between two parties.
We use the same credit policies in issuing stand-by letters of credit and making guarantees as we do for granting loans. In the opinion of our management, our outstanding commitments do not represent unusual credit risk.
The contractual amount of these instruments represents the maximum possible credit risk should the counterparty draw down the commitment or we fulfill our obligation under the guarantee, and the counterparty subsequently fails to perform according to the terms of the contract. Most of these commitments and guarantees expire without the counterparty drawing on the credit line or a default occurring or without being drawn. As a result, the total contractual amount of these instruments does not represent our future credit exposure or funding requirements. Further, certain commitments, primarily related to consumer financing are cancelable, upon notice, at our option.
The following table sets forth the maximum potential amount of future payments under stand-by letters of credit and financial guarantees.
|
| Amounts Due by Period |
| ||||||||
|
| Less than |
| 1-3 |
| 3-5 |
| After 5 |
| Total at |
|
|
| (in thousands of Pesos) |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Guarantees |
| 326,314 |
| 749,338 |
| 676 |
| 330,944 |
| 1,407,272 |
|
Stand-by letters of credit and acceptances |
| 172,988 |
| — |
| — |
| — |
| 172,988 |
|
Total Off Balance Sheet |
| 499,302 |
| 749,338 |
| 676 |
| 330,944 |
| 1,580,260 |
|
Commitments under Lease Agreements
Our commitments under our lease agreements are mainly rental payments. We can terminate lease agreements at any time at low or no cost at our option.
The following table sets forth the maximum potential amount of future payments under our lease agreements.
|
| Amounts Due by Period |
| Amounts Due by Period | |||||||||||||||||||||||||||
|
| Less than |
| 1-3 |
| 3-5 |
| After 5 |
| Total As |
| Less than 1 Year | 1-3 Years | 3-5 Years | After 5 Years | Total As December 31, 2018 | |||||||||||||||
|
| (in thousands of Pesos) |
| (in thousands of Pesos) | |||||||||||||||||||||||||||
Lease commitments |
| 225,024 |
| 354,493 |
| 98,370 |
| 45,620 |
| 723,507 |
| 446,403 | 491,318 | 176,206 | 77,008 | 1,190,935 | |||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||
Total commercial commitments |
| 225,024 |
| 354,493 |
| 98,370 |
| 45,620 |
| 723,507 |
| 446,403 | 491,318 | 176,206 | 77,008 | 1,190,935 | |||||||||||||||
| Item 5.G |
See the discussion at the beginning of this annual report under the heading “Forward-Looking Statements” for forward-looking statement safe harbor provisions.
| Item 6. | Directors, Senior Management and Employees |
Item 6.Directors, Senior Management and Employees
Board of Directors
According to our bylaws, our Board of Directors may be composed of a minimum of three and a maximum of nine directors, and the shareholders may also appoint an equal or lesser number of alternate directors. As of the date of this annual report, our Board of Directors is composed of eight directors. There are no alternate directors. All of our directors reside in Argentina.Argentina, with the exception of Hugo Enrique Santiago Basso, who resides in the United States of America.
Directors and their alternates, if any, are appointed for a term of two years by our shareholders during the annual ordinary shareholders’ meeting. Directors may be reelected. Alternate directors replace directors in the order in which they were elected. Our Board of Directors is currently composed of eight members, half of whom are elected annually in staggered elections. Pursuant to section 257 of the Argentine Corporate Law,AGCL, the directors maintain their positions until the following annual ordinary shareholders’ meeting where directors are appointed. See “Description of Bylaws and Capital Stock—Election of Directors.”
The latest election relating to our Board of Directors took place at the ordinary and extraordinary shareholders’ meeting held on April 24, 2018,26, 2019, in accordance with Article Nine9 of our bylaws as amended at the extraordinary shareholders’ meeting held on October 7, 2015, and as described in “Description of Bylaws and Capital Stock—Election of Directors.” The amendment to Article Nine of our bylaws was approved by means of Resolution No.18,024 of the CNV, and registered with the IGJ on July 5, 2016.
bylaws.
During the first meeting after directors have been appointed, they must appoint a chairman andvice-chairman of the board, or, if considered appropriate, a first vice-chairman and a second vice-chairman. Thevice-chairman, or, if applicable, the first vice-chairman, would automatically replace the chairman in the event that the chairman is absent, resigns, deceases or faces any other impediment to serve as chairman, and the second vice-chairman, if applicable, would replace the first vice-chairman. In the absence of any of these directors or chairmen, the Board of Directors may appoint who will serve as chairman or chairmen. The chairman of the board may cast two votes in the case of a tie. These provisions were incorporated by amendment to Article Nine of our bylaws and approved at our ordinary and extraordinary shareholders’ meeting held on April 19, 2016.
The Board of Directors functions and acts upon the majority vote of its members present at its meetings either physically or via any form of audio and visual simultaneous communication.
The following table sets forth the composition of our Board of Directors as of the date of this annual report:April 26, 2019:
Name | Title |
| Date of first appointment to Board(1) | Date of expiration of |
|
| Date of Birth | |||||
Julio Patricio Supervielle | Chairman of the Board | June 9, | December 31, |
| December 13, 1956 | |||||||
Jorge Oscar Ramírez | First Vice-Chairman of the Board | April 15, 2011 | December 31, |
| June 26, 1961 | |||||||
Emérico Alejandro Stengel | Second Vice-Chairman of the Board | July 13, 2010 | December 31, 2019 |
| December 17, 1962 | |||||||
| Director |
|
|
|
| |||||||
Atilio Dell’Oro Maini | Director | September 28, 2011 | December 31, |
| February 13, 1956 | |||||||
| Director | April | December 31, |
|
| |||||||
| Director |
| December 31, |
|
| |||||||
| Director | April | December 31, |
| ||||||||
| Hugo Enrique Santiago Basso |
| April 26, 2019 | December 31, 2020 | December 3, 1979 |
| (1) |
|
| (2) | Julio Patricio Supervielle held positions within the Board since March 21, 2000, but as of 2008 has served on our board continuously. |
| (3) | Notwithstanding the expiration date stated above, pursuant to section 257 of the AGCL, the directors maintain their positions until the following annual ordinary shareholders’ meeting where directors are appointed. |
There are no family relationships between the abovementioned current members of our Board of Directors.
Directors, except for Julio Patricio Supervielle and Hugo Enrique Santiago Basso (uncle and nephew).
The following are academic and professional backgrounds of the members of the board. The business address of each of the members of the Board is Bartolomé Mitre 434, 5th5th floor, Buenos Aires, Argentina.
Julio Patricio Supervielle receivedholds a degree in Business Administration, graduated from Universidad Católica Argentina and holds a master’sMaster’s degree from The Wharton School of the University of Pennsylvania. He attended the Global CEO Program organized by Wharton, IESE and CEIBS. He joined the family businessExprinter-Banex Financial Group in the year 1986 where he held severalvarious positions atin Banco Banex S.A., including:including General Manager, Director and Chairman.Chairman of the Board. He has led Grupo Supervielle for more than 16 years. During his term of office, Grupo Supervielle registered a significant growth in terms of net worth, assets, deposits and in its network, successfully completed some of its most significant acquisitions and launched its initial public offering (2016) that have been listed since with the New York Stock Exchange and the Buenos Aires Stock Exchange. He currently serves as Chief Executive Officer of Grupo Supervielle; Chairman of the Boards of Directors of Grupo Supervielle S.A., Banco Supervielle CCFS.A., Cordial Compañía Financiera S.A., Tarjeta Automática S.A., InvertirOnline S.A.U. and Tarjeta.InvertirOnline.com Argentina S.A.U. He has been awarded by Endeavor Argentina as Outstanding Entrepreneur of 2017 in recognition of those who undertake investing for the development of the country.
Jorge Oscar Ramírez is a certified public accountant, with a degree from the Universidad de Buenos Aires. He also holds an Executive Management Program degree (PADE) from ESE, the Business School of the Universidad de Los Andes, in Santiago, Chile. From 1981 to 1985, he worked in the International Capital Markets division of Banco Nacional de Desarrollo in Argentina (National Development Bank). He subsequently joined the First National Bank of Boston (later BankBoston) where he served as a lending officer and team leader in the Corporate Banking Division (1985 1989), then as an Investment Banking Officer, Senior Investment Banker and Managing Director of Boston Investment Group (BIGSA), the investment banking arm of First National Bank of Boston (1989 1995). From 1995 to 1997 he served as the Country Manager for First National Bank of Boston in Uruguay, and at the end of 1997, he served in the same capacity in Chile. In late 2000, he assumed regional responsibilities as Regional President for the Andean Region which included Chile, Peru, Colombia and Panama. In 2003, he returned to Argentina as CEO of BankBoston. In 2004, he assumed Regional responsibilities as Regional President for Argentina and Uruguay. Mr. Ramirez left BankBoston in December 2005 after the announcement of its sale to Standard Bank of South Africa. From May 2006 to January 2011, he was a partner of Prisma Investment S.A., a financial advisory firm in Argentina. He served on the Board of Directors of Alpargatas SAIC, the Argentine subsidiary of Alpargatas Brazil; of ALICO, the life insurance subsidiary in Argentina of AIG, later sold to Metlife,
and of Sigdopack Argentina, a subsidiary of the Chilean Sigdo Koppers Group. He is also a founding partner of Fondos Online (fol.cl), an online brokerage house in Chile founded in 2009. He is currently First Vice-ChairmanVice Chairman and CEO of the Boards of DirectorsGrupo Supervielle S.A., CEO of Banco Supervielle and Grupo Supervielle,S.A., Chairman of the Board of Directors of Supervielle Seguros Vice-Chairman of the Board of DirectorsS.A., Vice Chairman of Espacio Cordial de Servicios S.A., Second Vice Chairman of Cordial Compañía Financiera S.A., Director of Tarjeta Automática S.A., Vice Chairman of Micro Lending S.A.U., InvertirOnline S.A.U. and a member of the Board of Directors of CCF.
InvertirOnline.com Argentina S.A.U.
EméEmérico Alejandro Stengelobtained his degree in industrial engineering is an Industrial Engineer from Universidad de Buenos Aires and holds an MBA from The Wharton School of the University of Pennsylvania. He served as corporate banking officerworked in Corporate Banking at Citibank and Banco Santander. Subsequently,Later he became Partner of Booz Allen Hamilton, a global management consultancy,consulting firm where he worked with multinacionalmultinational and large corporations locally, in Latin America, the United States and Europe on strategy, corporate governance, organizationStrategy, Governance, Organization and operations.Operations. He led several strategic integration and operations enhancement projects in the financial services industry. LaterFinancial Services. Subsequently he was appointed CEO of Los Grobo Agropecuaria, a leading Mercosur agribusiness company that won the National Quality Award under his office. In 2010 heAward. He joined the Board of Directors of Grupo Supervielle and currently serves as Second Vice-Chairman of Grupo Supervielle and the Bank; Chairman of Sofital S.A.F. e I.I. and Espacio Cordial, First Vice-Chairman of CCF and Vice-Chairman of Supervielle Seguros and Tarjeta.
Laurence Nicole Mengin de Loyer graduated from McGill University in Canada with an undergraduate degree in Business Administration and a master’s degree in Business Administration. She started her career in New York City at the Mergers and Aquisitions Division for Banque Nationale de Paris. Afterwards, in Paris, she joined the Apparel Division of Sara Lee Corporation, where she held a number of financial positions in different business units including Financial Analyst, Financial Controller, Chief Financial Officer and European Controller. When Sara Lee Corporation sold its European Apparel Division in 2006, she served as Group Controller of the newly created stand-alone business with responsibilities in the reorganization, financial control, definition and implementation of exit strategies for the private equity fund. In 2008, as a result of her move to Argentina, she volunteered as Vice-President and Treasurer of a not-for-profit organization dedicated to integrating newly-arrived foreigners to Argentina. In 2009, she joined Banco Supervielle S.A. as Deputy Manager of the Administration Department until her nomination to the Board of Grupo Supervielle in March 2010. She currently2010 and serves ason the boards of its Consumer Finance and Insurance vehicles. Currently he is COO of Banco Supervielle where his responsibilities include Personal & Business Banking, Corporate Banking and Digital Transformation. He is also a Directormember of Grupo Supervielle.
Supervielle’s Executive, Risk Management and IT Committees.
AtilioAtilio Dell-Oro Maini is a lawyer, with degreesa Bachelor in Political Science and a Bachelor in Agricultural Production. In 1984, he joined the law firm Cárdenas, Cassagne & Asociados, andwhere he was made Partnerappointed partner in 1990. He worked in New York City as a Foreign Associateforeign associate at the law firm White & Case in 1987 and at Simpson Thatcher & Bartlett from 1988-1989.1988 to 1989. In 1997, he worked at the London-based global law firm Linklaters & Paines.Paines, a global firm based in London. He also completed the Instruction Program of Instruction for Lawyers by the School of Law at Harvard Law School.University. In 2003 he joined the law firm Cabanellas • Etchebarne • Kelly as a Senior Partner ofsenior partner for the Banking and Capital Markets divisions.departments. He has extensive experience advising banks and other financial entities, corporationscompanies and governments with respect toin all types of international and domestic banking and financial transactions.operations, both local and international. He iswas also a Professor atprofessor of the Master’s in Business Law program at Universidad de San Andrés, as well ass. He is a member of the Bar Association of the cityAutonomous City of Buenos Aires. AsTo date, he is Director of Grupo Supervielle S.A., Banco Supervielle S.A., Cordial Compañía Financiera S.A., Espacio Cordial de Servicios S.A., Tarjeta Automática S.A., InvertirOnline S.A.U. and InvertirOnline.com Argentina S.A.U. and Vice Chairman of Sofital S.A.F. and I.I.
Eduardo Braun is an Industrial Engineer graduated from Universidad de Buenos Aires, where he won the Bunge & Born scholarship for his academic excellence and holds an MBA with an emphasis in Finance and Marketing from The Wharton School, University of Pennsylvania, 1990. He is an international lecturer in Leadership and Innovation, a business consultant and the author of ‘People First: Chief Emotions Officers’. He taught in programs at UC Berkeley, as a special guest at prestigious institutions such as IMD, Babson College, Yale School of Management and lectures in various academic and business forums in Singapore, Dubai, Germany, the United States and other countries. He was a professor at Universidad Católica Argentina and is an expert in leadership at Universidad de San Andrés. Since January 2016 he has been director of Aeropuertos Argentina 2000 appointed by the Argentine Government. He was director of the dateHSM Group between 1999 and 2011, in charge of this annual report, he serves asthe Global Relations Direction with the Speakers. He is a member of the BoardsBoard of Directors of Banco Supervielle, Grupo Superviellemultinational companies such as: Cuvelier Los Andes (French wines) and Tarjeta,Aislantes Celulósicos (building materials). Sincemid-2018 he is responsible for creating and Vice-Chairmanconducting the Advisory Council for the Design of the BoardsInnovation Park of Directorsthe City of Sofital, CCFBuenos Aires. Previously he was a founding partner of MIG, a management consultancy firm specialized in strategies and Espacio Cordial.
Richard Guy Gluzman receivedbusiness development. His experience as a degreemanagement consultant began with Booz Allen & Hamilton at the Paris offices in Law from Nanterre University in Paris and a master’s degree in Business Administration from the ESSEC University in Paris. From 1978 to 1995,1990, where he worked in France holdingon various managerial positionsprojects for Europe, Brazil and Argentina, where he combined his experience as a consultant with that of executive positions. He participates or has participated in several technological companies (Burroughs S.A.NGOs such as the Clinton Global Initiative, of which he was a member for 5 years, EMA (Multiple Sclerosis Argentina), Digital Equipment Corporation, Wang S.A. and JBA S.A.). His career in Argentina started in 1995, when he joined Coming S.A. (France Telecom & Perez Companc Group) as General Manager until 1997. From 1997 through 1999, he served asis a member of Globalstarthe Council of ICANA (Argentine Cultural Institute of North America) and President of the G25 Foundation.
Victoria Premrou holds degrees in Accountancy and Business Administration, graduated from Universidad Católica Argentina and holds a Master’s Degree in Corporate Finance from Universidad del CEMA. Between 1995 and 1997 she worked at Fitch-Ibca in the analysis and risk rating of companies and debt instruments in different sectors, being a member of the Risk Rating Committee of Fitch. Between 1997 and 1999 she worked at Hermes Management Consulting, performing valuation tasks and consultancy in strategy and organization for the Exxel Group (retail, mass consumption, among others). In 1999 she joined Infupa S.A.’s Board to provide advice on mergers and acquisitions for clients in the mass consumption, wine, refrigeration, textile and financial services industries, among others. Since 2018, she has been an advisor on analysis and evaluation of Directors. From 1998 through 2000,investment projects for Grupo La Nación.
Ricardo Enrique De Lellis holds degrees in Accountancy and Business Administration graduated from Universidad de Buenos Aires. Between 1977 and 1982 he worked at Price Waterhouse as a specialized auditor in financial institutions. In 1982 he joined KPMG in Argentina, where he worked until 2018 as a specialized auditor in financial institutions, Audit Manager, Audit Partner, Partner in charge of Financial Services and Partner in charge of the Audit Department, until reaching the position of Partner Executive Director, from 2014 to 2018. He has acted as auditor in various positions for different financial institutions of the country, local, international, state-owned and provincial, as well as a consultant in various consulting tasks. He was also the partner in charge of the audit of the Central Bank of Argentina (periods 1999-2002 and 2008-2010) and the partner responsible for the audit of the Central Bank of Uruguay (2014-2017). He is a former professor at the helmSchools of Diveo Broadband Networks S.A.Economics of Universidad de Buenos Aires (1986-1994) and Universidad de Belgrano (1982-1995). He is a former researcher of the CECYT (FACPCE – Argentine Federation of Professional Councils in Economic Sciences), author andco-author of reports issued by this body in the area of audit (1983-1985) and a former member of CENCYA (Council for the Issue of Accounting and Audit Standards – FACPCE) (2011-2013). He is a member of the Drafting Commission of the regulation related to the performance of the External Auditor and Syndic for the prevention of money laundering at the Professional Council of Economic Sciences of the Autonomous City of Buenos Aires. Between 2010 and 2012 he worked as General Managertechnical advisor in the IAASB (International Auditing and then, from 2000 to 2006, heAssurance Standards Board). He was a Director of Pegasus Capital, a private equity fund. As of the date of this annual report, he serves as Independent Director of Grupo Supervielle. In previous years he served as First Vice-Chairman of the boards of directors of the Bank, CCF and as Vice-Chairmanmember of the Board of Directors of Tarjeta, SofitalIDEA (Institute for Business Development of Argentina) between 2014 and Viñ2018. He has been a member of the Consultancy Council of FIEL since 2014 to date. He is a lecturer in areas of his specialty, as del Monte.
well as for the financial system and is the author of several papers published in newspapers and specialized magazines.
María Gabriela MacagniHugo Enrique Santiago Basso is an Industrial Engineer graduated with a degree in chemical engineering from Instituto Tecnológico de Buenos Aires (ITBA) and received postgraduate specializationholds an MBA from The Wharton School of Business, University of Pennsylvania. He began his career at Banco Banex in business management at Harvard Business School and Stanford Business School. She began her2004, where he successfully managed the merger project with Société Générale Argentina. In 2007 he led the startup of the ‘Cordial Negocios’ unit, with a focus on microfinancing. Then, he continued his career asin the consultancy area working for Mars & Co., with responsibilities in competitive strategy for CPG multinationals. For the last five years, he has been residing in California, United States of America, having developed a consultant for Accenture. Subsequently, she joined Citibank Argentina where she worked as an Investment Banking officer and was responsiblesuccessful career in the financial area for the structuringwine industry inhigh-end brands. After working for Treasury Wine Estates, he joined E&J Gallo, currently overseeing a portfolio of both local and international debt issue transactions. Beginning in 2002, she led the Corporate Bank Restructuring Unit. Afterwards, she joined the Board of Citibank Argentina, supervising Strategic Planning and Business Development areas. Since late 2011, she has served as a Director of Endeavor Argentina, an organization supporting high impact entrepreneurs in scaling their businesses, both in Argentina and globally. She is also a member of the Graduate Council at ITBA. In 2015, she was appointed Director of Grupo Supervielle.
Jorge Luis Mocetti graduated as a lawyer from Universidad de Buenos Aires’ Law School. He also attended the Executive Human Recources Program organized by Stephen Ross School at Michigan University (Ann Arbor) and other Executive Programs at Duke University and Ashridge UK. He held Senior business and Human Rescources positions at The Nielsen Company, both in Latin America and Europe, as Country Manager, Senior Vice-President and Director. He also held director positions at Scotiabank and Telecom Argentina.ten luxury wineries. He is a memberdirector of the Executive Committee of Axion Energy. He is a lecturer for postgraduate courses at UniversidadEspacio Cordial de San Andrés. He currently serves as a Director of Grupo Supervielle S.A
Servicios S.A.
Duties and Liabilities of Directors
Directors have the obligation to perform their duties with the loyalty and the diligence of a prudent business person. Under Section 274 of the Argentine Corporate Law,AGCL, directors are jointly and severally liable to the company, the shareholders and third parties for the improper performance of their duties, for breaching any law or the bylaws or regulations, if any, and for any damage to these parties caused by fraud, abuse of authority or gross negligence. The following are considered integral to a director’s duty of loyalty: (i) the prohibition on using corporate assets and confidential information for private purposes; (ii) the prohibition on taking advantage, or allowing another to take advantage, by action or omission, of the business opportunities of the company; (iii) the obligation to exercise board powers only for the purposes for which the law, the corporation’s bylaws or the shareholders’ or the Board of Directors’ resolutions were intended; and (iv) the obligation to take strict care so that acts of the board do not go, directly or indirectly, against the company’s interests. A director must inform the Board of Directors and the supervisory committee of any conflicting interest he or she may have in a proposed transaction and must abstain from voting thereon.
In general, a director will not be held liable for a decision of the Board of Directors, even if that director participated in the decision or had knowledge of the decision, if (i) there is written evidence of the director’s opposition to the decision and (ii) the director notifies the Supervisory Committee of that opposition. However, both conditions must be satisfied before the liability of the director is claimed before the Board of Directors, the supervisory committee or the shareholders or relevant authority or the commercial courts.
Section 271 of the Argentine Corporate LawAGCL allows directors to enter into agreements with the company that relate to such director’s activity and under arms’ length conditions. Agreements that do not satisfy any of the foregoing conditions must have prior approval of the Board of Directors (or the supervisory committee in the absence of board quorum), and must be notified to the shareholders at a shareholders’ meeting. If the shareholders reject the agreement, the directors or the members of the supervisory committee, as the case may be, shall be jointly and severally liable for any damages to the company that may result from such agreement. Agreements that do not
satisfy the conditions described above and are rejected by the shareholders are null and void, without prejudice to the liability of the directors or members of the supervisory committee for any damages to the company.
The acts or agreements that a company enters into with a related party involving a relevant amount shall fulfill the requirements set forth in Section 72 and 73 of Law No. 26,831.the Argentine Capital Markets Law. Under Section 72, the directors and syndics (as well as their ascendants, descendants, spouses, brothers or sisters and the companies in which any of such persons may have a direct or indirect ownership interest) are deemed to be a related party. A relevant amount is considered to be an amount which exceeds 1% of the net worth of the company as per the latest balance sheet. The Board of Directors or any of its members shall require from the audit committee a report stating if the terms of the transaction may be reasonably considered adequate in relation to normal market conditions. The company may resolve with the report of two independent evaluating firms that shall have informed about the same matter and about the other terms of the transaction. The Board of Directors shall make available to the shareholders the report of the audit committee or of the independent evaluating firms, as the case may be, at the main office on the business day after the board’s resolution was adopted and shall communicate such fact to the shareholders of the company in the respective market bulletin. The vote of each director shall be stated in the minutes of the Board of Directors approving the transaction. The transaction shall be submitted to the approval of the shareholders of the company when the audit committee or both evaluating firms have not considered the terms of the transaction to be reasonably adequate in relation to normal market conditions. In the case where a shareholder demands compensation for damages caused by a breach of Section 73, the burden of proof shall be placed on the defendant to prove that the act or agreement was in accordance to the market conditions or that the transaction did not cause any damage to the company. The transfer of the burden of proof shall not be applicable when the transaction has been approved by the Board of Directors with the favorable opinion of the audit committee or the two evaluating firms or if the transaction has been approved by the ordinary shareholders’ meeting without the decisive vote of the shareholder in respect of which the condition of a related party is met or has an interest in the act or contract at issue.
Causes of action may be initiated against directors if so decided at a meeting of the shareholders. If a cause of action has not been initiated within three months of a shareholders’ resolution approving its initiation, any shareholder may start the action on behalf and on the company’s account. A cause of action against the directors may be also initiated by shareholders who object to the approval of the performance of such directors if such shareholders represent, individually or in the aggregate, at least 5% of the company’s capital stock.
Except in the event of a mandatory liquidation or bankruptcy, shareholder approval of a director’s performance, or express waiver or settlement approved by the shareholders’ meeting, terminates any liability of a directorvis-à-vis the company, provided that shareholders representing at least 5% of the company’s capital stock do not object and provided further that such liability does not result from a breach of law or the company’s bylaws.
Under Argentine law, the Board of Directors is in charge of the company’s management and administration and, therefore, makes any and all decisions in connection therewith, as well as those decisions expressly provided for in the Argentine Corporate Law,AGCL, the company’s bylaws and other applicable regulations. Furthermore, the board is generally responsible for the execution of the resolutions passed in shareholders’ meetings and for the performance of any particular task expressly delegated by the shareholders.
Meetings, Quorum, Majorities
Our Board of Directors must hold a minimum of one regularly scheduled meeting every three months. Meetings must also be convened when called by any member of the Board of Directors. The quorum for a Board of Directors’ meeting is the majority of its members. The Board of Directors will pass resolutions by the affirmative vote of the majority of members present. Pursuant to our bylaws our directors may participate in a meeting of the Board of Directors by means of a communication system that provides for a simultaneous transmission of sound, images and words. If we make a public offer of our stock, directors participating by such means count for quorum purposes and the board will pass resolutions by the affirmative vote of the majority of members present either physically or by means of such communication system.
Incentive-based Retirement Plan for Senior Management and Directors
In December 2016, Grupo Supervielle approved an incentive-based retirement plan, which replaced certain existing compensation mechanisms. Members of our senior management and Board of Directors will bewere entitled to receive cash payments over time under the plan if certain performance targets arewere met. 50% of the funds contributed by us to the plan will bewere released to individual plan accounts once the performance targets have beenwere met, subject to compliance with waiting periods mandated by Argentine legislation. The remaining 50% will vestwas vested after an additional twelve-month waiting period. We willinitially agreed to monitor the eligibility and participation of the members as the program developswould develop and expectexpected to contribute approximately U.S.$3.6 million per year to the program. The program was approved for aone-year period and can be cancelled or renewed every year.
The initial period. During 2018, the program covered up to 70 members of Supervielle’s senior management team and Board of Directors. In 2018, this program was renewed for another one-year period. The program currently covers up to 90 members of our senior management and Board of Directors.
did not take place.
Independence Criteria of Directors
In accordance with the provisions of Section 4, Chapter I, Title XII “Transparencia en el Ámbito de la Oferta Pública” and Section 11, Chapter III, Title II II““Órganos de Administración y Fiscalización, Auditoría Externa” of the CNV Rules, we are required to report to the shareholders’ meeting, prior to vote the appointment of any director, the status of such director as either “independent” or “non-independent.“non-independent.”
The members of the Board of Directors and the supervisory committee of companies admitted to the public offering regime in Argentina must inform the CNV within ten (10) business days from the date of their appointment whether such members of the Board of Directors or the supervisory committee are “independent” pursuant to CNV standards.
Pursuant to CNV Rules, a director is not considered independent in certain situations, including where a director:
(1) is a member of the board of the parent company or another company belonging to the same economic group of the issuer through a preexisting relationship at the time of his or her election, or if said relationship had ceased to exist during the previous three years;
(2) is or has been associated with the company or any of its shareholders having a direct or indirect “significant participation” on the same, or with corporations with which also the shareholders also have a direct or indirect “signification participation”; or if he or she was associated with them through an employment relationship during the last three years;
(3) has any professional relationship or is a member of a corporation that maintains frequent professional relationships of significant nature and volume, or receives remuneration or fees (other than the one received in consideration of his performance as a director) from the company or its shareholders having a direct or indirect “significant participation” on the same, or with corporations in which the shareholders also have a direct or indirect “significant participation.” At present,This prohibition includes professional relationships and affiliations during the last three years prior to his or her appointment as director;
(4) directly or indirectly owns 5% or more of shares with voting rights and/or a capital stock of the company or any company with a “significant participation” in it;
(5) directly or indirectly sells and/or provides goods and/or services (different from those accounted for in section c)) on a regular basis and of a significant nature and volume to the company or to its shareholders with direct or indirect “significant participation”, for higher amounts than his or her remuneration as a member of the board of directors. This prohibition includes business relationships that have been carried out during the last three years prior to his or her appointment as director;
(6) has been a director, manager, administrator or principal executive ofnot-for-profit organizations that have received funds, for amounts greater than those described in section I) of article 12 of Resolution No. 30/2011 of the UIF and its amendments, from the company, its parent company and other companies of the same group of which it is a part, as well as of the principal executives of any of them;
(7) 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 consideration set forth in section e);
(8) has served as director at the company, its parent company or another company belonging to the same economic group for more than ten years. If said relationship had ceased to exist during the previous three years, the independent condition will be recovered;
(9) is the spouse or legally recognized partner, relative up to the third level of consanguinity or up to the second level of affinity of persons who, if they were members of the board of directors, would not be independent, according to the above listed criteria.
Pursuant to the CNV Rules, a director who, after his or her appointment, falls into any of the circumstances indicted above, must immediately report to the issuer, which must inform the CNV and the authorized markets where it lists its negotiable securities immediately upon the occurrence of the event or upon the instance becoming known. In all cases, the references made to “significant participation” set forth in the aforementioned independence criteria will be considered as referring to those individuals who hold shares representing at least 5% of the capital stock and or the vote, or a smaller amount when they have the right to elect one or more directors by share class or have other shareholders agreements relating to the government and administration of the company or of its parent company; while those relating to the “economic group” correspond to the definition contained in section e) subsection 3, chapter V, Title II of the CNV Rules.
The independent directors will cease to be independent after 10 years of holding its position of directors, and will be restored with its status of independent three years after leaving office.
The Argentine independence standards under the CNV Rules differ in many ways from U.S. federal securities law and NYSE standards.
Additionally, the Buenos Aires Professional Council of Economic Sciences (Consejo Profesional de Ciencias Económicas de la Ciudad de Buenos Aires or “CPCECABA”) also established certain requirements regarding the independence of public accountants which act as members of the supervisory committee. Pursuant to regulations issued by the CPCECABA and the CNV, syndics must be independent from the company they are auditing. A syndic will not be independent if he/she:
| (i) | is the owner, partner, director, administrator, manager or employee of the company or economically related entities; |
| (ii) | is the spouse or relative (collateral until fourth grade), or relatives by affinity until second grade, of one of the owners, partners, directors, administrators or managers; |
| (iii) | is a shareholder, debtor, creditor or guarantor of the company or economically related entities, representing a significant amount if compared with its own wealth or the company’s net equity; |
| (iv) | possesses a significant amount of interest in the company or economically related entities (or if it has had such interest during the period to be audited); |
| (v) | if the remuneration depends on or is contingent with the conclusions or results of its auditing work; |
| (vi) | if the remuneration agreed depends on the result of the operations of the company. |
Currently, Julio Patricio Supervielle, Jorge Oscar Ramirez, Atilio Dell’Oro Maini, and Emérico Alejandro Stengel and Hugo Enrique Santiago Basso arenon-independent, whereas Richard Guy Gluzman, Laurence Nicole Mengin de Loyer, María Gabriela MacagniEduardo Braun, Victoria Premrou and Jorge MocettiRicardo Enrique De Lellis are independent members of our board according to the criteria established by the CNV. See “See“Audit Committee” for further details about independence requirements of the members of our Audit Committee.
Corporate Governance
We have adopted a Corporate Governance Code to put into effect corporate governance best practices, which are based on strict standards regarding transparency, efficiency, ethics, investor protection and equal treatment of investors. The Corporate Governance Code follows the guidelines established by the CNV and the Central Bank. We have also adopted a Code of Ethics and an Internal Conduct Code, each designed to establish guidelines with respect to professional conduct, morals and employee performance.
Officers
Our management is comprised of our CEO, Julio Patricio Supervielle,Jorge Oscar Ramirez, who reports to the Board of Directors, our Chief Operating Officer (“COO”), José Luis Panero, who isand in charge of ensuring that the different companies in the group function in a coordinated manner, with synergy and efficiency, applying the strategic guidelines defined for each business unit, and our chief financial officer (“CFO”), Alejandra Naughton, who is in charge of the financial and accounting division. Both report to the CEO. Alsodivision, our Chief of Legal Affairs and AML, Sergio Gabai, our Chief Credit Officer, Pablo Di Salvo, who is in charge of our global credit division, and our Chief of Human Resources, Santiago Batlle,Batlle. Our Chief Risk Officer (“CRO”), Javier Conigliaro reports to our Chief of ITCEO and Operations, Marcelo Vivanco and our Chief of Central Services & Supply Management, Claudia Andretto all of them reporting to the COO,
Risk Management Committee. Our Compliance Officer, Moira Almar, reports to our CEO and to the Ethics, Compliance and Corporate Governance Committee. For further information about the composition of our Board of Directors and Management, please see “Item 4.A.—Recent Developments” and “Item 8.B.—Significant Changes.”
Also reporting to the Board of Directors are the CRO, Javier Conigliaro, andis the Internal Audit Manager, Leandro Conti.Sergio Gustavo Vázquez.
Name | Office |
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| Date of Birth | ||||
| Chief Executive Officer | Business Administration |
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Alejandra Naughton | Chief Financial Officer | Economics | September 22, 1962 | |||||
Sergio Gabai | Chief of Legal Affairs and AML | Lawyer | April 26, 1967 | |||||
Javier Conigliaro | Chief Risk Officer | Economist | November 16, 1964 |
Pablo Di Salvo | Chief Credit Officer | Business Administration | June 19, 1964 | |||
Santiago Batlle | Chief of Human Resources | Lawyer | April 16, 1973 | |||
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The CEO has five main responsibilities: (i) creating value for shareholders by monitoring the business units, (ii) bringing innovation to the provision of financial services, (iii) making sure that we deliver high quality and cost competitive services, (iv) leveraging key resources to provide support for the business units and (v) planning and executing acquisitions and alliances that fit into the corporate strategy.
The COO of Grupo Supervielle reports to the CEO and Chairman of Grupo Supervielle. His main responsibility is to ensure sustainable results in each of the companies of Grupo Supervielle as well as synergies and efficiencies inside the company. He is responsible for encouraging and coaching the CEO’s of each of our companies in order to pursue each of the strategic and business plans. As part of his role, the COO is responsible for the coordination of the different group support functions in order to guarantee not only cost efficiency but also alignment to group strategy.
The CFO directs and oversees the finance, controlling, accounting and investor relations divisions. The finance division is responsible for capital planning and funding strategies. The controlling division is responsible for continuous evaluations ofshort-term andlong-term strategic financial objectives, preparing financial trends analyses and analyses of forecasts, budgets and costs. The accounting division monitors compliance with generally accepted accounting principles and applicable federal, state and local regulations and laws, and rules for financial and tax reporting. The investor relations division is responsible for preparing and providing financial information to, and coordinating with, regulatory bodies and both domestic and international investors and analysts.
The Chief of Legal Affairs and AML is in charge of ensuring that each of our businesses complies with internal policies and procedures within the legal framework established by regulatory authorities and with the applicable contractual requirements. In addition, the Chief of Legal Affairs and AML provides legal advice to Grupo Supervielle and each of its subsidiaries regarding business development, the prevention of legal risk and conflict resolution.
The CRO is responsible for developing and implementing an appropriate framework for the administration of overall risks that allows for the identification, evaluation, monitoring and mitigation of credit risk, financial risk (including market risk, interest rate risk and liquidity risk), as well as operational risks (including reputation risk) for each of our businesses.
The Chief Credit Officer is responsible for defining and putting into practice our global credit risk policies across all business units. The Chief Credit Officer utilizes common risk assessments and information collection platforms across all business units. He also maximizes the value we offer clients by facilitating the transit of clients across business units through credit policies designed specifically for upward sales and cross sales. In addition, the Chief Credit Officer maximizes penetration into differentsocio-economic segments through inclusive credit policies, while ensuring that pricing is consistent with risk levels. The Chief Credit Officer also manages and controls procedures related to credit risk and collection and recoveries for the purpose of safeguarding our assets, minimizing losses related to defaults and maximizing the protection of our businesses’ rights and interests.
The Chief of Human Resources is responsible for the design and implementation of human capital strategies. The human resource manager is in charge of global human resource policies across all business units. He functions as a strategic partner of top management to ensure that we attract and retain the talent necessary to achieve business growth. The Chief of Human Resources’s main strategies are: consolidating our talent pool, developing a sustainable organization focused on clients and with competitive remuneration packages, spreading the Supervielle culture, which breeds innovation, work ethic, empowerment and merit recognition and maintaining high morale among employees.
The following are academic and professional backgrounds of our management members:
José Luis Panero has been appointed Chief Operating Officer (COO) in June 2016. He previously wasmembers. For further information about the Bank’s Chief Executive Officer since April 2009. He received a degree in Economics from Universidad Nacional de Córdoba and a Master’s degree in Finance awarded by CEMA. In 2009, he also completed the General Manager Program (GMP 7) at Harvard Business School. From 1988 through 2002 he held several positions at Banco Suquía, including Planning and Capital Markets Manager. From 2002 through 2007, he worked at Banco Banex as Financial Manager and since the merger with the Bank Mr. Panero served as Headcomposition of the Finance and Capital Markets department until April 2009 and Deputy CEO from 2006 to 2009. He is currently a member of the Boardsour Board of Directors of Banco Supervielle, CCF, Sofital and Supervielle Seguros.
Management, please see “Item 4.A.—Recent Developments” and “Item 8.B.—Significant Changes” :
Alejandra Naughton has been Chief Financial Officer of Grupo Supervielle since September 2011. She holds a degree in Economics from the Universidad de Buenos Aires and a post graduate degree in Project Management from Universidad de Belgrano. She attended the CFO Executive Program at the University of Chicago Booth School of Business. She has taken courses at the Bank of England in London, where she was awarded the Expert in Finance and Management Accounting and Expert in Corporate Governance degrees; at the Federal Reserve Bank of New York where she was conferred the Expert in Management and Operations degree and at the International Monetary Fund where she was awarded the Expert in Safeguards Assessment degree. From 1994 to 2007 she served on the Central Bank’s staff in several senior positions, including that of Deputy General Manager (2003 to 2007) and Argentine Representative to the Governance Network at the Basle based Bank for International Settlements (Switzerland). During the years 2007 and 2008 she worked as a Consultant to the International Monetary Fund. As of the date of this annual report, she is also Chief Finance Officer at the Bank. She also acts as alternate director of ByMA.
Sergio Gabai has been Chief of Legal Affairs and AML of Grupo Supervielle since May 2012. A graduate of the Universidad de Buenos Aires as anAttorney-at-Law, he also holds a Master’s degree in Economics and Insurance Law from the Universidad Católica Argentina and a Ph.D. in Management from University of Navarra’s IESE Business School. He attended the Management Program for Lawyers at Yale University and participated of the Effective Leadership Program at Universidad Austral —– IAE. He also attended the Innovation Program at Universidad de San Andrés and the Finance and Operative Efficiency Program at Wharton School. From 1998 through 2000, he was the Legal Affairs Assistant Manager at Bank Boston. From 2000 through 2007 he was in charge of BBVA Banco Francés Legal Services for the Banking Business Department. He also serves as Director of SAM,Mila, Supervielle Seguros, Sofital and Supervielle Broker de Seguros, and as Alternate Syndic for Sofital, Tarjeta and Supervielle Seguros.
Tarjeta.
Javier Conigliaro has been Chief Risk Officer of Grupo Supervielle since July 2016. Previously he served as Chief Risk Officer of Banco Supervielle from 2012 through 2016. With over 2932 years of experience in the risk industry within financial institutions, Mr. Conigliaro is an economist with graduate studies from the University of Buenos Aires, he attended the Executive Education Program in Risk Management at Kellogg School of Management & PRMIA and the Management Development Program at Universidad Austral —– IAE School of Business. Previous to his experience in Banco Supervielle, Mr. Conigliaro was the Head of Corporate Risk in Société Générale Argentina, a credit risk senior analyst in SocGen New York and in Beal WestLB Argentina.
Pablo Di Salvowas appointed as Chief Credit Officer at Grupo Supervielle in September 2017. He received a degree in business administration from the Universidad Católica Argentina, and attended the Executive Development Program at Universidad Austral Business School. He held positions in credit risk at Banco Itaú Argentina and served as Credit Risk Manager at Banco Supervielle. He has worked in various positions with BankBoston Argentina, both in the credit risk and commercial teams, including Latam Credit Risk Manager and Corporate Team Leader. From 2003 to 2008, he was Head of Credit Risk at BankBoston Chile. He also held positions as Credit Risk Manager at American Express Argentina. He has over 30 year of experience in the financial services industry.
Santiago Enrique Batllegraduated from Universidad Católica de La Plata as an Attorney at Law and received his Master’s degree in Business Administration Management from the School of Business and Management at IAE Universidad Austral. He also received a postgraduate degree in Human Resources from Universidad Argentina de la Empresa. He participated in the Senior Management Program at IAE Universidad Austral and other programs at Stanford, London Business School and Michigan University. From July 2000 to 2004, he served as Labor Relations
Manager at Bank Boston NA, and from 2005 to March 2007 he served as their Human Resources Executive Director. From April 2007 to December 2010, he was Human Resources Executive Director at Standard Bank Argentina. He has served as Human Resources Head of Grupo Supervielle and Banco Supervielle since February 2011. He was appointed an alternate director of the Boards of Directors of Banco Supervielle and CCF. Such designations are pending of authorization by the Central Bank in agreement with Communication “A” 6304 of such regulator.
Marcelo Vivanco has been the Chief of IT and Operations since February 2017 and prior to his appointment, he has been the Chief of IT since September 2016. He obtained an MBA from the Universidad del Salvador, a degree in System Analysis from Universidad CAECE and a degree in Psychology. He served as Director of Systems and Technology at Lojack Corporation and as Chief Technology Officer at Banco Comafi and La Ley Editorial (Thompson Group). At Banco Santander Río and Banco Galicia he served as Development Manager.
Claudia Andretto has been the Chief of Central Services and Supply Management since Februrary 2017. Previously she served as Head of Operations since 2008. She holds a degree in Economics from the Universidad de Buenos Aires and participated on the Advanced Regional Management and Leadership Program at IAE. From 1982 through 1994, she worked at Banco Roca where she led the Organization and Methods Department. From 1994 through 1998, she worked at Exprinter Banco S.A. From 1999 through 2001, she worked at Banco San Luis as Product Leader. In 2001, she took office as Banco Banex Organization Manager and remained in that position until 2007. After the merger with the Bank, she continued heading the same department at the Bank until 2008, when she was appointed Head of Operations.
For the biography of Mr. Julio Patricio SupervielleJorge Oscar Ramirez, see “—Board of Directors.”
Supervisory Committee
We have a monitoring body called the supervisory committee (“Supervisory Committee”). Our Supervisory Committee consists of three syndics and three alternate syndics appointed by the shareholders at our annual ordinary shareholders’ meeting. The syndics and their alternates are elected for a period of one year, and any compensation paid to our syndics must have been previously approved at an ordinary shareholders’ meeting. The term of office of the members of the Supervisory Committee expires on the annual ordinary shareholders’ meeting to consider our financial statements as of December 31, 2018.2019.
Pursuant to the Argentine Corporate Law,AGCL, only lawyers and accountants admitted to practice in Argentina and domiciled in Argentina or civil partnerships composed of such persons may serve as syndics in an Argentinesociedad anónima, or limited liability corporation.
The primary responsibilities of the Supervisory Committee are to monitor the compliance with Argentine Corporate Law,the AGCL, the bylaws, its regulations, if any, and the shareholders’ resolutions, and to perform other functions, including, but not limited to: (i) attending shareholders’ and Board of Directors’ meetings, (ii) calling extraordinary shareholders’ meetings when deemed necessary and ordinary and special shareholders’ meetings when not called by the Board of Directors, (iii) monitoring the company’s corporate records and other documents, and (iv) investigating written complaints of shareholders. In performing these functions, the Supervisory Committee does not control our operations or assess the merits of the decisions made by the Board of Directors.
The following chart shows the members of our Supervisory Committee appointed by the annual ordinary and extraordinary shareholders’ meeting held on April 24, 2018.26, 2019. According to Technical Resolution No. 15 of the Argentine Federation of Professional Counsel of Economic Sciences and Section III, Chapter III of Title II of the CNV Rules, all of our syndics and alternate syndics are independent.
Name | Office |
| Beginning Date of |
| Date of Birth | ||||
Enrique José Barreiro | Syndic | June 8, 2009 |
| December 5, 1945 | |||||
Carlos Alberto Asato | Syndic | June 8, 2009 |
| January 15, 1948 |
Valeria Del Bono Lonardi | Syndic | April 24, 2018 |
| September 6, 1965 |
Name | Office | Beginning Date of Office | Date of Birth | |||||
Carlos Enrique Lose | Alternate Syndic | June 8, 2009 |
| October 2,1943 | ||||
Roberto Aníbal Boggiano | Alternate Syndic | June 8, 2009 |
| September 1,1955 | ||||
Carlos Alfredo Ojeda | Alternate Syndic | May 17, 2010 |
| January 15,1944 |
The following are academic and professional backgrounds of the Supervisory Committee members:
Enrique José Barreiro. He received holds a degree in Public AccountingAccountancy graduated from Universidad Nacional de Lomas de Zamora. From 1969 until May 2000, he worked at Banco Tornquist/Credit Lyonnais, where he held the position of Assistant Accountant for five years.Accountant. From June 2000 throughuntil June 2007, he held the position of Assistant Accountant and General Accountant at Banco San Luis/Banco Banex S.A. He currently serves as a Syndic of Grupo Supervielle the Bank, CCF,S.A., Banco Supervielle S.A., Cordial Compañía Financiera S.A., Tarjeta Automática S.A., Espacio Cordial de Servicios S.A., Sofital S.A.F.eS.A.F. e I.I. and Supervielle Seguros S.A.
Carlos Alberto Asato. He holds a degree in Accountancy graduated from Universidad de Buenos Aires’s School of Economic Sciences as a Public Accountant.Aires. From October 1969 to Marchtil 1998, he held several positions at Banco Quilmes, including Department Head. Since 1983, he has been managing his own accounting and tax consultancy firm, Carlos Asato y Asociados. He also renders services as an external consultant in finance, tax and costs to Estudio Bruno Matarazzo y Asociados S.A. He is also a lecturer for the Public Accounting, Administration and Foreign Trade programs at Universidad del Museo Social Argentino. He currently serves as a Syndic of Grupo Supervielle the BankS.A. and Sofital S.A.F. e I.I.
Valeria Del Bono Lonardi. She is a lawyer fromLawyer graduated from Universidad de Buenos Aires’ Law School (1994),Aires and attended other professional specialization courses, including the International Criminal Update Program at Universidad Austral (2009). She joined Salvi Law Firm in 1995 and since then has been dedicated to the counseling and practice of criminal law. Her professional specialization is mainly based on the dogmaticalnessdogmatic of criminal offenses, with permanent assistance to insurance companies and independent professionals; the elaboration of strategies and proposals of technical defenses in the framework of oral and public trials and the advice on the prevention of corporate fraud, particularly to banking and financial entities. She is a member of the Bar Association of Buenos Aires and of the Bar Association of San Isidro.
She currently serves as a Syndic of Grupo Supervielle S.A. Also, she has been appointed Syndic of Banco Supervielle S.A.
Carlos EnriqueLose. He receivedholds a degree of Public Accountantin Accountancy graduated from the Universidad de Buenos Aires’ School of Economics.Aires. He worked for several years in the Audit Department of an important audit firm, and later dedicated to providing business advice. He was a lecturer at the Universidad de Buenos Aires’ School of Economics and has lectured courses at both public and private professional institutions. He is a founding partner of Bermúdez, Lose & Asociados. He has published different Works with specialized journals and is aco-author of the book Normas de Presentación de Estados Contables de Sociedades por Acciones.Acciones. He currently serves as an Alternate Syndic of Grupo Supervielle CCFS.A., Cordial Compañía Financiera S.A. and Espacio Cordial.
Cordial de Servicios S.A.
Roberto Aníbal Boggiano. He is holds a public accountantdegree in Accountancy graduated from the Universidad de Buenos Aires’ School of Economics.Aires. He attended post-graduatepost graduate seminars on planning and corporate taxation. Mr. BoggianoHe has worked at several companies, including Celulosa Jujuy S.A., where he was as an analyst accountant assistant, general accountant and chief of planning from 1978 to 1994; Sert S.A., where he served as the administrative manager from 1994 to 1995; and Estudio Carlos Asato y Asociados, where he was in charge of corporate taxation and advising from 1995 to 2011. He was also an Alternate Syndic of Fiorito Factoring S.A. He currently serves as a Syndic of Banco Supervielle S.A. and as an Alternate Syndic of Grupo Supervielle and the Bank.
S.A.
Carlos Alfredo Ojeda. He is holds a public accountant whodegree in Accountancy graduated from the Universidad de Buenos Aires’ School of Economics.Aires. He was an Internal Audit Manager of the International Division of Gillette Company until 1977, and worked in Argentina, Brazil, Chile and Peru.Perú. He was a partner of a major local audit firm until 1995. He is a consultant on audit and corporate issues and has an active participation in management and control aspects of corporations in various industries. He has lectured at Universidad de Buenos Aires, including courses on Financial Planning and Budget Control and Audit and Management Control. He was also a speaker at various seminars and
courses in his areas of specialty. He is a co-authorco author of Auditoría —– Técnica y Práctica and Normas para la Presentación de Estados Contables de Sociedades por Acciones.Acciones. He is also a contributor to the publication Doctrina Societaria y Concursal.Concursal. He currently serves as an Alternate Syndic forof Grupo Supervielle.Supervielle S.A.
Pursuant to Article 13 ter of our bylaws, and according to the provisions of Section 79 of the Argentine Capital Markets Law, No. 26,831, an extraordinary shareholders’ meeting may vote to eliminate our Supervisory Committee by meeting the requirements of applicable laws, including Article 79 of Decree No. 1023/2013.laws.
Compensation of Directors, Management and Supervisory Committee
Our shareholders fix our directors’ compensation, including their salaries and any additional wages arising from the directors’ permanent performance of any administrative or technical activity. Compensation of our directors is regulated by the Argentine Corporate LawAGCL and the CNV regulations. Any compensation paid to our directors must have been previously approved at an ordinary shareholders’ meeting. Section 261 of the Argentine Corporate LawAGCL provides that the compensation paid to all directors and syndics in a year may not exceed 5.0% of net income for such year, if the company is not paying dividends in respect of such net income. The Argentine Corporate LawAGCL increases the annual limitation on director compensation to up to 25.0% of net income based on the amount of dividends, if any, that are paid. In the case of directors that perform duties at special committees or perform administrative or technical tasks, the aforesaid limits may be exceeded if a shareholders’ meeting so approves, such issue is included in the agenda, and is in accordance with the regulations of the CNV. In any case, the compensation of all directors and members of the supervisory committee requires shareholders’ ratification at an ordinary shareholders’ meeting.
We have not entered into employment contracts with the members of our Board of Directors. We have assigned certain executive andtechnical-administrative functions to some of our directors. As of the date of this annual report, neither we, nor any of our affiliates, have entered into any agreement that provides for any benefit or compensation to any director after expiration of his or her term.
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), senior management and members of our Supervisory Committee in 20172018 was approximately Ps.73.8Ps.165.9 million, Ps.90.9Ps.248.4 million and Ps.1.3Ps.2.1 million, respectively.
Audit Committee
Pursuant to the Argentine Capital Markets Law No. 26,831 and its implementing regulations, we are required to have an audit committee consisting of at least three members of our Board of Directors with experience in business, finance, accounting, banking and audit matters. Under CNV regulations, at least a majority of the members of the audit committee must be independent directors.
Our audit committee is composed of no fewer than three independent members designated by our Board of Directors, who are independent under Rule10A-3 under the Exchange Act (“Rule10A-3”) and applicable NYSE standards.
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Our audit committee is composed of three members who are financially literate, and one, Laurence Nicole Mengin de Loyer,Ricardo Enrique De Lellis, is a financial expert.
We will take the necessary measures to ensure that independent alternate members are available in order to fill possible vacancies. A quorum for a decision by the audit committee will require the presence of a majority of its members and matters will be decided by the vote of a majority of those present at the meeting. A chairman of the committee must be appointed during the first meeting after members of the committee have been appointed. The chairman of the committee may cast two votes in the case of a tie. Pursuant to our bylaws, audit committee members may participate in a meeting of the committee by means of a communication system that provides for a simultaneous transmission of sound, images and words, and members participating by such means count for quorum
purposes and the committee will pass resolutions by the affirmative vote of the majority of members present either physically or by means of such communication system. If the committee holds meetings by means of such communication system, it must comply with the same requirements applicable to Board of Directors’ meetings held
in such way. Decisions of the audit committee will be recorded in a special corporate book and will be signed by all members of the committee who were present at the meeting. Pursuant to Section 17 Chapter III Title II of the CNV Rules, the audit committee must hold at least one regularly scheduled meeting every three months.
Pursuant to the Argentine Capital Markets Law, No. 26,831, the audit committee, among other things:
·advises on the Board of Directors’ proposal for the designation of external independent accountants and ensure their independence;
·oversees our internal control mechanisms and administrative and accounting procedures and assesses the reliability of all financial and other relevant information filed with the CNV and other entities to which we report;
·oversees our information policies concerning risk management;
·provides the market with complete information on transactions in which there may be a conflict of interest with members of our various corporate bodies or controlling shareholders;
·advises on the reasonableness of fees or stock option plans for our directors and managers proposed by the Board of Directors;
·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 whichpre-emptive rights are excluded or limited;
·verifies the fulfillment of any applicable rules of conduct; and
·issues grounded opinions on related-party transactions under certain circumstances and file such opinions with regulatory agencies as required by the CNV in the case of possible conflicts of interest.
Additionally, the audit committee is required to prepare an annual working plan and present it to the Board of Directors and the Supervisory Committee. Members of the board, members of the Supervisory Committee and external independent accountants are required to attend the meetings of the audit committee if the audit committee so requests it, and are required to grant the audit committee full cooperation and information. The audit committee is entitled to hire experts and counsel to assist it in its tasks and has full access to all of our information and documentation.
The following chart shows the current membership of our Audit Committee according to the resolution passed at the Board of Directors’ meeting held on April 28, 2017.Committee:
Name | Position | Profession |
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| ||||||
| Director, | Accountant and Business | Independent | ||||||||
| Director |
| Independent | ||||||||
Eduardo Braun | Director | Industrial Engineer | Independent | ||||||||
| Richard Guy Gluzman | Director at the Bank |
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| ||||||||
| Head of Internal Audit | Accountant | Permanent Invitee and Secretary of the Committee |
| (1) | Pursuant toRule 10A-3 of the Exchange Act. |
(1) Pursuant to Rule 10A-3.
Anti-Money Laundering and Anti-Terrorist Finance Committee
We have an anti-money laundering and anti-terrorist finance committee consisting of two members of our Board of Directors. Decisions of the Anti-Money Laundering and Anti-Terrorist Finance Committee are recorded in a special corporate book and signed by all members of the committee who were present at the meeting.
Among its duties, the anti-money laundering and anti-terrorist finance committee must:
·oversee the adequacy, appropriateness and effectiveness of our internal control systems to ensure the reasonableness, reliability, adequacy and transparency of our consolidated financial statements, financial and accounting information and our consolidated financial statements and information;
·maintain an understanding of and ensure timely and appropriate responses regarding compliance with applicable rules and matters related to money laundering, conduct in the securities markets, data protection, reporting requirements and enforcement actions;
·ensure that the Code of Ethics and Internal Conduct Code comply with current rules and regulations,
·maintain an understanding of procedures to ensure that they are complete andup-to-date and approve such procedures to then bring them before the Board of Directors for its consideration and approval;
·advise Grupo Supervielle on its financial, reputational, legal and operative risks, and oversee compliance with policies designed to mitigate these risks;
·evaluate and improve the quality of Grupo Supervielle’s customer service, risk control and operations;
·ensure the proper intervention of the Board of Directors with respect to the approval of decisions adopted by the committees when required by corporate governance rules and to oversee compliance with these rules;
·oversee 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
·oversee the compliance with current applicable anti-money laundering rules and ensure that Grupo Supervielle and its subsidiaries are in compliance with best practices related to anti-money laundering; and ensure that the anti-money laundering and anti-terrorist finance committee has a rapporteur member with knowledge relating to anti-money laundering and anti-terrorism finance who from time to time presents a report to the anti-money laundering and anti-terrorist finance committee regarding the state and relevant facts relating to each of Grupo Supervielle’s subsidiaries.
Additionally, the anti-money laundering and anti-terrorist finance committee must prepare an annual working plan and present it to the Board of Directors and the Supervisory Committee. Members of the board, members of the Supervisory Committee and external independent accountants must attend the meetings of the anti-money laundering and anti-terrorist finance committee if the committee so requests it, and must grant the anti-money laundering and anti-terrorist finance committee full cooperation and information. The anti-money laundering and anti-terrorist finance committee is entitled to hire experts and counsel to assist it in its tasks and has full access to all of our information and documentation.
The following table sets forth the members of the anti-money laundering and anti-terrorist finance committee.
Name | Position | |
| Director, Chairman of the Committee, Responsible Officer before | |
| Director | |
Hugo Santiago Enrique Basso | Director | |
| Juan Cuccia | Head of AML, Rapporteur Member |
(1) FIU: Financial Information Unit (Unidad de Información Financiera)
Risk Management Committee
The risk management committee is composed of two of our directors and members of the management team, and of our main subsidiaries.
Our risk management committee performs the following functions:
·develops strategies and policies for the management of credit risk, market risk, interest rate risk, liquidity risk, operational risk and other risks that could affect us, makes sure our strategies and policies are in line with regulations and best practices and oversees their correct implementation and enforcement and defines Grupo Supervielle’s risk appetite and tolerance and the global risk profile for the approval of the Board of Directors;
·approves limits relating to the management of credit risk, market risk, interest rate risk and liquidity risk, and monitors the evolution of key indicators relating to operational risk, which includes a map of risks used by the trading desk for trading operations and the map of risks for investment operations at a consolidated level;
·periodically monitors the risks that Grupo Supervielle faces and the application of strategies and policies designed to address such risks;
·defines the general criteria for pricing risk;
·evaluates the adequacy of capital with respect to Grupo Supervielle’s risk profile;
·defines policy and the methodological framework for performing stress tests with respect to risk management, approves scenarios for conducting individual stress tests for particular and general risks, evaluates and discusses the results of the stress tests that are presented and recommends contingency plans to address such risks, utilizes the results of the stress tests for the consideration of establishing or revising the limits and brings all of the results of the tests to the Board of Directors for approval;
·designs effective information channels and systems for the Board of Directors related to risk management;
·ensures that oursour subsidiaries’ management compensation plans incentivize a prudent level of each risk;
·approves risk management quantitative models and monitors the effectiveness of such models; and
·remains aware of the memos and rules related to risk published by each regulatory agency that regulates any of our subsidiaries, as well as understands the repercussions that the application of such memos or rules could have on our operations.
The following table sets forth the members of the risk management committee.
Name | Position | |
Jorge Oscar Ramírez | Chairman of the Committee, Director and CEO | |
| Julio Patricio Supervielle | Chairman of the Board | |
|
| |
Emérico Alejandro Stengel | Director | |
|
| |
Alejandra Naughton | Chief Financial Officer (CFO) | |
Javier Conigliaro | Chief Risk Officer (CRO), Secretary of the Committee |
Name | Position |
| Ramiro Gonzalez Prandi | Director at Banco Supervielle, Permanent Invitee | |
| Pablo Di Salvo | Chief Credit |
Hernán Oliver | Head of Global Markets of Banco Supervielle, Permanent Invitee | |
Sabrina Roiter | Credit Risk and Business Continuity Manager of Banco Supervielle, Permanent Invitee | |
Fernando Bodasiuk | Financial Risks Manager of Banco Supervielle, Permanent Invitee |
Credit House Limit Committee
The Credit House Limit committee 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 CCROCCO and the Bank’s heads of Retail Banking and/or Corporate Banking and/or Global Markets, are also members. The CCROCCO acts as chairmansecretary of the committee.
For further information about the composition of our Management, please see “Item 4.A.—Recent Developments”.
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.
Our Credit House Limit committee performs the following functions:
·Approves credit policies and each of our subsidiaries’ credit approval limits.
·Reviews and establishes credit risk limits for our subsidiaries relating to facilities, duration, guarantees, special circumstances and environmental risks in connection with financing projects.
·Confirms the credit policies approved by the Board of Directors of each of our subsidiaries.
·Oversees the performance of each of our subsidiaries’ credit committees.
A quorum is established when more than half of the committee’s members are present and requires the presence of the chairman of the committee and at least two directors. A quorum of the majority of members present at the assembly is required to make any decision, and each of the directors may veto such decision. In the case of a tie, our CEO will have the deciding vote.
The following table sets forth the members of the Credit House Limit committee.
Name | Position | |
Julio Patricio Supervielle | Chairman of the Board | |
Jorge Oscar Ramírez | Director and CEO | |
Emérico Alejandro Stengel | Director | |
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| |
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| |
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| |
|
| |
|
|
When the agenda for the meeting relates to policy, the Chief Risk Officer and Head of Credit Risk of Institutional Relations must join the committee as voting members.
Ethics, Compliance and Corporate Governance Committee
The ethics, compliance and corporate governance committee monitors the implementation and enforcement of the corporate governance code for Grupo Supervielle and its subsidiaries, and the execution of the Ethics and Compliance Program. The ethics, compliance and corporate governance committee makes sure that we and our subsidiaries comply with the guidelines established by the CNV Rules, the Capital Markets Law(Ley de Mercado de Capitales) and the Communication “A” 5201 of the Central Bank. Among its duties, the ethics, compliance and
corporate governance committee monitors the structure of our Board of Directors and committees and establishes the basic objectives that the Board of Directors and management must follow with respect to their activities and businesses.
The ethics, compliance and corporate governance committee periodically evaluates the operations and compliance levels of the Board of Directors and each of the existing committees, and may issue recommendations to improve efficiency. It also organizes annual training sessions with assistance from the Human Resources Manager. The ethics, compliance and corporate governance committee defines the policies and governing proceedings as to the Ethics and Compliance Program and is also in charge of engaging with local regulators (such as the CNV, Central Bank, ByMA, MAE and IGJ), international regulators and enforcing agencies, and ensuring compliance with each recommendation or proposal issued by them. The corporate governance committee also makes recommendations to our Board of Directors regarding how to comply with applicable guidelines established by the Basel accords.
The following table sets forth the members of the corporate governance committee.
Name | Position | |
Atilio Dell’Oro Maini | Director, Chairman of the Committee | |
| Director and CEO | |
| Independent Director | |
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| |
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| |
Sergio Gabai | Chief of Legal Affairs and AML, Invitee Member | |
Javier Conigliaro | Chief Risk Officer (CRO), Invitee Member | |
|
|
Human Resources Committee
The human resources committee approves and monitors our compensation policies. The committee helps create compensation policies and job performance evaluation systems.
Our human resources committee performs the following functions:
·brings to the Board of Directors proposals for nominations of the directors of Group Supervielle and its subsidiaries and all other officials that the Board of Directors appoints;
·proposes to the Board of Directors compensation policies for the directors;
·carries out an annual report regarding director compensation policies and submits its conclusions and recommendations to the Board of Directors;
·gathers information about the periodic evaluations of the staff of Group Supervielle and its subsidiaries;
·determines the search method for directors, whether through a third party from an external consulting firm that specializes in human resources or directly; and
·approves any external consulting firm that specializes in human resources.
The following table sets forth the members of the human resources committee.
Name | Position | |
Julio Patricio Supervielle | Chairman of the Board, Chairman of the Committee | |
Eduardo Braun | Independent Director | |
| Richard Guy Gluzman | Director at Banco Supervielle, Permanent Invittee | |
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| |
Santiago Batlle | Chief Human Resources Officer, Secretary of the Committee, Permanent Invitee |
Disclosure Committee
The disclosure committee is responsible for the following tasks:
·supervise our system of controls and disclosure procedures to ensure (i) that the information required to be made known to the public (directly or through regulatory bodies) is recorded, processed, summarized and reported accurately and in a timely manner.
·evaluate the effectiveness of disclosure controls and procedures to determine the need or desirability of making changes to those controls and procedures in relation to the preparation of the next periodic reports.
·review of any information related to a material fact that must be submitted to the Argentine Securities and Exchange Commission, Buenos Aires Stock Exchange, Mercado Abierto Electrónico S.A., Securities and Exchange Commission, New York Stock Exchange, the Argentine Central Bank, the Superintendency of Insurance, and any other regulatory body with which it interacts and which relates to (i) mandatory reports; (ii) press release containing financial information, information on significant or material transactions; (iii) publication of relevant facts, (iv) oral communication and written correspondence for dissemination to shareholders and investors; and (v) any other relevant piece of information that should be communicated.
·propose to the Board the policy for the management of confidential information and control its compliance, particularly that related to legal persons.
The following table sets forth the members of the disclosure committee.
Name | Position | |
Jorge Oscar Ramírez | Director and CEO, Chairman of the Committee | |
|
| |
Atilio Dell’Oro Maini | Director | |
|
| |
Alejandra Naughton | Chief Financial Officer (CFO) | |
Javier Conigliaro | Chief Risk Officer (CRO) | |
Sergio Gabai | Chief of Legal Affairs and AML | |
Sergio Vazquez | Internal Audit | |
| Ana Bartesaghi | Treasurer and Investor Relations Officer (IRO), Secretary of the Committee | |
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| |
Mariano Biglia | Head of Accountancy of Banco Supervielle |
Banco Supervielle S.A.’s Board of Directors
Our main subsidiary, the Bank, is managed by its Board of Directors, which is currently comprised of sevenfive members. As of the date of this annual report, the shareholders present at any annual ordinary meeting may determine the size of the Board of Directors, provided that there shall be no less than three and no more than nine directors, and appoint an equal or lesser number of alternate directors. Any director so appointed will serve for two years. The elections of the Bank’s Board of Directors are staggered. As of the date of this annual report, one half of the members of the Bank’s Board of Directors are elected each year. While directors generally servetwo-year terms, in the event of an increase or decrease in the number of directors serving on the Bank’s board, the shareholders’ are authorized to appoint directors for a period of less than two years. Directors may be reelected and will remain on their duties until their replacements take their positions.
On July 19, 2010, the Board of Directors approved a revised version of the Bank’s corporateThe Bank’scorporate governance model, which contains most of the recommendations made by the Central Bank and CNV regarding corporate governance.
Such model provides guidelines regardingdecision-making by our Board of Directors, as well as certain guidelines for the committees reporting to the Board of Directors. This corporate governance model may change in the future in consideration of the recommended guidelines in Communication “A” 5201, approved by the Central Bank on May 9, 2011. Among other things, the model incorporates provisions to the Board of Directors’ regulations, such as:
·
The Board of Directors shall meet on a monthly basis in order to discuss policies, strategic issues and business, and other customary issues such as provisions, budgetary divergences, portfolios, etc.
·The Board of Directors shall meet on a quarterly basis in order to analyze: (i) operational risks and regulatory compliance, (ii) prevention of money laundering and financing of terrorism, (iii) auditing, (iv) information technology, (v) human resources, (vi) credit risks, and (vii) implementation of the Bank’s strategic plan.
The following table sets forth information about the members of the Bank’s BoardBank’sBoard of Directors, which is currently comprised of sevenfive regular members:
Name | Title |
| Year of Election to the | Date of Expiration of Term consider the financial statements as of) | Date of Birth | ||||||
Julio Patricio Supervielle | Chairman of the Board | 2005 | December 31, 2019 | December 13, 1956 | |||||||
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Atilio Dell’Oro Maini |
| 2011 | December 31, 2019 | February 13, 1956 | |||||||
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| December 31, | July 11, 1953 | |||||||
Ramiro Gonzalez Prandi | Director | 2019 | December 31, 2020 | July 22, 1967 | |||||||
Hugo Enrique Santiago Basso | Director | 2019 | December | December 3, 1979 | |||||||
Santiago Batlle | Alternate Director | 2017 | December 31, 2018 | April 16, 1973 |
Richard Guy Gluzman resigned from the position of DirectorAppointed directors Messrs. Julio Patricio Supervielle, Atilio Dell’Oro Maini and First Vice-Chairman of the Board on April 27, 2017.
All of the appointed directorsSantiago Batlle were approved to be members of the Board of Directors as required by Central Bank regulations, withwhereas the exceptionappointment of Messrs. Richard Guy Gluzman, Ramiro González Prandi and Hugo Enrique Santiago Batlle, whose designation as alternate director isBasso are pending authorization, in agreement with Communication “A” 6304 of the Central Bank.
In accordance with Section 11, Chapter III, Title II of the CNV Rules, all directors have the status ofnon-independent directors, with the exception of Carlos Martín Noel, who holds the status of independent director. directors.
Set forth below is a brief biographical description of Carlos Martín NoelRichard Guy Gluzman, Ramiro Gonzalez Prandi and Santiago Batlle. For biographical description of José Luis Panero, see “—Offices” and for biographical descriptions of the rest of the Bank’s directors, see “—Board of Directors.”
Richard Guy Gluzman has a Law degree from Nanterre University in Paris and a master’s degree in Business Administration from the ESSEC University in Paris. From 1978 to 1995, he worked in France holding various managerial positions in several technological companies (Burroughs S.A., Digital Equipment Corporation, Wang S.A. and JBA S.A.). His career in Argentina started in 1995, when he joined Coming S.A. (France Telecom & Perez Companc Group) as General Manager until 1997. From 1997 through 1999, he served as a member of Globalstar S.A.’s Board of Directors. From 1998 through 2000, he was at the helm of Diveo Broadband Networks S.A. as General Manager and then, from 2000 to 2006, he was a Director of Pegasus Capital, a private equity fund. In recent years he served as Director of the boards of directors of Grupo Supervielle, the Bank, CCF, Tarjeta and Sofital.
Ramiro González Prandi holds a Business Administration degree from Universidad de Belgrano and an Master of Science in Management from Arthur D. Little. He also attended different corporate governance and executive programs. During the decade that finished in 2017, he worked at Itaú-Unibanco Group, where reached the highest position as a senior partner at Itaú Group. During his executive career, he served as board member of several regulated andnon-regulated entities including Itaú, Bank of America and BankBoston. He left Itaú Group at the end of 2016 and returned to Argentina after 15 years. While working for Itaú-Unibanco Group, he led Itaú BBA’s banks as a CEO for Colombia, Chile and Perú for 10 years. He had responsibility for the
execution of the country entry of Itaú Group in Colombia by opening the bank from scratch that ended years later in the acquisition of Banco Corpbanca Colombia. Before that, he built Itaú BBA’s operations in Chile. Along his career, he conducted several financial transactions involving the most important companies in the region for commercial, mergers and acquisitons and capital markets. Previously, he worked for Bank of America, BankBoston Argentina, Bansud-Banesto, Lloyds Bank Argentina and Citibank Argentina in retail banking, SME banking, wholesale and investment banking.
Santiago Enrique Batlle was appointed Chief Human Resources Officer of Grupo Supervielle in 2011. Previously, from 2007 to 2010 he served as Chief Human Resources Officer at Standard Bank. From 1997 through 2007, his career at Bank Boston climbed up to Chief Human Resources Officer. He has a degree as an Attorney at Law from the Universidad Católica de La Plata, an MBA from IAE Business School and an Executive Degree in Strategy for Results from London Business School. He attended the HR Executive Program from Ross School of Business and obtained a Human Resources Post Degree from the Universidad Argentina de la Empresa. He was appointed an alternate director of the Boards of Directors of Banco Supervielle and CCF. Such designations are pending of authorization by the Central Bank in agreement with Communication “A” 6304 of such regulator.
Carlos Martín Noel resigned to his position as Director of the Board on April 19, 2018.
Banco Supervielle S.A.’s Senior Management
The Bank’s senior management is in charge of the implementation and execution of its overall short term and strategic objectives and reports to the CEO. For further information about the composition of our Board of Directors and Management, please see “Item 4.A.—Recent Developments” and “Item 8.B.—Significant Changes.” The following table sets forth certain relevant information on the Bank’s current executive officers and its senior management as of the date of this annual report:management:
Name | Position |
| Date of Birth | Year of Appointment | |||
| Chief Executive Officer |
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| ||||
Germán Magnoni | Head of Corporate Banking | September 24, 1969 | 2012 | ||||
| Head of Retail Banking |
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Pablo Di Salvo | Chief Credit Officer | June 19, 1964 | 2017 | ||||
Hernán Oliver | Head of Global Markets | June 2, 1973 | 2009 | ||||
Alejandra Naughton | Chief Finance Officer | September 22, 1962 | 2012 | ||||
Sergio Gabai | Chief of Legal Affairs and AML | April 26, 1967 | 2012 | ||||
Javier Conigliaro | Chief Risk Officer | November 16, 1964 | 2016 | ||||
Marcelo Vivanco | Chief Technology Officer & Operations | January 9, 1962 | 2016 | ||||
Claudia Andretto | Chief of Central Services & Supply Management | May 8, 1960 | 2008 | ||||
| Head of Internal Audit |
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| ||||
Santiago Batlle | Chief Human Resources Officer | April 16, 1973 | 2011 |
Set forth below are brief biographical descriptions of the members of the Bank’s seniorBank’ssenior management.
Nerio Peitiado was appointed CEO of Banco Supervielle in 2016. He received a degree in Business and Administration from the Universidad de Buenos Aires and a Master’s degree in Business and Administration from the University of Texas. From 1994 through 1999 he was an associate at McKinsey & Co. From 1999 through 2004 he held the position of General Manager at Formatos Eficientes (EKI). From 2004 through 2005 he was General Manager at Valle de las Leñas. From 2005 to August 2009 he was General Director at Entertainment Depot. From 2009 to 2016, he was Head of Retail Banking of the Bank. As of the date of this annual report, he serves as Vice-Chairman of SAM and as an Alternate Director of Supervielle Seguros.
Germán Magnoni has been the Bank’s Head of Corporate Banking since 2012. He graduated as a Public Accountant at the Universidad de Morón. He holds a Master’s degree in Business Administration from CEMA. He took part of the Banking Management Program at UTDT and the Advanced Management Program at IAE. He was in charge of the Leasing Department at Banco Supervielle until 2012. At Societé Générale Argentina he led the office of Large Corporations and Fiduciary Business. Before that, he worked for seven years in Corporate Sales at Banco Río (Santander).
Beatriz de la Torre Silvio Margariahas been joined the Bank in October 2016 and in April 2019, was appointed as Head of Retail Banking since November 2016. ShePersonal and Business Banking. He has over 30more than 25 years of industry experience. Priorexperience in the financial industry. Before joining Supervielle, he was responsible for banking companies at Banco Macro S.A. from 2011 to her appointment, she served2016. Previously, he held several managerial positions overseeing nationwide retail banking networks, as Senior Advisor for Banco de la Nación Argentina. Previously, she was Head of Retail Bankingwell as corporate banking at Itaú Argentina from 2009international banks such as BankBoston, N.A. (from 1994 to 2015. She was also Retail Banking Manager at2007) and Standard Bank Argentina, formerly Bank Boston, from 2005S.A. (from 2007 to 2009 and held several Retail Banking and Technology Managerial positions at BankBoston and Deutsche Bank. She2011). He holds a Law degree in systems from Universidad Tecnológica NacionalCatolica Argentina and attended the Executive Development Program atof the Universidad Austral Business School. She has over 30 years of experience in the financial services industry.
Hernán Oliver has been the Bank’s Head of Global Markets since May 2009. He holds a degree in Economics from the Universidad Católica Argentina as well as a Master’s degree in Finance from CEMA. Over the 1996 - 1996—1997 period, he worked at Bank of America. From 1997 to 2002, he served as Finance Department Senior Trader at Banco General de Negocios. He then worked at Banco Finansur Finance Department until 2004, when he was hired as the Head of the Trading Desk at Banco Banex (at present Banco Supervielle). He has also been appointed as Alternate Director of Mercado Abierto Electrónico, the most important electronic securities and foreign currency trading market in Argentina.
Leandro ContiSergio Gustavo Vázquez has been the Bank’s Head of Internal Audit since September 2007.March 2019. He graduatedholds degrees in Business Administration and Public Accountant from the Universidad Nacional de La PlataUniversity of Buenos Aires and an MBA from the IAE. He also obtained international certifications as a Public Accountant and attended the Advanced Management Program at the IAE Business School and he also holds the CIA (Certified Internal Auditor) certification conferred byAuditor “CIA” from the Institute of Internal Auditors. In the period 1997 through 2006,Auditors in 2001 and as Information System Auditor “CISA” from ISACA in 2006. Prior to his career progressedappointment he was Audit Director at Price WaterhouseBanco Itaú and Co. S.R.L upits subsidiaries in Argentina from June 2013 to March 2018, and he added responsabilities as Head of Audit Nothern Hemisphere Subsidiaries since 2017. He also held several positions within the Audit Manager position. From 2006area in Itaú from 1998 to 2007,2013 where he heldserved as Latam Audit System Supervisor in Itaú Latam Subsidiaries among others. He developed an extensive career with a scope of Risk, Finance, Analitycs and IT.
Marcelo Vivancohas been the positionChief of Audit ManagerIT and Operations since February 2017 and prior to his appointment, he has been the Chief of IT since September 2016. He obtained an MBA from the Universidad del Salvador, a degree in System Analysis from Universidad CAECE and a degree in Psychology. He served as Director of Systems and Technology at Lojack Corporation and as Chief Technology Officer at Banco Santa CruzComafi and La Ley Editorial (Thompson Group). At Banco Santander Río and Banco Galicia he served as Development Manager.
Claudia Andrettohas been the Chief of Central Services and Supply Management since Februrary 2017. Previously she served as Head of Operations since 2008. She holds a degree in Economics from the Universidad de Buenos Aires and participated on the Advanced Regional Management and Leadership Program at IAE. From 1982 through 1994, she worked at Banco Roca where she led the Organization and Methods Department. From 1994 through 1998, she worked at Exprinter Banco S.A. From 1999 through 2001, she worked at Banco San Luis as Product Leader. In 2001, she took office as Banco Banex Organization Manager and remained in that position until 2007. After the merger with the Bank, she continued heading the same department at the Bank until 2008, when she was appointed Head of Operations.
For the biographies of Mr. Jorge Oscar Ramírez, Pablo Di Salvo, Ms. Alejandra Naughton, Mr. Sergio Gabai, and Mr. Santiago Enrique Batlle and Mr. Marcelo Vivanco and Ms. Claudia Andretto.Batlle. See “—Officers.”
Committees Reporting to Banco Supervielle S.A.’s Board of Directors
In accordance with Central Bank regulations, the Bank has several committees under the supervision of our Board of Directors: the Audit Committee (Communication “A” 2525), the Information Technology Committee (Communication “A” 4609) and the Committee on Control and Prevention of Money Laundering and Financing of Terrorism (Communications “A” 4363 and “A” 4459). In addition, the Bank also has a Risk Management Committee. Each of the Bank’s Board committees has its own code of regulation. Each committee must report to the Board on a periodical basis and submit an annual report.
Banco Supervielle S.A.’s Audit Committee
The audit committee is formed by at least two members of the Bank’s Board of Directors and its internal audit manager. The Board of Directors appoints the members of the audit committee for a term of two or three years. The CEO is invited to attend the meetings.
The audit committee is responsible for assisting the Board of Directors in the supervision of the consolidated financial statements, controlling compliance with policies, processes, procedures and rules set forth for each of the Bank’s business areas and for evaluating and approving the corrective measures proposed by the internal audit area.
The following table sets forth the members of the audit committee:
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Richard Guy Gluzman |
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| Independent Director at Grupo Supervielle, Permanent Invittee | |
Victoria Premrou | Independent Director at Grupo Supervielle, Permanent | |
Eduardo Braun | Independent Director at Grupo Supervielle, Permanent Invittee | |
Sergio Vazquez | Internal Audit, Secretary of the Committee |
Banco Supervielle S.A.’s Information Technology Committee
The Information Technology Committee is formed by nine members, appointed by the Board of Directors. This committee must have among its members at least one director and the Head of Information Technology and Operations. The following table sets forth the members of the Information Technology Committee.
The information technology committee is responsible, among other things, for the following activities: (i) controlling the adequate operation of the information technology environment and its efficiency; (ii) taking notice of the information technology and systems plan and reviewing it; (iii) periodically evaluating such plan and the level of compliance with it; (iv) reviewing reports related to information technology; and (v) maintaining an adequate dialogue with the external auditing division of the Superintendency:
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Richard Guy Gluzman |
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| COO and Deputy CEO | |
Marcelo Vivanco |
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Banco Supervielle S.A.’s Committee on the Control and Prevention of Money Laundering and Financing of Terrorism
The committee on the control and prevention of money laundering and financing of terrorism is formed by six members, two of which are permanent guests. The Board of Directors appoints the members of the control and prevention of money laundering and financing of terrorism committee for a term of 2 or 3 years.
The committee on the control and prevention of money laundering and financing of terrorism analyzes the general policies and strategies with respect to control and prevention of money laundering and financing of terrorism developed by the senior management and submits such policies and strategies, together with its recommendations, to the Board of Directors in order to get its approval. In addition, this committee is responsible for the application of the general policies and strategies approved by the Board of Directors, approving the internal procedures necessary to assure compliance with the legal framework and policies effective over such areas, promoting the implementation of such policies and controlling compliance.
The following table sets forth certain relevant information on the members of the committee on control and prevention of money laundering and financing of terrorism:
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Atilio Dell’Oro Maini | Director, Chairman of the Committe | |
Hugo Santiago Enrique Basso | Director | |
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Sergio Gabai | Member | |
Juan Cuccia | Member | |
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Banco Supervielle S.A.’s Risk Management Committee
The Risk Management Committee sets forth policies and limits to financial risks (including market risk, credit risk, liquidity risk, interest rate risk, exchange risk and other risks) and submits to the Board of Directors the appropriate proposals. Furthermore, this committee supervises the degree of correlation between the risks assumed and the risk profile set forth by the Board of Directors, and analyzes and approves investment and funding policies.
The following table sets forth the members of the Risk Management Committee:
Name | Position | |
Ramiro Gonzalez Prandi |
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Julio Patricio Supervielle | Chairman of the Board | |
Jorge Ramírez |
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Emérico Alejandro Stengel |
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Pablo Di Salvo | Chief Credit Officer, Member | |
Alejandra Naughton | CFO, Member | |
Hernán Oliver | Member | |
Javier Conigliaro | Member | |
Sabrina Roiter | Member | |
Fernando Bodasiuk | Member | |
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Juan Lombardini | Permanent Guest | |
Ana Bartesaghi |
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| Permanent Guest |
Banco Supervielle S.A.’s Credit Committee
The Bank’s credit committee is formed by two directors and the Bank’s CEO, Chief Credit Officer, the Head of Corporate Banking and certain Corporate Banking Officers. The Chairman of the Risk Committee of Grupo Supervielle is a permanent invitee to their meetings.
Banco Supervielle S.A.’s other management committees
The Bank has other management committees, such as the Executive Committee, formed by the CEO and the Senior managers, the Assets and Liabilities Committee, the Retail Banking Credit Committee and the Operational and Reputational Risk Committee.
Management of Our Other Subsidiaries
The senior management of our other subsidiaries is in charge of the implementation and execution of those subsidiaries’ overallshort-term and strategic objectives and reports to the respective CEOs of those companies. The CEO of CCF, Tarjeta, Espacio Cordial and TarjetaMila is Carlos Depalo,Juan Martin Monteverdi, the CEO of SAM is Guillermo Guichandut, the CEO of Supervielle Seguros is Diego Squartini, and the CEO of Espacio CordialIOL is Juan Martin Monteverdi.
José Vignoli.
Set forth below are brief biographical descriptions of the CEOs of our other subsidiaries.
Carlos Depalo Juan Martin Monteverdi has been responsible of the consumer finance units of Grupo Supervielle since August 2018. He has been Chief Executive Officer Cordial Servicios since April 2014 and Chief Executive Officer of CCFCordial Compañía Financiera, Tarjeta Automática and Mila since 2011.September 2018. He graduated fromstudied Business Management at the Universidad Nacional de Buenos Aires as a Public AccountantQuilmes and attended the Advancedtook courses in Management, ProgramLeadership and Sales at The IAE Business School. Between 2004School and Universidad Austral. From June 2011 to April 2014 he worked at GE Money (General Electric) serving as Sales & Marketing Director. During 2004 he heldwas the position of Alternative ChannelsBranch Network Manager at Banco Comafi.Supervielle. From 2001July 2009 to 2003,July 2011 he served as Business Planningwas Territorial Manager at Orígenes AFJP. From 1996 to 2001for Retail Banking and since 2006 he held Business Managementseveral managerial positions also at Banco Río (Santander).
Supervielle.
Guillermo Guichandut has served as CEO of SAM since 2005. He received a degree in public accounting from Universidad Nacional de la Plata, and has completed a masters in Banking Management at the Universidad del CEMA. He is currently an Adjunct Professor of financial mathematics in the Economics department of the Universidad Nacional de la Plata. He is a member of the Executive Committee of the Argentine Chamber of Mutual Funds and President of its Communication Commission. Mr. Guichandut has vast experience in the financial sector, having worked at Bank of Boston and Banco Société Générale Argentina until his appointment as General Manager at SAM in 2005.
Diego Squartini has been Chief Executive Officer of Supervielle Seguros since 2013. He obtained a degree in Economics and a Master’s degree in Business Management from Universidad Nacional de Cuyo. He also attended the Leadership Program at Universidad Austral. From 2010 to 2013, he served as Regional Manager at Banco Supervielle. From 2004 to 2010 he was the Financial Manager at Banco Regional de Cuyo. From 2000 to 2004, he worked as Corporate Business Manager and from 1995 to 2000 as Branch Manager, also at Banco Regional de Cuyo.
Juan Martin MonteverdiJosé Vignoli has been the Chief Executive Officer of Cordial ServiciosInvertirOnline SA ALyC since April 2014. He studiedhold a degree in Business Administration from the University of Tucumán and a Master’s Degree in Finance from the University Torcuato Di Tella. He also attended a Management at the Universidad Nacional de Quilmes and took courses in Management, Leadership and SalesDevelopment Program at IAE Business School in 2012. Between 2004 and Universidad Austral. From June 2011 to April 2014, he was the Branch Network Manager at Banco Supervielle. From July 2009 to July 2011 he was the Territorial Manager for Retail Banking and since 2006 he held several managerial positions also at Banco Supervielle.
EmployeesInvertirOnline.com, where he served as Administration, Finance and Operations Manager and COO. Previously, he held positions in the Audit area of PricewaterhouseCoopers in Buenos Aires, providing services to local and multinational firms.
Employees
We had 5,307 employees as of December 31, 2018, 5,320 employees atas of December 31, 2017, and 4,982 employees at December 31, 2016 and 4,843 employees atas of December 31, 2016.
At the holding company we had 12 employees as of December 31, 2018, 10 employees atas of December 31, 2017, and 6 employees at December 31, 2016 and 6 employees at2016. As of December 31, 2015. At December 31,2018, 2017 2016 and 20152016 the Bank had 3,987, 3,835, 3,522 and 3,3983,522 employees, respectively. AtAs of December 31, 2017, 65.8%2018, 65.9% of the Bank’s employees were members of a national union in which membership is optional. The Bank has not experienced any significant conflicts with this union.
All management positions in the Bank are held bynon-union employees. AtAs of December 31, 2017,2018, the Bank’s employees were under collective bargaining agreement No. 18/75, which regulates labor contracts of financial entities, while the Bank’s managers were covered by general contractual labor laws. However, senior management, as is the case for all other banks in Argentina, is not under a union’s supervision with respect to remuneration and other labor conditions and follows the applicable regulation in this respect.
The Bank currently does not maintain any pension or retirement program for its employees. In order to incentivize the performance of its employees, the Bank implemented several incentive payment plans for its employees linked to performance and results.
At
As of December 31, 2018, 2017 2016 and 2015,2016, CCF had 346, 501, 703 and 701703 employees, respectively. At December 31, 2017, 42.3%2018, 33.5% of CCF’s employees were under the collective bargaining agreementConvenio Colectivo de Empleados de Comercio No.130/75(Convenio de Comercio), which regulates labor contracts ofnon-banking, financial institutions. The remaining 57.7%66.5% of employees, all managers and some senior analysts, were covered only by general contractual labor laws. In addition, atas of December 31, 2017, 0.6% of2018, there are not CCF’s employees were members of the Commerce Employees Union (Sindicato de Empleados de Comercio).
At As of December 31, 2018, 2017 2016 and 2015,2016, Tarjeta had 538, 739, 487 and 479487 employees, respectively. AtAs of December 31, 2017, 92.3%2018, 3.9% of Tarjeta’s employees were under the collective bargaining agreementConvenio Colectivo de Empleados de Comercio No.130/75(Convenio de Comercio). The remaining 7.7%96.1% of employees, all managers and some senior analysts, were covered by general contractual labor laws.
At As of December 31, 2018, 2017, and 2016, SAM had 12, employees12, and 11 in December 31, 2015.employees, respectively. Employees of SAM are not unionized and are covered only by general contractual labor laws. SAM currently does not maintain any pension or retirement program for its employees. SAM incentivizes employee performance through several incentive payment plans linked to performance and results.
At As of December 31, 2018, 2017, 2016 and 2015,2016, Espacio Cordial had 125, 132, 120 and 113120 employees, respectively. AtAs of December 31, 2017,2018, 100% of Espacio Cordial’s employees were under the collective bargaining agreement No. 18/75, which regulates labor contracts of financial entities, including the Bank’s. In addition, atas of December 31, 2017, 68.9%2018, 72.0% of Espacio Cordial’s employees were union members.
At As of December 31, 2017,2018, Supervielle Seguros had 91107 employees. AtAs of December 31, 2017, 122018, 11 out of 91107 of its employees were union members from theSindicato del Seguro de la República Argentina. At December 31, 2017, 89 out2018, 100% of 91its employees were under the collective bargaining agreement No. 264/95Convenio Colectivo de Empleados de Seguros y Reaseguros.
As of December 31, 2018, Micro Lending S.A.U. had 114 employees. As of December 31, 2018, 47.4% of MILA’s employees were under the collective bargaining agreement Convenio Colectivo de Empleados de Comercio No.130/75 (Convenio de Comercio). The remaining 52.6% of employees were covered by general contractual labor laws.
As of December 31, 2018, InvertirOnline S.A.U. and Invertironline.com Argentina S.A.U. had 39 and 27 employees respectively. As of December 31, 2018, 41% of InvertirOnline S.A employees were under the collective bargaining agreement Convenio Colectivo de Empleados de Comercio No.130/75 (Convenio de Comercio). Employees of InvertirOnline S.A.U. and Invertironline.com are not unionized and are covered only by general contractual labor laws.
Grupo Supervielle has grown significantly since 2001. As of December 31, 2017,2018, Grupo Supervielle had 5,3205,307 employees, as compared to December 31, 2001, when the Bank (operating under the name Banco San Luis S.A., Banco Comecial Minorista) had 515 employees.
Compensation
Labor relations in Argentina are governed by specific legislation, such as labor Law No. 20,744 and Collective Bargaining Law No. 14,250, which, among other things, dictate how salary and other labor negotiations are to be conducted. Every industrial or commercial activity is regulated by a specific collective bargaining agreement that groups together companies according to industry sectors and by trade unions. While the process of negotiation is standardized, each chamber of industrial or commercial activity negotiates the increases of salaries and labor benefits with the relevant trade union of such commercial or industrial activity. In the banking sector, salaries are established on an annual basis through negotiations between the chambers that represent the banks and the banking employees’ trade union. The National Labor Ministry mediates between the parties and ultimately approves the annual salary increase to be applied in the banking activity. Parties are bound by the final decision once it is approved by the labor authority and must observe the established salary increases for all employees that are represented by the banking union and to whom the collective bargaining agreement applies.
For the past ten years, negotiations have taken place during the first half of the year.
In addition, each company is entitled, regardless ofunion-negotiated mandatory salary increases, to give its employees additional merit increases or variable compensation schemes.
| Item 7. |
| Item 7.A. |
As of April 24, 2018,30, 2019, we had 456,722,322 outstanding shares of common stock, consisting of 126,738,188 Class A shares and 329,984,134 Class B shares, all with a par value of Ps.1.00 per share. Each share of our common stock represents the same economic interests, except that holders of our Class A shares are entitled to five votes per share and holders of our Class B shares are entitled to one vote per share. As of March 28, 2018,April 30, 2019, we had approximately 5,56012,700 holders of record of our shares.
The table below sets forth information concerning the ownership of our Class A and Class B shares as of April 26, 2018.30, 2019. We are not aware of any other shareholder or holder of ADSs that beneficially owns 5.0% or more of any voting class of our securities.
Shareholder |
| Class A |
| Class B Shares 1 |
| Total Shares |
| Percentage |
| Total Votes |
| Percentage |
| Class A Shares 5 votes | Class B Shares 1 Vote | Total Shares | Percentage of Capital Stock | Total Votes | Percentage of Votes | ||||||||||||||||||
Julio Patricio Supervielle |
| 126,738,188 |
| 37,030,422 |
| 163,768,610 |
| 35.85737 | % | 670,721,362 |
| 69.60036 | % | 126,738,188 | 35,062,713 | (*) | 161,800,901 | 35.426537 | % | 668,753,653 | 69.39618 | % | |||||||||||||||
Capital World Investors(1) |
| — |
| 26,397,070 |
| 26,397,070 |
| 5.77968 | % | 26,397,070 |
| 2.73921 | % | ||||||||||||||||||||||||
Other |
| — |
| 266,556,642 |
| 266,556,642 |
| 58.36295 | % | 266,556,642 |
| 27.66043 | % | — | 294,921,421 | 294,921,421 | 64.573463 | % | 294,921,421 | 30.60382 | % | ||||||||||||||||
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Total: |
| 126,738,188 |
| 329,984,134 |
| 456,722,322 |
| 100.00 | % | 963,675,074 |
| 100.000 | % | 126,738,188 | 329,984,134 | 456,722,322 | 100.00 | % | 963,675,074 | 100.000 | % | ||||||||||||||||
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(1) Based on a Schedule 13G filed by Capital World Investors on February 8, 2018. Held in the form of ADSs.
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.
| (*) | Includes: (i) 2,713 Class B shares of common stock of the Company, par value Pesos 1.00 per share (“Class B Shares”), (ii) 35,060,000 Class B Shares represented by 7,012,000 ADSs. For further information, see Item 4.A—“Recent Developments—Conversion of Class “A” Shares.” |
As of April 20, 2018,30, 2019, we have identified 4332 record holders of our ADSs (each representing the right to receive five Class B shares) in the United States, and no record holders of our Class B shares in the United States. The record holders of our ADSs located in the United States, in the aggregate, held, as of April 20, 201830, 2019 approximately 53.29.2 million of our ADSs, representing approximately 94.5%17.9% of our ADSs and 80.6%13.9% of our Class B shares.
Share Ownership of Banco Supervielle S.A.
As of April 24 2018,30 2019, the Bank had 744,386,351808,852,264 outstanding shares of common stock, consisting of 930,371 Class A shares and 743,455,980807,921,893 Class B shares, all with a par value of Ps.1.00 per share. Each share of the Bank’s common stock represents the same economic interests, except that holders of its Class A shares are entitled to five votes per share and holders of Class B shares are entitled to one vote per share.
The following table sets forth information regarding the ownership of the Bank’s Class A and Class B shares as of April 24, 2018:
Shareholder Name |
| Class A |
| Class B |
| Total Shares |
| Percentage |
| Total Votes |
| Percentage |
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Grupo Supervielle S.A.(2) |
| 830,698 |
| 719,516,097 |
| 720,346,795 |
| 96.77 | % | 723,669,587 |
| 96.73 | % |
Sofital S.A.F.e.I.I.(3) |
| 49.667 |
| 23,131,588 |
| 23,181,255 |
| 3.11 | % | 23,379,923 |
| 3.13 | % |
Other Shareholders |
| 50,006 |
| 808,295 |
| 858,301 |
| 0.12 | % | 1,058,325 |
| 0.14 | % |
Total: |
| 930,371 |
| 743,455,980 |
| 744,386,351 |
| 100 | % | 748,107,835 |
| 100 | % |
(1) Percentages in the chart have been adjusted by rounding. It is possible that such percentages do not represent arithmetic aggregations of the figures used for its calculation.30, 2019:
(2) Grupo Supervielle is a financial services holding company organized under the laws of Argentina of which Julio Patricio Supervielle owns 35.86% of the capital stock, with a 69.60% of total voting rights.
Shareholder Name | Class A Shares 5 votes | Class B Shares 1 Vote | Total Shares | Percentage of Capital Stock(1) | Total Votes | Percentage of Votes | ||||||||||||||||||
Grupo Supervielle S.A.(2) | 830,698 | 783,990,702 | 784,821,400 | 97.029 | % | 788,144,192 | 96.994 | % | ||||||||||||||||
Sofital S.A.F.e.I.I.(3) | 49,667 | 23,131,588 | 23,181,255 | 2.8659 | % | 23,379,923 | 2.877 | % | ||||||||||||||||
Other Shareholders | 50,006 | 799,603 | 849,609 | 0.1050 | % | 1,049,633 | 0.129 | % | ||||||||||||||||
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Total: | 930,371 | 807,921,893 | 808,852,264 | 100 | % | 812,573,748 | 100 | % | ||||||||||||||||
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| (1) | Percentages in the chart have been adjusted by rounding. It is possible that such percentages do not represent arithmetic aggregations of the figures used for its calculation. |
(3)
| (2) | Grupo Supervielle is a financial services holding company organized under the laws of Argentina of which Julio Patricio Supervielle owns 35.43% of the capital stock, with a 69.40% of total voting rights. |
| (3) | Sofital is a corporation organized under the laws of Argentina of which Grupo Supervielle owns 96.8% and Espacio Cordial owns 3.2%. |
| Item 7.B | Related Party Transactions |
Item 7.BRelated Party Transactions
Other than as set forth below, we are not a party to any material transactions with, and have not made any loans to any (i) enterprises that directly or indirectly through one or more intermediaries, control or are controlled by us; (ii) associates (i.e., an unconsolidated enterprise in which we have a significant influence or which has significant influence over us); (iii) individuals owning, directly or indirectly, an interest in our voting power that gives them significant influence over us, as applicable, and close members of any such individual’s family (i.e., those family members that may be expected to influence, or be influenced by, that person in their dealings with us, as applicable); (iv) key management personnel (i.e., persons that have authority and responsibility for planning, directing and controlling our activities, including directors and senior management of companies and close members of such individual’s family); or (v) enterprises in which a substantial interest is owned, directly or indirectly, by any person described in (iii) or (iv) over which such a person is able to exercise significant influence nor are there any proposed transactions with such persons. For purposes of this paragraph, this includes enterprises owned by our directors or major shareholders that have a member of key management in common with us, as applicable. In addition, “significant influence” means the power to participate in the financial and operating policy decisions of the enterprise, but means less than control. Shareholders beneficially owning a 10% interest in our voting power are presumed to have a significant influence on us.
Management Services
To the extent that there are no conflicts of interest, we lend management services to our subsidiaries, the Bank, Tarjeta, SAM, Sofital, CCF and Espacio Cordial. Our services include: financial and commercial advisory services, fiscal planning and optimization, defining auditing policies, developing and evaluating upper management, elaborating annual budgets, planning and developing complementary activities and defining the mission of related companies and policies related to social responsibility. These services are provided pursuant to agreements that provide that our subsidiaries will indemnify us for any claim, damage, liability, tax, cost and expense incurred or suffered by us in connection with financial transactions in which such subsidiaries were engaged. The management’s fees are equal to the ordinary and extraordinary costs incurred plus amark-up of 20% plus 21% VAT. If the services to be provided are of an extraordinary nature, we have the right to additional compensation, the amount of which shall be determined in each case.
The following table sets forth information regarding fees received from our subsidiaries and related parties for our management services for the yearyears ended December 31, 2018 and 2017.
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| Year ended December 31, 2018 | Year ended December 31, 2017 | |||||||
| (in thousands of Pesos, plus VAT) | (in thousands of Pesos, plus VAT) | |||||||
Bank | 71,841 | 78,929 | ||||||
Tarjeta | 232 | 256 | ||||||
Cordial Microfinanzas | — | 75 | ||||||
SAM | 768 | 845 | ||||||
Sofital | 74 | 98 | ||||||
Viñas del Monte | — | 9 | ||||||
CCF | 7,086 | 7,804 | ||||||
Espacio Cordial | 393 | 432 | ||||||
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Total. | 80,394 | 88,448 | ||||||
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Operator Services Agreement with the Bank
In March 2016, we entered into an agreement with the Bank pursuant to which the Bank will provide accounting, administrative, legal and treasury services to us. We will pay the Bank Ps.32.000 (plus 21% VAT) per month for such services. In addition, we will pay the Bank Ps.8.000 (plus 21% VAT) per month for institutional services. The Bank’s services include, among others: accounting records of daily transactions and closing entries, preparation of financial statements, management of accounting records, management of institutional relations, structuring and management of funding instruments, liquidity investment operations management, maintenance of our corporate records, management of compliance with disclosure requirements, registration of corporate acts and compliance with information requirements. The term of the agreement is one year and may be renewed automatically at maturity for equal and successive periods. This agreement was renewed automatically and it is in force as of the date of this annual report.
Trademark Licenses
In 2013, we signed agreements with Espacio Cordial CCF and Cordial MicrofinanzasCCF granting them licenses to use certain of our trademarks (including our trademarks for “Cordial,” “Cordial Servicios,” “Cordial.com,” “Cordial Servicios Pensados para vos,” “Cordial mucho más que efectivo,” “Cordial Negocios,” “Cordial Negocios un impulso para tus proyectos”)“Cordial”, “Carta App” and “Tienda Supervielle”. We granted these trademark licenses to these subsidiaries to enhance the marketing of certain their products and services related to insurance, health, tourism, credit cards and loans, among others. Pursuant to these agreements, we received fees from these companies in 20172018 in a total amount of Ps.4.5Ps.5.8 million.
Financial Loans
Some of our directors and the directors of the Bank have been involved in certain credit transactions with the Bank as permitted by Argentine law. The Argentine Corporate LawAGCL and the Central Bank’s regulations allow directors of a limited liability company to enter into a transaction with such company if such transaction follows prevailing market conditions. Additionally, a bank’s total financial exposure to related individuals or legal entities is subject to the regulations of the Central Bank. Such regulations set limits on the amount of financial exposure that can be extended by a bank to affiliates based on, among other things, a percentage of a bank’s RPC.
The Bank is required by the Central Bank to present to its Board of Directors, on a monthly basis, the outstanding amounts of financial assistance granted to directors, controlling shareholders, officers and other related entities, which are transcribed in the minute books of the Board of Directors. The Central Bank establishes that the financial assistance to directors, controlling shareholders, officers and other related entities must be granted on an equal basis with respect to rates, tenor and guarantees as loans granted to the general public.
The financial assistance granted to our directors, officers and related parties by the Bank was granted in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with othernon-related parties, and did not involve more than the normal risk of collectability or present other unfavorable features.
The following table presents the aggregate amounts of total consolidated financial exposure of the Bank to related parties, the number of recipients, the average amounts and the single largest exposures as of the end of the periods indicated.
|
| As of December 31, |
| ||||
|
| 2017 |
| 2016 |
| 2015 |
|
|
| (in thousands of Pesos) |
| ||||
Aggregate total financial exposure |
| 428,758 |
| 281,620 |
| 207,787 |
|
Number of recipient related parties |
| 76 |
| 78 |
| 79 |
|
(a) individuals |
| 68 |
| 69 |
| 70 |
|
(b) companies |
| 8 |
| 9 |
| 9 |
|
Average total financial exposure |
| 5,642 |
| 3,611 |
| 2,630 |
|
Single largest exposure |
| 336,110 |
| 79,709 |
| 73,499 |
|
| As of December 31, | ||||||||
| 2018 | 2017 | |||||||
| (in thousands of Pesos, except number of recipients) | ||||||||
Aggregate total financial exposure | 783,183 | 633,042 | ||||||
Number of recipient related parties | 75 | 76 | ||||||
(a) individuals | 68 | 68 | ||||||
(b) companies | 7 | 8 | ||||||
Average total financial exposure | 13,897 | 10,200 | ||||||
Single largest exposure | 735,463 | 496,252 | ||||||
Irrevocable Capital Contributions and Share Transfers
Following the approval at the Shareholders’ Meeting of April 27, 2017, Julio Patricio Supervielle made a capital contribution to Grupo Supervielle in the form of 7,672,412 of newly-issued Sofital shares. As a result of 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 thein-kind contribution, representing 57.66% 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% of the total capital increase.
On February 17, 2017, we and the Bank made capital contributions to CCF for Ps.100.0 million. On March 22, 2017, CCF held an Extraordinary Shareholders’ meeting by which it resolved to accept such contributions for increase the capital stock in the amount of Ps.19.3 million increasing it 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. 1Ps.1 each and entitled to one vote per share.
On March 27, 2017, we made capital contributions to the Bank for Ps.95.0 million.
On July 24, 2017, we 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, we, the Bank and CCF made an irrevocable capital contribution in advance of future capital increases to Tarjeta for an amount of Ps.131.3 million, Ps.15.0 million and Ps.3.8 million, respectively.
On November 24, 2017, we made a 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 with a paid in capital from Ps.2.5 billion.
On December 13, 2017, we and the Bank made an irrevocable capital contribution in advance of future capital increases to CCF for an amount of Ps.30 million and Ps.570 million, respectively.
On January 16, 2018, we and the Bank made a 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 with a paid in capital from Ps.973.243.
On March, 19,, 2018, we, the Bank and CCF made a capital contribution to Tarjeta for an amount of Ps.262.5 million, Ps.30.0 million and Ps.7.5 million, respectively.
On March 14, 2018 and April 18, 2018 Grupo Supervielle S.A. commited to make a cash and or in kind capital contribution to Banco Supervielle S.A. for an amount of Ps.500 million and Ps.361 million respectively. On April, 19, 2018, the shareholders’ meeting of the Bank approved the capitalization of the capital contriubtion commited by us for an amount of Ps.861 million.
On August, 21, 2018, and on November 12, 2018, Grupo Supervielle approved to make an irrevocable capital contribution in advance of future capital increases to Mico Lending S.A.U. for an amount of Ps.58 million and Ps.100 million respectively. On November 12, 2018, Micro Lending S.A.U. held an ordinary shareholders’ meeting by which it resolved to accept the contributions received..
Item 7.CInterestsOn November 21, 2018, the Shareholder meeting of experts and counselBanco Supervielle S.A. approved the capitalization of anin-kind capital contribution made by Grupo Supervielle for an amount of Ps.1 billion. This capitalization was approved by the Central Bank of Argentina on January 17, 2019 in the framework of the Communication “A” 6304.
On December 17, 2018 Grupo Supervielle S.A. received a restitution on the capital contribution to Invertir Online.com S.A. for an ammount of $276,000 which was not capitalized.
On December 18, 2018, Grupo Supervielle S.A. made anin-kind capital contribution for an amount of Ps.200 million to Micro Lending S.A.U., in accordance with the shareholders meeting resolution held on December 17, 2018.
On February 12, 2019 Banco Supervielle S.A. made an irrevocable Capital Contribution to CCF for an amount of Ps.950 million. Grupo Supervielle S.A. was committed to make a cash and/orin-kind capital contribution for an amount of Ps.50 million.. On February 2019, CCF held a shareholder meeting by which it resolved to capitalize the abovementioned capital contribution subject to the Central Bank of Argentina authorization in the framework of the Communication “A” 6304.
| Item 7.C | Interests of experts and counsel |
Not applicable.
Financial Information |
| Item 8.A. | Consolidated Statements and Other Financial Information. |
See Item 18 and our audited consolidated financial statements as of and for the three years ended December 31, 2018 and 2017 included in this annual report.
Legal Proceedings
As of the date of this annual report, we are not a party to any legal or administrative proceedings for which the outcome is likely to have a material adverse effect on our results of operations.
The Bank and CCF are party to proceedings relating to collection efforts and other legal or administrative actions initiated in the normal course of business, including certain class actions initiated against a number of banks and financial companies, including ours, by public and private organizations in connection with alleged overcharging on products and interest rates, among others.
Although the provisions regarding class actions held in the Argentine National Constitution and the Consumer Protection Law are currently considered to be insufficient and in need of completion, the Argentine Supreme Court has, nonetheless, admitted class actions, as is the case with lawsuits against financial entities related to “collective interests,” as long as certain procedural requirements are met.
The class action lawsuits involving the Bank and CCF are related to alleged overcharging on life insurance, interest rates and administrative charges, fees on the sale price of foreign currency, administrative charges on savings accounts, consumer loans and credit cards, and interest rates in factoring operations, as well as the inadequacy of the contingency risk charge on checking accounts. These types of class actions were brought against every financial entity in Argentina. 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.
Our subsidiaries are not parties to any legal proceedings, the outcome of which is likely to have a material adverse effect on their respective results of operations.
Dividends
Dividends
In accordance with Argentine Corporate Law,the AGCL, our bylaws and CNV regulations, we may make one or more declarations of dividends with respect to any year, including anticipated dividends, out of our distributable net income(ganancias líquidas y realizadas)as reflected in our consolidated balance sheet, or consolidated special interim balance sheet in case of anticipated dividends.
Declaration and payment of dividends to all holders of each class of our shares (Class A, Class B shares and preferred shares (to the extent any such shares are outstanding)), to the extent funds are legally available, is determined by all of our shareholders with voting rights (i.e., our Class A and Class B shareholders) at the annual ordinary shareholders’ meeting. At such annual ordinary shareholders’ meeting, our Class A shares will be entitled to five votes each and our Class B shares will be entitled to one vote each. It is the responsibility of our Board of
Directors to make a recommendation to our shareholders with respect to the amount of dividends to be distributed. The Board of Directors’ recommendation will depend on a number of factors, including but not limited to, our operating results, cash flow, financial condition, capital position, legal requirements, contractual and regulatory requirements, and investment and acquisition opportunities. As a general rule, the Board of Directors will favor efficient use of capital in itsrecommendation-making process. Thus, the Board will recommend reinvesting earnings when there are investment opportunities or it will recommend distributing dividends when there is excess capital.
However, shareholders are ultimately entitled to overrule the recommendation of the Board of Directors through the affirmative vote of the absolute majority of the present votes at an ordinary shareholders’ meeting.
The Board of Directors may also decide and pay anticipated dividends. In such instance, each individual director and member of the Supervisory Committee will be jointly and severally liable for the payment of such dividends if our retained earnings for the year for which such dividends were paid is insufficient to cover the payment of such dividends.
Dividends are distributed on a pro rata basis according to the number of common shares held by the shareholder. All shares of our capital stock rankpari passu with respect to the payment of dividends, regardless of class. Under CNV regulations, cash dividends must be paid to the shareholders within 30 days of their approval. In the case of stock dividends, shares are required to be delivered within three months of our receipt of notice of authorization by the CNV for the public offering of such shares. The right of shareholders to demand payment of dividends shall toll three years after the date on which we first make them available to shareholders. Any dividends that are not claimed during this period are deemed extraordinary gains by us.
In accordance with Argentine law, our bylaws and CNV regulations, we are required to allocate to our legal reserve 5% of our yearly income, plus or minus the results of prior years, until our legal reserve equals 20% of our adjusted capital stock. Under Argentine Corporate Lawthe AGCL and our bylaws, our yearly net income (as adjusted to reflect changes in prior results) is allocated in the following order: (i) to comply with the legal reserve requirement; (ii) to pay the accrued fees of the members of the Board of Directors and Supervisory Committee; (iii) to pay dividends on preferred stock, which shall be applied first to pending and unpaid accumulated dividends; and (iv) the remainder of the net income for the year may be distributed as additional dividends on preferred stock, if any, or as dividends on common stock, or may be used for voluntary or contingent reserves, or as otherwise decided by our shareholders at the annual ordinary shareholders’ meeting.
Holders of ADSs will be entitled to receive any dividends payable in respect of our underlying Class B shares. We will pay cash dividends to the ADS depositary in U.S. dollars abroad, although we reserve the right to pay cash dividends in Pesos in Argentina if so required by applicable foreign exchange regulations in place at the time of payment. The ADS deposit agreement provides that the depositary will convert cash dividends received by the ADS depositary in Pesos to U.S. dollars: if so permitted by, and subject to the limits set forth in, applicable foreign exchange regulations in place at such time and, after deduction or upon payment of fees and expenses of the ADS depositary and deduction of other amounts permitted to be deducted from such cash payments in accordance with the ADS deposit agreement (such as for unpaid taxes by the ADS holders in connection with personal asset taxes or otherwise), will make payment to holders of the ADSs in U.S. dollars. If dividend payments cannot be made in U.S. dollars outside of Argentina, the transfer outside of Argentina of any funds collected by foreign shareholders in Pesos in Argentina may be subject to certain restrictions. Although the transfer of funds abroad by local companies to pay annual dividends only to foreign shareholders based on approved and fully audited consolidated financial statements does not require formal approval by the Central Bank, however, the decrease in availability of U.S. dollars in Argentina in the past years led the Argentine government to impose informal restrictions that consisted of de facto measures restricting local residents and companies from purchasing foreign currency through the MLC to make payments abroad, such as dividends, among others. The Macri administration has since eliminated most of the foreign exchange restrictions in place, but, in the future, the Argentine government or the Central Bank could reintroduce exchange controls and impose restrictions on capital transfers abroad by our shareholders. See “Item 10.D Exchange Controls” and “Item 3.D Risk Factors.”
We are a holding company, and in addition to certain management fees we collect from some of our subsidiaries, our main source of cash to pay dividends are the dividends we receive from our subsidiaries. We therefore depend on the results of operations, cash flow and distributable income of our operating subsidiaries, principally the Bank.
We and our subsidiaries are subject to contractual, legal and regulatory requirements affecting our ability to pay dividends.
In particular, pursuant to Central Bank Communication “A” 6464, as amended and supplemented, dividend distributions shall be admitted as long as none of the following circumstances apply:
| (i) |
|
(iii) the financial institution is in compliance with its reporting obligations to
| (ii) | the financial institution is not receiving financial assistance from the Central Bank; |
(iv) 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
| (iii) | the financial institution is in compliance with its reporting obligations to the Central Bank; |
(v) if the financial institution did not comply with the applicable Additional Capital Margins (as defined below).
| (iv) | 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 |
| (v) | 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 or mentioned by external auditors on their report, and (e) individual exemptions for asset valuation granted by the Superintendency. In addition, pursuant to Central Bank Communication “A” 5827, as of January 1, 2016, financial entities are required to establish a capital margin in addition to their minimum capital requirements, for the purpose of accumulating their own resources, which they will be able to use if they incur losses. 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 restore that margin. See “Item 4.B4.B Business overview—Argentine Banking Regulation—Liquidity and Solvency Requirements—Requirements Applicable to Dividend Distribution.”
Although distribution of dividends by the Bank has been authorized by the Central Bank at times, no assurance can be given that in the future the Central Bank will not limit the Bank’s ability to distribute dividends approved by its shareholders at the annual ordinary shareholders’ meeting or that such authorization will be for the full amount of dividends that the Bank may distribute pursuant to applicable regulation.
We are required to pay personal assets tax corresponding to Argentine and foreign individuals and foreign entities for the holding of our shares at December 31 of each year. We pay this tax on behalf of our shareholders, whenever applicable, and are entitled, pursuant to the Personal Assets Tax Law, to seek reimbursement of such paid tax from the applicable shareholders in various ways, including by withholding dividends. See “Item 10.E Taxation—Material Argentine Tax Considerations—Personal assets tax.”
Over the past five years,During 2017 and 2018, we received the following dividend payments in cash from our subsidiaries: (i) Ps.144.6 million in 2018 and Ps.115.6 million in 2017 from SAM, for 2016, 2015, 2014, 2013(ii) Ps.27.8 million in 2018 and 2012 of Ps.73.0, Ps.77.5; Ps.17.1Ps.36.5 million Ps.16.1 million and Ps.9.0 million, respectively, Ps.7.0 million from Tarjeta Automatica in 2015, Ps. 23.1 million and Ps.42.3 million2017 from Espacio Cordial, (iii) Ps.97.4 million in 20162018 and 2015 respectivelyPs.233.9 million in 2017 from Supervielle Seguros, and Ps.6.5(iv) Ps.25.6 million in 2018 and Ps.0 million in 2017 from Sofital in 2015. WeSofital. Moreover we received an advance dividend payments in cashpayment from Supervielle Seguros for the period endedwhich will be ending on June 30, 2017, June 30, 2016 and June 30, 20152019 of Ps. 150.0 million, Ps.76.8 million and Ps.4.8 million, respectively.Ps.152.0 million. We did not receive dividend payments from the Bank andor our other subsidiaries. However,subsidiaries during 2018 and 2017.
As described in Note 25 to our audited consolidated financial statements we received a distributionmay pay dividends to the extent that we have distributable retained earnings and distributable reserves calculated in accordance with the rules of dividendsthe Argentine Central Bank. Therefore, retained earnings included in the form of Bank shares for 2012 for an amount equal to Ps.97.4 million.our audited consolidated financial statements may not be wholly distributable.
Grupo Supervielle paid dividends to its shareholders for 2017, 2016, 2015, 2014, 2013, 2012 and 20112012 totaling approximately Ps.243.7 million, Ps.65.5, Ps.25.2 million, Ps.7.4 million, Ps.8.3 million, Ps.8.7 million and Ps.24.4Ps.8.7 million, respectively.
Shareholders’ equity under the rules of the Argentine Central Bank comprise the following captions:
| As of December 31, 2018 | ||||
Capital Stock | 456,722 | |||
Paid in Capital | 8,996,882 | |||
Legal Reserve | 91,344 | |||
Other Reserves | 5,355,848 | |||
Retained earnings | (775,223 | ) | ||
Net Income for the year | 3,029,982 | |||
Total shareholders’ equity under the rules of the Argentine Central Bank | 17,155,555 | |||
On February 19, 2018,March 7, 2019, our Board of Directors proposed a distribution of dividends in cash for the 20172018 fiscal year of Ps.243.7Ps.303 million. On April 24, 2018,26, 2019, our ordinary shareholders’ meeting approved the dividend payment for the 20172018 fiscal year in the amounts of Ps.243.7 million.Ps.303 million.
| Item 8.B | Significant Changes |
Please see “Item 8.BSignificant Changes4.A—Recent Developments” herein.
| Item 9. | The Offer and Listing |
| Item 9.A. | Offer and Listing Details |
Not applicable.
Plan of distribution |
Not applicable.
The following table sets forth, for the periods indicated, the annual high and low market prices for the Class B Shares on the ByMA and the ADSs on the NYSE.
|
| ByMA |
| NYSE |
| ||||
|
| Ps. per Class B Share |
| U.S.$ per ADS |
| ||||
Year |
| High |
| Low |
| High |
| Low |
|
2016(1) |
| 47.50 |
| 31.85 |
| 15.40 |
| 11.20 |
|
2017 |
| 112.90 |
| 40.59 |
| 30.08 |
| 13.36 |
|
The following table sets forth, for the periods indicated, the annual high and low market prices for the Class B Shares on the ByMA and the ADSs on the NYSE.
|
| ByMA |
| NYSE |
| ||||
|
| Ps. per Class B Share |
| U.S.$ per ADS |
| ||||
Period |
| High |
| Low |
| High |
| Low |
|
2016 |
|
|
|
|
|
|
|
|
|
Second Quarter(1) |
| 37.90 |
| 31.85 |
| 12.88 |
| 12.10 |
|
Third Quarter |
| 46.00 |
| 37.45 |
| 15.40 |
| 12.55 |
|
Fourth Quarter |
| 47.50 |
| 39.00 |
| 15.26 |
| 11.20 |
|
|
| ByMA |
| NYSE |
| ||||
|
| Ps. per Class B Share |
| U.S.$ per ADS |
| ||||
Period |
| High |
| Low |
| High |
| Low |
|
2017 |
|
|
|
|
|
|
|
|
|
First Quarter |
| 53.10 |
| 40.90 |
| 17.00 |
| 13.40 |
|
Second Quarter |
| 59.71 |
| 49.87 |
| 18.26 |
| 16.32 |
|
Third Quarter |
| 86.00 |
| 58.07 |
| 24.69 |
| 16.94 |
|
Fourth Quarter |
| 112.90 |
| 82.20 |
| 30.08 |
| 23.41 |
|
|
| ByMA |
| NYSE |
| ||||
|
| Ps. per Class B Share |
| U.S.$ per ADS |
| ||||
Period |
| High |
| Low |
| High |
| Low |
|
2018 |
|
|
|
|
|
|
|
|
|
First Quarter |
| 134.90 |
| 112.00 |
| 33.01 |
| 28.26 |
|
The following table sets forth, for the periods indicated, the annual high and low market prices for the Class B Shares on the ByMA and the ADSs on the NYSE.
|
| ByMA |
| NYSE |
| ||||
|
| Ps. per Class B Share |
| U.S.$ per ADS |
| ||||
Period |
| High |
| Low |
| High |
| Low |
|
2017 |
|
|
|
|
|
|
|
|
|
October |
| 94.00 |
| 83.65 |
| 27.01 |
| 23.89 |
|
November |
| 97.75 |
| 82.20 |
| 27.67 |
| 23.41 |
|
December |
| 112.90 |
| 90.60 |
| 30.08 |
| 26.38 |
|
2018 |
|
|
|
|
|
|
|
|
|
January |
| 128.70 |
| 112.00 |
| 33.01 |
| 29.40 |
|
February |
| 134.90 |
| 112.00 |
| 32.59 |
| 28.26 |
|
March |
| 125.70 |
| 116.50 |
| 30.84 |
| 28.40 |
|
April(2) |
| 126.50 |
| 109.00 |
| 31.21 |
| 26.55 |
|
(1) Values available for our Class B Shares and ADS from May 19, 2016, the first trading day on the ByMA and NYSE, respectively.
(2) From April 1 through April 26, 2018.
C. Markets.
| Item 9.C. | Markets. |
On May 18, 2016, we completed our IPO. Since May 19, 2016, our ADSs representing Class B shares have been trading on the NYSE under the symbol ‘SUPV.’ Our Class B shares are currently traded on the ByMA (MERVAL since May 2016,(formerly MERVAL and, ByMA since April 2017) and MAE (since May 2016) under the symbol ‘SUPV.’
On December 29, 2016, the CNV approved the constitution of ByMA as a new stock market, formed byas aspin-off of certain assets of the MERVAL relating to its stock market operations and capital contributions ofby the Buenos Aires Stock Exchange. Following such authorization, and effective April 17, 2017, the listing of all securities listed on MERVAL have been automatically transferred to ByMA, as successor of MERVAL’s activities. Additionally, the delegation of powers granted by MERVAL to the Buenos Aires Stock Exchange will apply to ByMA, and, thus, the Buenos Aires Stock Exchange will continue to carry out the activities referred to in paragraphs b), f) and g) of Article 32 of the Argentine Capital Markets Law No. 26,831 on accountbehalf of ByMA, including the authorization, suspension and cancelling of the listing or trading of securities and acting as arbitration court of such market for all matters concerning listed companies’ relationship with shareholders and investors.
| Item 9.D. | Selling Shareholders |
D. Selling ShareholdersNot applicable.
| Item 9.E. | Dilution |
Not applicable.
E. Dilution
| Item 9.F. | Expenses of the issue |
Not applicable.
Additional InformationF. Expenses of the issueItem 10.
| Item 10.A | Share capital |
Not applicable.
| Item 10.B |
|
Corporate Purpose
Our bylaws set forth in Article 4 that our corporate purpose is to carry out financial activities, within or outside of Argentina, either on our own account, or on account of a third party or associated with athird-party, by providing capital, in cash or otherwise, to other existing or newly created companies, assuming their control or not (with the limitations set forth in Section 30 and related sections of the Argentine Corporate Law)AGCL), or to individuals, as well as stock trading, shares, debentures and all types of securities, the issuance of guarantees, constitution or transfer of secured loans, whether real or not, excluding transactions provided under the Financial Institutions Law and any other law that requires public bidding. We may exercise mandates, representations, agencies and commissions for all transactions related to financial activity and manage assets and businesses of corporations, persons or entities located in Argentina or abroad. To that extent, and according to our bylaws, we have full legal capacity to acquire rights, incur obligations and exercise any kind of acts not prohibited by law or by our bylaws.
Rights, Preferences and Restrictions of Each Class of Common Shares
Our Class A shares are entitled to five votes each and our Class B shares are entitled to one vote each during shareholders’ meetings, as established in subsection (a) of Article Six6 of our bylaws.
However, Class A shares are entitled to only one vote with regard to certain issues detailed in the last paragraph of Article 244 of the Argentine Corporate Law,AGCL, such as: (i) change of our corporate structure; (ii) our early dissolution; (iii) our relocation abroad; (iv) a fundamental change in our corporate purpose; or (v) total or partial recapitalization of our statutory capital after a loss. The provisions set forth in Article 244 of the Argentine Corporate LawAGCL will not apply to the surviving entity in a merger or asplit-up. Also, under Article 284 of the Argentine Corporate Law,AGCL, Class A shares are entitled to only one vote in the election of syndics.
Upon request from a shareholder of Class A shares, our Board of Directors must convert all or part of such shareholder’s Class A shares into Class B shares at an exchange rate of one Class B share per one Class A share. Before making the exchange, the Board will verify that there are no restrictions that prohibit or limit the exchange (subsection b) of Article Six6 of the bylaws.
A two thirds vote by our Class A shares is required, regardless of the percentage of capital they represent, in order for us to duly resolve a merger with another company, our voluntary dissolution, our relocation abroad, and the fundamental change in our corporate purpose (subsection d) of Article Six6 of the bylaws.
Any person who directly or indirectly acquires through any means or title Class B shares, or any of our stock convertible into Class B shares, in an amount which gives that person control over more than 3% of all Class B shares, must inform us of this within five days (5) of completing the acquisition which causes them to exceed this 3% threshold (subsection e) of Article Six6 of our bylaws.
The provisions of subsection (f) of Article Six6 of our bylaws authorize the total or partial redemption of fullypaid-in shares, which must be made on the terms provided in Article 223 of the Argentine Corporate LawAGCL (including the condition that the shareholders’ meeting set a fair price with respect to the shares to be redeemed) and such other terms as may be determined by our Board of Directors. This partial or total redemption must be approved by the affirmative vote of the absolute majority of the present votes at an extraordinary shareholders’ meeting.
Preferred Shares
Preferred shares may only be issued with the prior approval by a shareholders’ general meeting.
The Argentine Corporate LawAGCL and our bylaws permit our shareholders to authorize the issuance of preferred shares and determine their rights during a general shareholders’ meeting. These preferred shares may be entitled to accumulated andnon-accumulated fixed dividends, with or without additional participation.
Holders of preferred shares may also have other privileges, such as in the event of liquidation. Holders of preferred shares may also have a right to vote. Additionally, if holders of preferred shares are not paid dividends they shall be entitled to vote. Regardless of dividend payments, preferred shares shall also have a right to vote with respect to special issues, such as a change in our corporate structure, a merger into another company (where we are not the surviving company and the surviving company does not trade on an exchange), early liquidation, our relocation abroad, total or partial recapitalization of our statutory capital after a loss and a fundamental change in our corporate purpose as it is described in our bylaws.
Shareholders’ Liability
Shareholders’ liability for the losses of a company is limited to the value of the shareholder’s shareholdings in the company. According to the Argentine Corporate Law,AGCL, however, shareholders who have a conflict of interest with the company with respect to certain matters and who do not abstain from voting on such matters may be held liable for damages to the company, provided that their votes were necessary for the adoption of the relevant decision. In addition, shareholders who voted in favor of a resolution that is subsequently declared void by a court as contrary to Argentine laws or a company’s bylaws (or regulations, if any) may be held jointly and severally liable for damages to such company, other shareholders or third parties resulting from such resolution. See also “Item 3.D Risk Factors —Risks Relating to Our Class B Shares and the ADSs—Our shareholders may be subject to liability for certain votes of their securities.”
Preemptive Rights and Accretion Rights
According to the Argentine Corporate LawAGCL and Article Six,6, (subsection c) of our bylaws, in the event of a capital increase, holders of common shares of any class have a preferential right, in proportion to the number of shares they hold, to subscribe to additional shares of the same class as those they own. Holders of preferred shares have a preemptive right to subscribe only with respect to the issuance of preferred shares. Preemptive rights will also be given to holders of common shares in the event of an issuance of preferred shares or convertible securities, but will not apply in the event of a conversion of such preferred shares or convertible securities.
According to Article 15 of our bylaws and Section 216 of the Argentine Corporate Law,AGCL, no shares issued after our IPO may be entitled to multiple votes, except as permitted by applicable law.
According to Article 194 of the Argentine Corporate Law,AGCL, shareholders who would have exercised their right to a preemptive subscription and who have indicated their intention to exercise their right to accrue will have the right to assume the preemptive subscription rights of shareholders who do not exercise their right, in proportion to the number of shares bought by said shareholders upon exercising their right to preemptive subscription. The right to a preemptive subscription must be exercised within 30 days of the announcement to shareholders that they can exercise their right. Such announcement must be published for a period of three days in the Official Gazette and in an Argentine newspaper of wide circulation. According to the Argentine Corporate Law,AGCL, companies that are authorized by the CNV to make public offers of their securities may, upon authorization of an extraordinary shareholders’ meeting held in the same place
and manner as other shareholders’ meetings, reduce this period to 10 days. Any shares which are not subscribed by shareholders pursuant to their preemptive subscription right or right to accrue may be offered to third parties.
Appraisal Rights
Whenever our shareholders approve:
·a merger orspin-off in which we are not the surviving corporation, unless the acquirer’s shares are authorized for public offering or listed on any stock exchange;
·a transformation of our corporate legal status;
·a fundamental change in our corporate purpose;
·a change in our domicile outside Argentina;
·a voluntary termination of the public offering or listing authorization;
·a decision in favor of our continuation upon delisting or cancellation of our public offering authorization; or
·a total or partial recapitalization following a mandatory reduction of our capital or liquidation,
any shareholder that voted against such action or did not attend the relevant meeting may exercise appraisal rights, that is, the rights to withdraw and have its shares cancelled in exchange for the book value of its shares, determined on the basis of our latest balance sheetfinancial statements prepared, or that should have been prepared, in accordance with Argentine laws and regulations, provided that such shareholder exercises its appraisal rights within the time frame set forth below.
Appraisal rights must be exercised within five (5) days following the meeting at which the resolution was adopted in the event of a dissenting shareholder that voted against such resolution, or within 15 days following such meeting in the case of a dissenting shareholder that did not attend the meeting and who can prove that it was a shareholder at the date of the meeting. In the case of mergers or spinoffs involving an entity authorized to make public offering of its shares, appraisal rights may not be exercised if the shares to be received as a result of the transaction are listed in
any stock exchange. Appraisal rights are terminated if the resolution giving rise to such rights is overturned at another shareholders’ meeting held within 60 days from the last day for our attending shareholders to exercise their appraisal rights.
Payment of appraisal rights must be made within one year of the date of the shareholders’ meeting at which the resolution was adopted, except where the resolution that gave rise to such rights was to delist the capital stock of the company or to reject a public offering or listing proposal, in which case the payment period is reduced to 60 days from the meeting at which the resolution was adopted or from the publication of the notice informing the delisting or rejection of the public offering or listing of the capital stock.
Because of the absence of legal precedent directly on point, there is doubt as to whether holders of ADSs will be able to exercise appraisal rights either directly or through the depositary with respect to Class B shares in the form of ADSs.
Registration Requirements of Foreign Companies that Hold Class B Shares Directly
Under the Argentine Corporate Law,AGCL, foreign companies that hold shares directly (and not as ADSs) in an Argentine company must register with the IGJ in order to exercise certain shareholder rights, including voting rights. The registration requires the filing of corporate and accounting documents in order to demonstrate that the foreign shareholder’s principal activity is performed outside Argentina. Therefore, it will have to prove that it is entitled to conduct business in its place of incorporation and meets certain foreign assets requirements.
Liquidation Rights
In the case of our liquidation or dissolution, our assets will be applied to satisfy our outstanding liabilities and proportionally distributed first among our holders of preferred stock, if any, as per the terms of the preferred stock, if any. If any surplus remains, it will be proportionally distributed among holders of our common stock. Our liquidation will be carried out by the Board of Directors or by the liquidator or liquidators appointed by a shareholders’ meeting, under the surveillance of the Supervisory Committee.
Meetings of Shareholders and Voting Rights
Notice of Meetings
Notices of shareholders’ meetings are governed by the provisions of our bylaws, the AGCL and Argentine Corporate Law and Law No. 26,831.Capital Markets Law. Notice of shareholders’ meetings must be published for five days in the Official Gazette, in an Argentine newspaper of wide circulation and in the publications of Argentine authorized markets in which the shares are listed and traded, at least 20 days but not more than 45 days prior to the date on which the meeting is to be held and must include information regarding the type of meeting to be held, the date, time and place of such meeting and the agenda. If a quorum is not available for such meeting, a notice for a second meeting, which must be held within 30 days from the date on which the first meeting was called, must be published for three days, at least eight days before the date of the second meeting. Theabove-described notices of shareholders’ meetings may be effected simultaneously, in the case of ordinary meetings, in order for the second meeting to be held on the same day as the first meeting, one hour after, except in certain circumstances. Shareholders’ meetings may be validly held without notice if all shares of our outstanding capital stock are present and resolutions are adopted by unanimous vote of such shares.
The quorum for an ordinary shareholders’ meeting is the majority of the share capital entitled to vote. The quorum for an extraordinary meeting is at least 60% of the share capital entitled to vote. Shareholders may attend in person or by proxy. Directors, syndics, members of the Supervisory Committee, managers and our employees may not hold proxies in representation of shareholders. If the quorum is not achieved, meetings may be reconvened with lower quorum requirements. According to our bylaws, the quorum for the second meeting of an extraordinary meeting will be satisfied with any presence of shareholders. Decisions at an ordinary or extraordinary shareholders’ meeting require the affirmative vote of the absolute majority of the present votes. In addition, pursuant to the provisions of Article Sixteen16 of our bylaws, as amended at our ordinary and extraordinary shareholders’ meeting held on May 25,
5, 2016, any amendment to subsection (g) of Article Six6 of our bylaws require the affirmative vote of the absolute majority of the present votes of Class B shareholders. Class B shares are entitled to one vote per share. Class A shares are entitled to five votes per share, except in those cases described below. The ordinary and extraordinary shareholders’ meeting held on April 24, 2018 approved further amendments to subsection (g) of Article Six6 of our bylaws. However, as of the date of this annual report, these amendments have not been approved by the CNV and are pending registration before the IGJ, therefore, are not yet effective. Please see “Item 10.B. Memorandum and articles of association—Corporate Governance” for a description of these amendments.
The Argentine Corporate LawAGCL requires that certain resolutions, such as early dissolution, major changes in corporate purpose or the transfer of a company’s legal domicile abroad, be decided by the majority of all outstanding shares and without allowing multiple votes per share,, except in the case of the surviving entity in a merger or asplit-up. Under Article 284 of the Argentine Corporate Law,AGCL, Class A shares are entitled to one vote only in the election of syndics. Our bylaws require a two thirds vote by Class A shares, regardless of the percentage of capital they represent, in order for us to duly resolve a merger with another company, our voluntary dissolution, our relocation abroad, and the fundamental change in our corporate purpose (subsection d) of Article six6 of the bylaws).
Election of Directors
The board is made up of the number of members determined at the ordinary shareholders’ meeting, between a minimum of three and a maximum of nine directors. The shareholders may appoint as many alternate directors as there are effective directors, and for the same term in order to cover any vacancy and in the order in which they were elected.
Board members are appointed at the annual ordinary shareholders’ meeting.
Directors will be elected for a term of two years when the Board is composed of three to eight members, and for a term of three years when the Board is composed of nine members.
According to our bylaws, if our Board of Directors is composed of six or more members, their election will be staggered. If the ordinary shareholders’ meeting appoints six, seven or eight directors, half of our board will be elected annually if there is an even number of members, and the whole number of directors calculated by dividing the total number of members of our board by half and rounding either up or down based, as appropriate in each alternating year, will be elected if there is an odd number of members. In such circumstances, the shareholders will decide which one of the new directors is appointed for a term of one or two years for the purposes of electing half of our Board. If nine directors are appointed, a third of our board will be elected annually. In such circumstances, the shareholders will decide which one of the new directors is appointed for a term of one, two or three years, for the purposes of electing a third of our Board. In each case at least three directors shall be elected at each ordinary shareholders’ meeting.
Pursuant to section 257 of the Argentine Corporate Law,AGCL, the directors maintain their positions until the following annual ordinary shareholders’ meeting where directors are appointed.
Argentine Corporate LawThe AGCL reserves the right to cumulative voting in order to elect up to one third of the directors to fill vacancies of the Board of Directors, sharing such part with candidates voted for by means of the plural system. Cumulative voting is a system designed to protectnon-controlling interests results, as it gives rise to the possibility, but does not ensure, thatnon-controlling interests results will be able to elect some of their candidates to the Board of Directors. Such system works by multiplying the number of votes corresponding to the members that are taking part in the proceeding by the number of contemplated vacancies, which cannot exceed one third of the vacancies. The larger the number of vacancies, the greater the possibility that minority groups or shareholders will win positions in the Board of Directors.
Mandatory Tender Offer Regime
Tender offer regime in the case of a change in control
We are subjectMandatory tender offer or exchange in Argentina
Pursuant to the mandatory tender offer rules set forth in the Capital Markets Law No. 26,831. These rules provide that in certain circumstances an OPA with respect to some or all of our outstanding shares must be launched. The circumstances include situations in whichand the CNV Rules, anyone intends to purchase, either directly or indirectly, for cash,who, either individually or collectively, either in one act oreffectively achieves a “controlling interest” in a seriespublicly traded company, will be bound to submit a mandatory tender offer (“OPA”, acronym in Spanish forOferta Pública de Adquisición Obligatoria) in any of successive acts during a periodthe scenarios set forth below:
| a) | acquisition of shares or share subscription rights or options granted by the company, corporate bonds convertible into shares or similar securities which, directly or indirectly, may give a right to share subscription or acquisition of securities, or conversion of voting shares; |
| b) | execution of agreements by and among other holders of securities, which grant the necessary votes to control the company’s decisions or to appoint or revoke a majority of the members of the Supervisory Committee, as well as any other agreement which regulates the right to vote in the Board of Directors or in any of its delegate bodies. This scenario shall be applicable when the parties to the agreement have acquired the voting shares of the company, acting either individually or jointly, within the 12 months prior to the execution of the agreement; or when a new shareholder agrees to a joint control of the company with existing shareholders. Furthermore, this scenario shall not be applicable when the acquired interest is below 50% of a controlling subsidiary of a publicly traded company; or |
| c) | indirectly or contingently, including the cases of mergers or other corporate reorganizations, involving a company that has direct or indirect shareholding with the right to vote in a publicly traded third party, |
The OPA must be addressed to any and all shareholders of 90 consecutive days, a number of voting shares,the company and any person with rights to share subscription rights or stock options convertible negotiable securitiesgranted by the company, corporate bonds or other similar securities which together with that person’s existing holdings could, directly or indirectly entitle such person to subscribe, purchase
or convert voting shares, shares entitled to or that once exercised grant themay give right to a “significant share”share subscription and/or acquisition of securities, or conversion of voting shares. The addressees of the OPA must be offered an equitable price, in the voting capital stockterms of a publicly traded company.section 88 of the Capital Markets Law, and section III, Chapter II, Title III of the CNV Rules.
In such circumstances, the OPAabove mentioned cases, the prospective purchase must file the request to submit a mandatory tender offer before the CNV no later than 1 month after the takeover has been completed.
The mandatory tender offer must be launched by the prospective purchaser within 10five (5) days of having madeobtaining the decision to participate in such purchase.
Such obligation is not applicable in cases where the acquisition would not trigger a change of controlapproval of the company. It also does not apply in cases where there is a change of control as a consequence of a corporate reorganizationCNV. The term for the investors to accept or as a consequence of mere redistributions of shares among companies ofreject the same group.offer will have to be at least ten (10) days and no more than twenty (20).
Concept of “Controlling Interest”
In accordance with the Capital Markets Law, a “Significant Share”person can be considered to have a controlling interest, either individually or collectively, if:
The regulations establish a duty to effect an offer with respect to part or all of the outstanding sharesi) voting rights exceed 50% of the company, depending onexcluding the percentageshares owned directly or indirectly by the affected Company from the calculation base; or
ii) even though the shareholding is below 50%, the person acts as the “controller” of the voting capital stock to be acquired. The regulations provide forCompany in the following duties relating to the OPA:
· Whenever the goal is to acquire a holding equal to or greater than 15%terms of the voting capital stock or of the company votes, the offer must be made for a number of securities that would enable the purchaser to acquire at least 50% of the voting capital stock of the affected company.markets law.
· Whenever an entity already has a holding equal to or greater than 15% of the voting capital stock or the votes of the company, but less than 51% of such rights, and the intention is to increase such shareholding in the affected company’s capital stock at least 6% during a twelve-month period, the offer shall be made on the number of securities representing at least 10% of the voting capital stock of the affected company.
· Whenever a holding equal to or greater than 51% of the voting capital stock or the votes of the company is sought, the offer shall be made for the number of securities that would enable the purchaser to obtain 100% of the voting capital stock of the affected company. The application of this stipulation shall have priority over the stipulations discussed in the preceding paragraphs.
Determination of the OPA Price in the Case of a Change in Control
The price shall be determined by the offeror with the following exceptions:
· If the purchaser has purchased other securities related to the offering within the 90 days prior to the announcement of the offer, the price cannot be lower than the highest price the purchaser paid in such transactions.
· If the purchaser has obtained firm sale commitments from the controlling shareholder or other shareholders entitled to take part in the public offering, the price cannot be lower than the price provided for in such commitments.
In order to determine the price, the purchaser shall also consider the following criteria, according to the CNV Rules: (i) book value of the shares; (ii) valuation of the target company according to discounted cash flows (DCF) or other applicable valuation criteria applicable to comparable business; and (iii) average price of the shares forOPA in the last six months before the “offer.” Based on certain interpretationscase of Law No. 26,831 and the CNV Rules, there is no certainty as to whether the averagea change in control
The equitable price of mandatory tender offers must be the shares for the last six months before the “offer” should be considered as a minimum price. The price may be challenged by both the CNV and any offeree shareholder.higher between: Capital Markets Law:
Subsection (g) of Article Six of our bylaws, as amended at the ordinary and extraordinary shareholders’ meeting held on May 25, 2016, provides that if an OPA on our shares takes place, there may be no difference in the price to be offered for common shares, regardless of the class of shares. In addition, if there is an OPA triggered by a change of control, the price to be offered cannot be lower than the highest price that the offeror, acting individually or with its affiliates and/or other persons, paid or agreed to pay for our common shares regardless of the class of shares,
during the 180 days prior to the date of the offer (inclusive of such date). The ordinary and extraordinary shareholders’ meeting held on April 24, 2018 approved further amendments to subsection (g) of Article Six of our bylaws. However, as of the date of this annual report, these amendments have not been approved by the CNV and are pending registration before the IGJ, therefore, are not yet effective. Please see “Item 10.B. Memorandum and articles of association—Corporate Governance” for a description of these amendments.
| (i) | the higher price that the offeror, acting individually or jointly, may have paid or agreed to pay for the securities to be offered by virtue of the OPA during the 12 months prior to the beginning of the period during which the OPA must take place; |
| (iii) | the average price of the shares for the last six months before the “offer.” |
Penalties for Breach
Without prejudice to the penalties established by the CNV, Argentine Capital Markets Law No. 26,831 provides that purchases in violation of such regime will be declared irregular and ineffective for administrative purposes by the CNV and cause the auction of the shares acquired in violation of the applicable regulation, without prejudice to the penalties that may correspond.
Tender Offer Regime in the Case of a Voluntary Withdrawal from the Public Offering and Listing System in Argentina
The Argentine Capital Markets Law No. 26,831 and CNV regulationsRules also established that when a company whose shares are publicly offered and listed in Argentina agrees to withdraw voluntarily from the public offering and listing system in Argentina, it must follow the procedures provided for in the CNV’s regulations and it must likewise launch an OPA for its aggregate shares or subscription rights or securities convertible into shares or stock options under the terms provided for in such regulation. It is not necessary to extend the public offering to those shareholders that voted for the withdrawal at the shareholders’ meeting.
The acquisition of one’s own shares must be made with liquid and realized profits or with free reserves, whenever paid up in full, and for the amortization or disposition thereof, within the term set forth in Section 221 of the Argentine Corporate LawAGCL and the company must present the CNV with evidence that it has the necessary solvency to effect such purchase and that the payment for the shares will not affect its solvency.
According to Section 98 of the Argentine Capital Markets Law No. 26,831 the price offered in the case of a voluntary withdrawal from the public offering and listing system in Argentina should be equitable and take into account the following relevant criteria:
·
The equity value of the shares, taking into account a special financial statement for the withdrawal from the public offering system or listing;
·The value of the company, in accordance with discounted cash flow criteria and ratios applicable to comparable businesses or companies;
·The company’s liquidation value;
·Average quotation prices on the stock exchange where the shares are listed during the six month period immediately preceding the withdrawal application, regardless of the number of sessions necessary for such negotiation; and
·The consideration offered before, or the placement of the new shares, in the event that a public offering has been made with regard to the same shares or if new shares have been issued, if applicable, during the last year, to be counted as of the date of the agreement for the withdrawal application.
Under no circumstances can the price offered be lower than the price indicated in the fourth bullet above.
Mandatory or Voluntary Tender Offer in the Case ofNear-total Control
If a shareholder or group of shareholders holds, directly or indirectly, 95% or more of the outstanding capital stock of a publicly traded Argentine company, any minority shareholder may request that the controlling shareholder launch an OPA for all outstanding shares of such company. In addition, a person that holds, directly or indirectly, 95% or more of the outstanding capital stock of a publicly traded Argentine company may issue a unilateral declaration of its intention to purchase all outstanding shares of such company within six months following the date of acquisition ofnear-total control and withdraw the company from public offering and its shares from listing and
trading. The price offered should be an equitable price, following the criteria set forth in the Argentine Capital Markets Law, No. 26,831, but in no case may it be lower than the average trading price of such shares during thesix-month period preceding the OPA application.
Shareholder Claims
Pursuant to article 46 of Law No. 26.831, companies whose shares are listed on any authorized market (including the ByMA), such as we intend our shares to be, are subject to the jurisdiction of the arbitration court of such authorized market for all matters concerning such companies’ relationship with shareholders and investors, without prejudice to the right of shareholders and investors to submit their claims to the courts of the City of Buenos Aires.
Corporate Governance
We comply with the AGCL, the Argentine CorporateCapital Markets Law the Law No. 26,831 and CNV rules and corporate governance regulations.
Our bylaws were amended at the extraordinary shareholders’ meeting held on October 7, 2015. Such amendment was approved by means of Resolution No.18,024 of the CNV dated April 19, 2016 and was registered before the IGJ. In addition, the extraordinary shareholders’ meetings held on April 19, 2016 and May 5, 2016 approved several amendments to our bylaws and an amended and restated text of our bylaws (texto ordenado), which were approved by the CNV and registered before the IGJ.
The ordinary and extraordinary shareholders’ meetings held on April 27, 2017 and April 24, 2018 approved further amendments to our bylaws and an amended and restated text of our bylaws(texto ordenado), which are currently subject to approval by the CNV and pending registration before the IGJ and, therefore, are not yet effective.
The shareholders’ meeting held on April April 27, 2017, amended Article Five, subsection (g) of Article Six6 and Article Sixteen16 of our bylaws. The latter two provisions were further amended by the shareholders’ meeting held on April 24, 2018.
Article Five of our bylaws, as amended on April 27, 2017, provides that the capital stock of the Company may be increased through an ordinary shareholders’ meeting decision up to five-fold of the amount at that time pursuant to article 188 of Argentine Law No. 19,550,the AGCL, being liable to register any capital increase resolution in public deed. As long as the Company is authorized to place a public offering of its shares, the capital stock: (a) will result from each subscription of the last approved capital stock increase and the capital evolution will be included in the Company’s financial statements; (b) pursuant to article 188 of of Argentine Law No. 19,550,the AGCL, may be increased through ordinary shareholders’ meeting without any limitation whatsoever and without being compelled to amendby-laws. Upon each increase, features of those shares to be issued will be defined in virtue of such increase, and the Board of Directors may be assigned the power to issue such shares, at different times, as deemed convenient within thetwo-year period from such shareholders’ meeting date, as well as the definition of payment terms and conditions of such shares. As long as the Company is authorized to place a public offering of its shares, the shareholders’ meeting may pass the issuance of options to be issued or securities convertible in shares and assign the Board of Directors the definition of such issuance terms and conditions, rights to be granted, price fixing of options and shares resulting from such options, as well as any other issue susceptible to be assigned pursuant to all regulations in force.
Subsection (g) of Article Six6 of our bylaws, as amended on April 24, 2018, provides that upon a tender offer of any shares of the Company, the price to be tendered per common share shall be the same for all classes of shares. In addition, upon a tender offer in case of a change of control, the fair price to be tendered shall not be lower than the highest price paid or agreed to be paid by the offeror, whether acting individually or jointly with any affiliates and or otherwise, per common share of any class of the Company during the 180 calendar days prior to, and including, the date of the offer. The procedure to carry out the tender offer must be done in accordance with the Capital Markets Law and with the CNV Rules.
Article Sixteen16 of our bylaws, as amended on April 24, 2018, provides that quorum and majority requirements for shareholders’ meetings shall be governed by Sections 243 and 244 of Argentine Law No. 19,550,the AGCL, according to the class of shareholders’ meeting, whether it is a first- or second-call meeting and the matters to be transacted thereat, except for the quorum at second-call extraordinary shareholders’ meetings, which shall be deemed validly constituted whichever the number of voting shares present. Further, any amendment to subsection (g) of Article Six6 described above shall be valid if also approved by the absolute majority of votes of Class B shareholders present at the meeting.
| Item 10.C |
No material contracts outside the ordinary course of business have been entered into during the last 2 years.
| Item 10.D | Exchange Controls |
In January 2002, with the approval of the Public Emergency Law, Argentina declared a public emergency situation in its social, economic, administrative, financial and foreign exchange matters and authorized the Argentine Executive Branch to establish a system to determine the foreign exchange rate between the Peso and foreign currencies and to issue foreign exchange-related rules and regulations. The Public Emergency Law ceased to be in effect on December 31, 2017. Within this context, on February 8, 2002, through Decree No. 260/2002, the Argentine Executive Branch established (i) the MLC through which all foreign exchange transactions in foreign currency must be conducted, and (ii) that foreign exchange transactions in foreign currency must be conducted at the foreign exchange rate to be freely agreed upon among contracting parties, subject to the requirements and regulations imposed by the Central Bank.
On June 9, 2005, through Decree No. 616/2005, the Argentine Executive Branch mandated that (i) all inflows of funds into the local foreign exchange market arising from foreign debts incurred by residents, both individuals or legal entities in the Argentine private sector, except for those concerning foreign trade financing and primary issuances of debt securities admitted to public offering and listed in authorized markets; and (ii) all inflows of funds by non-residents channeled through the MLC and aimed at being held in local currency, acquiring all types of financial assets or liabilities in the financial or non-financial private sector (except for foreign direct investments and primary issuances of debt securities and shares admitted to public offering and listed in authorized markets), and investments in securities issued by the public sector and acquired in secondary markets, should meet the following requirements: (i) such inflows of funds could only be transferred outside the local foreign exchange market at the expiration of a term of 365 calendar days as from the date of settlement of such funds into Pesos; (ii) the proceeds of such inflows of funds should be credited to an account in the local banking system; (iii) a non-transferable and non-interest-bearing deposit for 30% of the amount of the transaction should be kept in Argentina for a period of 365 calendar days, in accordance with the terms and conditions set forth in the applicable regulations (the “Deposit”); and (iv) the Deposit was to be denominated in U.S. dollars and held in Argentine financial institutions and it could not be used to guarantee or as collateral of any type of credit transactions. The requirements of Decree 616/2005 were subsequently eased, as detailed below.
On December 18, 2015, through Resolution No. 3/2015, the former Ministry of Treasury and Public Finance amended Executive Decree No. 616/2005, reducing (i) the Deposit percentage to 0% and (ii) the required period that the proceeds of any new financial indebtedness incurred by residents, held by foreign creditors and transferred through the MLC had to be kept in Argentina from 365 calendar days to 120 calendar days from the date of the transfer of the relevant amount. On January 5, 2017, pursuant to Resolution No. 1—1–E/2017 of the Ministry of Treasury, the mandatory stay period of 120 days was further reduced to 0 days.
On May 19, 2017, the Central Bank issued Communication “A” 6244 effective as of July 1, 2017 (amended by Communication “A” 6312 dated August 30, 2017), which structurally modified the exchange regulations in force, establishing a new foreign exchange regimen that significantly eased the access to the MLC.MLC. Communication “A” 6244 (as amended by Communication “A” 6312) has replaced all previous rules governing exchange transactions, the general exchange position and the provisions of Decree No. 616/05, while rules governing information and filing requirements were not replaced.
In addition, Communication “A” 6244 (as amended by Communication “A” 6312 and Communication “A” 6363) set forth:
| 1. | The principle of freedom of exchange: Argentine andnon-Argentine residents may freely access the MLC. |
2. | The obligation of carrying out any exchange transaction through an entity authorized by the Central Bank has been maintained. |
3. | Time restrictions to trade in the MLC for carrying out foreign exchange transactions have been eliminated. |
4. | The mandatory inflow and settlement of export proceeds through the MLC within the applicable term. |
5. | The obligation of Argentine residents to comply with the reporting regime, even though there has not been an income of funds to the MLC nor any future access through the transactions to be declared, is maintained. |
Likewise, on November 10, 2017, the Central Bank repealed the requirement that proceeds from operations of exports of goods, services and raw materials, be repatriated and settled through the MLC.
Pursuant to Communication “A” 6401, dated December 26, 2017, a new reporting regime was created by means of which the “Review of Debt Securities and External Liabilities Issued by the Financial Sector and theNon-Financial Private Sector” established by Communication “A” 3602, and the “Survey on direct investments,” established by Communication “A” 4237, were replaced by a unified report on direct investments and debt. Only Argentine residents (both legal entities or natural persons) whose flow of balance of foreign assets or debt during the previous calendar year reaches or exceeds the equivalent of U.S.$1 million in Pesos are required to report foreign holdings of (i) shares and other capital participations; (ii) debt; (iii) financial derivatives; and (iv) real estate, on an annual basis. Argentine residents whose flow or balance of foreign assets or debt reaches or exceeds the equivalent of U.S.$50 million in Pesos, shall comply with the report on a quarterly basis. On January 11, 2018, with the aim of providing more flexibility to the foreign exchange system and promoting competition, allowing the entrance of new players to the system, a free floating foreign exchange market was created by means of Decree No. 27/2018 replacing the MLC.
Within the new foreign exchange market, exchange operations will be carried out by financial entities and any other person authorized to by the Central Bank to engage in permanent or customary trade in the purchase and sale of foreign coins and banknotes, gold coins or bars and traveler’s checks, money orders, transfers or similar operations in foreign currency.
By virtue of Communication “A” 6443 of the Central Bank, which entered into force on March 1, 2018, companies from any sector that operate in the foreign exchange market may operate as an exchange agency solely by registering via an electronic form entitled the “Registry of Exchange Operators” (Registro de Operadores de Cambio).
As of the date of this annual report, in accordance with current regulations, all individuals and legal persons, assets and other universities may operate freely in the MLC and foreign exchange transactions shall be carried out at the exchange rate freely agreed between the parties. All exchange and/or arbitrage operations must be carried out through financial or exchange entities authorized by the Central Bank, and must comply in all cases with the provisions applicable to each transaction. Transactions that do not fall within the scope of the foreign exchange regulations will be subject to the Foreign Exchange Regime Law.
| Item 10.E | Taxation |
The following discussion contains a description of the principal Argentine and United States federal income tax consequences of the acquisition, ownership and disposition of our Class B shares or ADSs, but itADSs. It does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase our Class B shares or ADSs, andit is not applicable to all categories of investors, some of which may be subject to special rules, and it does not specifically address all of the Argentine and Unites States federal income tax considerations applicable to any particular holder. This summarydiscussion is based upon the tax laws of Argentina and the regulations thereunder and the tax laws of United States and the regulations thereunder as in effect on the date of this annual report, which are subject to change, possibly with retroactive effect, and to differing interpretations. Each prospective purchaser is urged to consult its own tax advisor about the particular Argentine and United States federal income tax consequences to it of an
investment in our Class B shares or ADSs. This discussion is also based upon the representations of the depositary and on the assumption that each obligation in the deposit agreement among us, The Bank of New York Mellon, as depositary and the registered holders and beneficial owners of the ADSs, and any related documents, will be performed in accordance with its terms.
Material Argentine Tax Considerations
The following opiniondiscussion is a summary of the material Argentine tax mattersconsiderations relating to the purchase, ownership and disposition of our Class B shares or ADSs. The following summary is based upon the tax laws of Argentina and regulations thereunder as ofin effect on the date of this annual report,document and is subject to any subsequent change in Argentine laws and regulations whichlaw that may come into effect after such date. date, and any change could apply retroactively and could affect the continued validity of this summary. On December 29, 2017, Law 27,430 was published in the Official Gazette introducing a material tax reform (the “Tax Reform Law”), which introduces several modifications to the former tax regime. The Tax Reform Law has been regulated by the Decree N°279/2018 (published on April 9th 2018 in the Official Gazette) and General Resolution (AFIP) N°4227/2018 (published on April 12th 2018), regulating, among others, the income tax applicable to income derived from financial transactions, obtained by Foreign Beneficiaries (as defined below). Recently, Decree N° 1170/2018 (published on December 27th, 2018) has regulated certain amendments introduced by the Tax Reform Law.
This section issummary includes the opinionmodifications under the Tax Reform Law; nevertheless, please note it does not include all of the law firm of Errecondo, González & Funes insofar as it relatestax considerations that may be relevant to matters of Argentineyou or your situation, particularly if you are subject to special tax law. rules.
This opinionsummary does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a holder of such securities.our Class B shares or ADSs. No assurance can be given that the courts or tax authorities responsible for the administration of the laws and regulations described in this annual report will agree with this interpretation. Holders should carefully read “Item 3.D Risk Factors—Risks Relating to Our Class B Shares and the ADSs—Changes in the Argentine tax laws may adversely affect the results of our operations and the tax treatment of our Class B shares and/or the ADSs.” Holders are encouraged to consult their tax advisors regarding the tax treatment of our Class B shares andor ADSs as it relates to their particular situation.
Taxation on dividends
PursuantAccording to Law No. 26,893, dividends and other profits paid in cash or in kind —except for stock dividends—by companies and other entities incorporated in Argentina referredthe recent amendments introduced to in the Income Tax Law Sections 69 (a)(1), (2), (3), (6)by virtue of the Tax Reform Law, as of fiscal year 2018, the taxation applicable on the distribution of dividends from Argentine companies would be as follows:
(i) Dividends originated in profits obtained during fiscal years initiated after January 1, 2018 and (7), and Section 69(b), wereup to December 31, 2019: dividends on Argentine shares paid to Argentine resident individuals and/ornon-Argentine residents would be subject to a 7% income tax atwithholding on the amount of such dividends (“Dividend Tax”). However, if dividends are distributed to Argentine Entities (in general, entities organized or incorporated under Argentine law, certain traders and intermediaries, local branches ofnon-Argentine entities, sole proprietorships and individuals carrying on certain commercial activities in Argentina), no Dividend Tax should apply. Equalization Tax (as defined below) is not applicable.
Argentine individuals and undivided estates are not allowed to offset income arising from the distribution of dividends on Argentine shares with other losses arisen in other type of operations.
(ii) Dividends originated in profits obtained during fiscal years initiated after January 1, 2020 onward: dividends on Argentine shares paid to Argentine resident individuals and/ornon-Argentine residents would be subject to a 10%13% income tax withholding on the amount of such dividends. In the case ofnon-Argentine residents, said 13% rate could be reduced pursuant to applicable treaties to avoid double taxation if certain conditions are met, as the case may be. However, if dividends are distributed to Argentine Entities, no Dividend Tax should apply. Equalization Tax is not applicable.
(iii) Dividends originated in profits obtained during tax periods before those contemplated above: no Argentine income tax withholding would apply on dividend distributions except for those beneficiaries that were domestic corporate taxpayers. Law No. 27,260 repealed this withholding tax as of July 23, 2016. Consequently, no withholding tax is to levied on dividends distributed to either Argentine or non-Argentine resident shareholders since then. This treatment applies only to 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.
Likewise, the portion of those dividends exceeding the company’s accumulated net taxable income (as determined by application of the ArgentineEqualization Tax.
The equalization tax (the “Equalization Tax”) is applicable when the dividends distributed are higher than the “net accumulated taxable income” of the immediate previous fiscal period from when the distribution is made. In order to assess the “net accumulated taxable income” from the income calculated by the Income Tax Law), if any, is subjectLaw, the income tax paid in the same fiscal period should be subtracted and the local dividends received in the previous fiscal period should be added to such income. The Equalization Tax would be imposed as a 35% withholding tax on such excess (the “Equalization Tax”). For purpose of the Equalization Tax,shareholder receiving the amount of accumulated net taxable incomedividend. Dividend distributions made in property (other than cash) would be subject to be considered shall be determined by (1) deducting the incomesame tax rules as cash dividends. Stock dividends on fully paid by the company, and (2) adding the dividends
and profitsshares (“acciones liberadas”) are not subject to tax received as distributions from other corporations. If the distribution is in-kind, then the corporation must pay the tax toEqualization Tax.
For Argentine resident individuals and undivided estates not registered before the Argentine tax authorities andas taxpayers for income tax purposes as well as fornon-Argentine residents, the Dividend Tax withholding will be entitledconsidered a final payment. Argentine individuals and undivided estates are not allowed to seek reimbursementoffset income arising from the shareholders.distribution of dividends on Argentine shares with losses from other types of operations.
DividendsThe income tax law provides a firstin-first out rule pursuant to bewhich distributed out of earnings accrued in fiscal years starting on or after January 1, 2018, are to be subject to a tax treatment different from the one previously described, based on the recent enactment of a comprehensive tax reform -Law No. 27,430-, published in the Official Gazette on December 29, 2017, and generally effective since January 1, 2018.
Pursuant to Law No. 27,430, dividends and other profits paid in cash or in kind —except for stock dividends—by companies and other entities incorporated in Argentina referred to in the Argentine Income Tax Law (the “Income Tax Law”), Sections 69 (a)(1), (2), (3), (6), (7) and (8), and Section 69(b) out of retained earnings accumulated in fiscal years starting on or after January 1, 2018, will be subject to withholding 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 January 1, 2020 and onwards), provided that they are distributed to Argentine resident individuals and foreign shareholders. No dividend withholding tax applies if dividends are distributedcorrespond to the aforementioned Argentine corporate entities required to assessformer accumulated profits of the dividend withholding tax. In addition, the Equalization Tax is repealed. distributing company.
Holders are encouraged to consult a tax advisor as to the particular Argentine income tax consequences derived from any profit distributions we may make not onlymade on our Class B shares but also on theand ADSs.
Capital gains
TheAccording to Income Tax Law regulations, the results derived from the transfer of shares, quotas and other equity interests, titles, bonds and other securities, of Argentine companies are subject to Argentine capital gainsincome tax (unless an exemption applies), regardless of the type of beneficiary who realizes the gains.
gain.
Capital gains obtained by Argentine corporate taxpayersentities (in general, entities organized or incorporated under Argentine law, certain traders and intermediaries, local branches ofnon-Argentine entities) entities, sole proprietorships and individuals carrying on certain commercial activities in Argentina) derived from the sale, exchange or other disposition of shares in Argentine entities are subject to income tax on the net income at the corporate rate on net income. Recently, Law No. 27,430 decreased the corporate income tax rate from 35% toof 30% for fiscal years beginning oninitiated after January 1, 2018 and up to December 31, 2019 and toat the rate of 25% for fiscal years beginning ontax periods initiated after January 1, 2020 and onwards. Losses arising from the sale of shares can only be offset against income derived from the same type of operations, for a five-year carryover period.
Individual resident’s capital gains tax
Law No 27,430 established that as from January 1,Starting in 2018, gains realizedincome obtained by Argentine resident individuals and undivided estates from the sale transfer or disposition of shares securities representing shares and certificates of deposit of sharesother securities are exempt from capital gains tax in the following cases: (i) when the shares are placed through a public offering authorized by the CNV,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,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. For periods prior to 2018, it is currently under discussion the extent ofADSs do not qualify for the exemption (established by Law No. 26,893 and its implementing decree 2334/2013) applicable to Argentine resident individuals since the sale of sharesreferred conditions would not apply. If the exemption does not apply, the income derived by Argentine resident individuals and other securities through a stock exchange market, so as to determine whether it applies only sales of securities made in stock exchanges duly authorized by the CNV or in any stock exchanges.
Nonresident’s capital gains tax
Pursuant to Law No. 26,893, capital gains obtained by non-Argentine residentsundivided estates from the sale, exchange or other disposition of shares and other equity interests, bonds and other securities of Argentine companies wereis subject to income capital gains tax until December 30, 2017, even if those transactions were entered into between nonresidents.
Law No. 27,430 provides thatat a 15% rate on net income. Losses arising from the capital gains tax applicable to nonresidents for transactions entered into between September 23, 2013 and December 30, 2017, is still due. However, no taxes will be claimed to nonresidents with respect to past salessale ofnon-exempt Argentine shares or othercan only be offset by Argentine individuals and undivided estates against income derived from the same type of operations, for a five-year carryover period.
If Argentine resident individuals and undivided estates perform a conversion procedure of securities tradedrepresenting shares, that do not meet the exemption requirements stated in CNV’s authorized markets (such as ADSs) as long as the causeparagraph above, to hold instead the underlying shares that do comply with said requirements, such conversion would be considered a taxable transfer of the non-payment wassecurities representing shares for which the absence of regulations stating the mechanism of tax collection atfair market value by the time the transaction was closed. General Resolution (AFIP) 4.227, which will come into effect on April 26, 2018,
stipulates that the income taxconversion takes place should be paidconsidered. The same tax treatment will apply if the conversion process involves shares that do not meet the
exemption requirements stated above that are converted into securities representing shares to which the AFIP underexemption is applicable. Once the following procedures: (i) in case the securities were sold through an Argentine stock exchange market, and the withholding has been made, then the withholder must pay the tax, (ii) in case the securities were sold but not through an Argentine stock exchange market and there is an Argentine buyer involved, then the Argentine buyer should pay the income tax; and (iii) when both the seller and the buyer were foreign beneficiaries and the sale was not performed through an Argentine stock exchange market, the person liable for the tax is the buyer and the payment shall be made through an international bank via wire transfer 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 turn, Law 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 ofunderlying shares or securities by nonresidents. However, nonresidentsrepresenting shares are exempt fromconverted, the capital gains tax on gains realizedresults obtained from the sale, exchange, swap or any other disposition thereof would be exempt from income tax provided that the conditions mentioned in points (i), (ii) or (iii) of (a)the paragraph above are met. Due to the amendments introduced to the Income Tax Law, as from 2018,non-Argentine resident individuals or legal entities (“Foreign Beneficiaries”) are also exempt from income tax derived from the sale of Argentine shares in the following cases: (i) when the shares are placed through a public offering authorized by the CNV,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,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.CNV. The exemptions will only applyexemption applies to the extent the foreign beneficiariesForeign Beneficiaries reside in ora cooperative jurisdiction and, in accordance with the amendments introduced by Decree N°1170/2018, if their funds used for the investment proceedcome from jurisdictions considered as cooperating for purposes of the exchange of tax information.
cooperative jurisdictions.
In addition, it is clarified that, from 2018 onward, gainsincome derived from the sale of ADSs willgives rise to Argentine source income. However, capital gains obtained from the sale, exchange or other disposition of ADSs by Foreign Beneficiaries that reside in a cooperative jurisdiction and, in accordance with the amendments introduced by Decree N°1170/2018, their funds come from cooperative jurisdictions, are exempt from income tax on capital gains to the extent the underlying shares are issued by an Argentine company and they are authorized for public offering by the CNV.
In case Foreign Beneficiaries conduct a conversion process of shares that do not meet the exemption requirements into securities representing shares that are exempt from income tax pursuant to the conditions stated above, such conversion would be treated from Argentine sources.
considered a taxable transfer of the securities representing shares for which the fair market value by the time the conversion takes place should be considered.
In case the exemption is not applicable and to the extent foreign beneficiaries doForeign Beneficiaries are not residedomiciled in or thenon-cooperative jurisdictions and whose funds dowere not arise from,channeled throughnon-cooperative jurisdictions, not considered as cooperative for purposes of fiscal transparency, the gain realizedderived from the disposition of sharesADSs 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
For Foreign Beneficiaries domiciled in or thewhose funds arisecome from jurisdictions not considerdconsidered as cooperativenon-cooperative for purposes of fiscal transparency, a 35%the tax rate onapplicable to the the net capital cagin sales of shares and/or ADSs is assessed at a 31.5% effective rate on the gross price should apply.
In such scenarios, according35%. Pursuant to General Resolution (AFIP)AFIP 4227, the income taxpresumed net basis on which the 35% rate should be withheld and paid to the AFIP under the following procedures: (i) in case the securities were sold by a foreign beneficiary, through an Argentine stock exchange market, the custodian entity should withhold and pay the tax if it is involvedapply in the payment process; if itcase of sale or disposition of securities is not involved inassessed at 90%. The list ofnon-cooperative jurisdictions shall be published by the payment process but there is an Argentine buyer involved,Executive Branch. However, Decree 279/2018 provides that until the Executive Branch issues thenon-cooperative list, taxpayers should consider the list of “cooperative jurisdictions” published by the Argentine buyer should withhold the income tax (ii) in case the securities were sold byauthorities to determine whether a foreign beneficiary, but not through an Argentine stock exchange market and therejurisdiction is an Argentine buyer involved, the Argentine buyer should withhold the income tax; and (iii) when both the seller and the buyer are foreign beneficiaries and the sale is not performed through an Argentine stock exchange market, the person liable for the tax shall be the legal representative of the seller of the sharesdeemed cooperative or securities being transferred or directly by the seller, in the event that there was no local legal representative. In this case, the payment shall be made through an international bank via wire transfer to the AFIP.
not.
Holders are encouraged to consult a tax advisor as to the particular Argentine income tax consequences derived from the holding and disposing of ADSs orour Class B Shares.
shares and ADSs and whether any different treatment under a treaty to avoid double taxation could apply.
Personal assets tax
Argentine companies, such asentities, like us, have to assess and pay the personal assets tax corresponding to their shareholders that are Argentine and foreign domiciled individuals and non-Argentine resident persons. Asforeign domiciled entities for the holding of company shares at December 31 2016, Law No. 27,260 lowered theof each year. The applicable tax rate tois 0.25%, which and is to be assessedlevied on the proportional net worth value (valor(“valor patrimonial proporcional),proporcional”)by December 31st of each year, of the shares as perarising from the Argentine entity’s last financial statements prepared under Argentine GAAP.statements. Pursuant to the Personal Assets Tax Law, the Argentine company is entitled to seek reimbursement of such paid tax from the applicable Argentine domiciled individuals and/or foreign domiciled shareholders. The Argentine company may seek this reimbursement of Personal Assets Tax by setting off the applicable tax against any amount due to its shareholders or in any other way or, under certain circumstances, waive its right under Argentine law to seek reimbursement from the shareholders.
PursuantIt is unclear whethernon-Argentine domiciled parties are subject to Law No. 27,260, Argentine companies that have properly fulfilled theirpersonal assets tax obligations during the two fiscal year periods prioron ADSs. Holders are encouraged to consult a tax advisor as to the 2016 fiscal year and comply with certain other requirements may qualify for an
exemption onparticular Argentine personal assetassets tax for the 2016, 2017 and 2018 fiscal years. The request for this tax exemption had to be filed before March 31, 2017. The Company has already filed this request and has been granted the exemption for the referred fiscal years. Notwithstanding, in the future, the Company may not be exemptconsequences derived from the paymentholding of the personal assets tax.Class B shares and ADSs.
Value added tax
The sale, exchange or other disposition of our Class B shares and ADSs, and the distribution of dividends in connection therewith, are exempted from the value added tax.
Tax on debits and credits on Argentine bank accounts (“TDC”)
Credits toAll credits and debits fromoriginated in bank accounts held at Argentine financial institutions, as well as certain cash payments, are subject to this tax, which is assessed at a general rate of 0.6%. There are also increased rates of 1.2% and reduced rates of 0.075% that may apply in certain cases.. Owners of bank accounts subject to the general 0.6% rate may consider 34%33% of the tax paid upon credits to such bank accounts andas a tax credit against specific taxes. The taxpayers that are subject to the 1.2% rate may consider 17%33% of all tax paid upon credits to such bank accounts as a credit against specific taxes. Such amounts can be utilized as a credit for income tax, or tax on presumed minimum income. Whenincome or special contributions on cooperatives capital. If lower rates were applied, the available credit would be reduced to 20%.
The TDC has certain exemptions. Debits and credits in special checking accounts (created under Communication “A” 3250 of the Argentine Central Bank) are exempted from this tax if the accounts are held by foreign legal entities and if they are exclusively used for financial investments in Argentina.
According to Law No. 27,432, the Executive may increase up to 20% per year the percentage of the TDC payments that can be accounted for as payment on account of the income tax. Additionally, the Tax Reform Law enables the Executive to establish that starting in 2022 the amounts paid as TDC may be totally accounted for as payment on account of the income tax. Whenever financial institutions governed by Law No. 21,526 make payments acting in their own name and on their own behalf, the application of this tax is restricted only to certain specific transactions. Such specific transactions include, among others, dividends or profits distributions.
Tax on minimum presumed income
Entities domiciled in Argentina are subject to this tax at the rate of 1% applicable over the total value of their taxable assets, to the extent it exceeds in theabove an aggregate an amount of Ps.$200,000.Ps.200,000. Specifically, the law establishes that banks, other financial institutions and insurance companies will consider a taxable base equal to 20% of the value of taxable assets. This tax shall be payable only to the extent the income tax determined for any fiscal year does not equal or exceed the amount owed under the tax on minimum presumed income. In such case, only the difference between the tax on minimum presumed income determined for such fiscal year and the income tax determined for that fiscal year shall be paid. Any tax on minimum presumed income paid will be applied as a credit toward income tax owed in the immediately-following 10ten fiscal years. Please note that shares and other equity participations in entities subject to tax on minimum presumed income are exempt from this tax. Pursuant
Holders are encouraged to consult a tax advisor as to the Tax Amnesty Law,particular Argentine tax on minimum presumed income was repealed effective effectiveconsequences derived from the holding of Class B shares and ADSs.
Pursuant to Law No. 27,260, passed by the Argentine Congress on June 29, 2016, the tax on minimum presumed income is eliminated for tax periods beginning as of the fiscal year beginning on January 1, 2019.
Turnover tax
In addition, gross turnover tax could be applicable to Argentine residents on the transfer of Class B shares or ADSs and on the paymentperception of dividends to the extent such activity is conducted on a regular basis within an Argentine province or within the City of Buenos Aires. However, under the Tax Code of the City of Buenos Aires, any transactionstransaction with shares as well as the paymentperception of dividends are exempt from gross turnover tax.
Holders of our Class B shares orand ADSs are encouraged to consult a tax advisor as to the particular Argentine gross turnover tax consequences derived fromof holding and disposing of our Class B shares and ADSs in the involved jurisdictions.
Regimes for the Collection of Provincial Tax Revenues on the Amounts Credited to Bank Accounts
Different tax authorities (i.e., City of Buenos Aires, Corrientes, Córdoba, Tucumán, Province of Buenos Aires and Salta, among others) have established collection regimes for gross turnover tax purposes applicable to those credits verified in accounts opened at financial entities, of any type and/or ADS.
nature and including all branch offices, irrespective of territorial location. These regimes apply to those taxpayers included in the lists provided monthly by the tax authorities of each jurisdiction. The applicable rates may vary depending on the jurisdiction involved. Collections made under these regimes shall be considered as a payment on account of the turnover tax. Note that certain jurisdictions have excluded the application of these regimes on certain financial transactions. Holders shall corroborate the existence of any exclusions to these regimes in accordance with the jurisdiction involved.
Stamp taxes
Stamp tax is a localprovincial tax, thatwhich is also levied based on the formal execution of public or private instruments.
Documents subject to stamp tax include, among others, all types of contracts, notarial deeds and promissory notes. Each province andin the City of Buenos Aires, have its own stamp tax legislation.
Stamp tax rates vary accordingapplicable to the execution of onerous transactions within a provincial jurisdiction and typeor the City of agreement involved. Buenos Aires or outside a provincial jurisdiction or the City of Buenos Aires but with effects in such jurisdiction.
In certain jurisdictions,the City of Buenos Aires, acts or instruments related to the negotiation of shares and other securities duly authorized for its public offering by the CNV are exempt from stamp tax. This does not apply
Holders of Class B shares and ADSs are encouraged to ADSs.
On January 2, 2018, Law No. 27,429 enforcedconsult a “Fiscal Consensus” signed betweentax advisor as to the National Executive Power and representatives of the Provinces and the City of Buenos Aires. Among other issues, the provinces assumed the commitment to apply tax rates not higher than those for each activity and period In theparticular stamp tax for certain acts and contracts, not higher than 0.75% as of January 1, 2019 with a gradual reduction until its complete elimination as of January 1, 2022.consequences arising in the involved jurisdictions.
Prospective investors should consider the tax consequences in force in the above mentioned jurisdictions at the time the concerned document is executed and/or becomes effective.
Other taxes
There are no Argentine federalFederal inheritance or succession taxes applicable to the ownership, transfer or disposition of our shares. The provincesClass B shares or ADSs. At the provincial level, the province of Buenos Aires and Entre Ríos establishimposes a tax on free transmission of assets, including inheritance, legacies, donations, etc. Any gratuitous transfer of property lower than or equal to Ps.269,000 is exempt. This amount is increased to Ps.1,120,000 in the case of transfers among parents, sons, daughters and spouses. The amount to be taxed, which includes a fixed component and a variable component that is based on differential rates (which range from 1.6026% to 8.7840%), varies according to the property value to be transferred and the degree of kinship of the parties involved. Free transmission of ourClass B shares or ADSs could be subject to this tax. Holders of Class B shares and ADSs are encouraged to consult a tax advisor as to the particular tax consequences arising in the involved jurisdictions.
Court tax
In the caseevent that it becomes necessary to institute enforcement proceedings in relation to our Class B shares and ADSs in the federal courts of litigation regardingArgentina or the shares before a court ofcourts sitting in the City of Buenos Aires, a 3% court feetax (currently at a rate of 3.0%) will be imposed on the amount of any claim brought before such courts. Certain court and other taxes could be imposed on the amount of any claim brought before the Province courts.
Incoming Funds Arising fromNon-Cooperative or Low or Nil Tax Jurisdictions
As defined under Argentine Income Tax Law,non-cooperative jurisdictions are those countries or jurisdictions that do not have an agreement in force with the Argentine government for the exchange of information on tax matters or a treaty to avoid international double taxation with a broad clause for the exchange of information. Likewise, those countries that, having an agreement of this type in force, do not effectively comply with the exchange of information will also be considered asnon-cooperative. The aforementioned treaties and agreements must comply with international standards of transparency and exchange of information on fiscal matters to which the Argentine Republic has committed. The Executive Branch shall publish a list of thenon-cooperative jurisdictions based on the criteria above. According to Decree N° 279/2018, until the new list to be issued by the Executive Power is published,non-cooperative jurisdictions would be charged, calculated ondeemed as those not included in the basis“cooperative jurisdictions” list currently published in AFIP’s website, created in accordance with the Decree N°589/2013.
In turn, low or nil tax jurisdictions are defined as those countries, territories, associated states or special tax regimes that foresee a maximum corporate tax rate below 15%. Pursuant to Decree 1170/2018, the 15% threshold rate should be assessed considering the aggregate corporate tax rate in each jurisdiction, regardless of the claim.governmental level in which the taxes were levied. In turn, “special tax regime” is understood as any regulation or specific scheme that departs from the general corporate tax regime applicable in said country and results in an effective rate below that stated under the general regime.
According to the legal presumption under Section 18.2 of Law No. 11,683, as amended, incoming funds fromnon-cooperative or low or nil jurisdictions could be deemed unjustified net worth increases for the Argentine party, no matter the nature of the operation involved. Unjustified net worth increases are subject to the following taxes:
income tax would be assessed at 110% of the amount of funds transferred.
VAT would be assessed at 110% of the amount of funds transferred.
Although the concept of “incoming funds” is not clear, it should be construed as any transfer of funds:
(i) from an account in anon-cooperative/low or nil tax jurisdiction or from a bank account opened outside of anon-cooperative or low or nil tax jurisdiction but owned by an entity located in anon-cooperative or low or nil tax jurisdiction;
(ii) to a bank account located in Argentina or to a bank account opened outside of Argentina but owned by an Argentine party.
The Argentine party may rebut such legal presumption by duly evidencing before the Argentine tax authority that the funds arise from activities effectively performed by the Argentine party or by a third party in such jurisdiction, or that such funds have been previously declared.
Tax treaties
Argentina has signed tax treaties for the avoidance of double taxation with several countries, although thereAustralia, Belgium, Bolivia, Brazil, Canada, Chile, Denmark, Finland, France, Germany, Italy, Mexico, the Netherlands, Norway, Russia, Spain, Sweden, Switzerland and the UK. The treaties signed with China, Qatar, Turkey and the United Arab Emirates are still undergoing the respective ratification procedures. There is currently no tax treaty or conventionfor the avoidance of double taxation in effect between Argentina and the United States. Holders are encouraged to consult a tax advisor as to the potential application of the provisions of a treaty in their specific circumstances.
THE ABOVE OPINIONSUMMARY IS NOT INTENDED TO BE A COMPLETE ANALYSIS OF ALL TAX CONSEQUENCES RELATING TO THE OWNERSHIP OR DISPOSITION OF CLASS B SHARES OR ADSs. HOLDERS ARE ENCOURAGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE TAX CONSEQUENCES ARISING IN EACH PARTICULAR CASE.
United States Federal Income Tax Considerations
This summarydiscussion describes certain U.S. federal income tax consequences for a U.S. holder (as defined below) of acquiring, owning and disposing of the Class B shares and ADSs (and to the extent provided under “Information Reporting and Backup Withholding” and “FATCA” below, investors other than U.S. holders). TheThis discussion does not contain a detailed description of all potential U.S. federal income tax consequences and does not address the Medicare tax on net investment income or the effects of any state, local ornon-U.S. tax laws. In addition, this discussion does not apply to certain classes of holders, such as persons that own or are deemed to own 10% or more of ourthe voting stockpower or 10% or more of the total value of all classes of our stock, dealers in securities or currencies, regulated investment companies, real estate investment trusts, traders that electmark-to-market accounting for securities holdings, banks, financial institutions, insurance companies,tax-exempt organizations, entities treated as partnerships for U.S. federal income tax purposes (or a partner therein), persons who are liable for the alternative minimum tax, persons who acquired ADSs or Class B Shares underlyingshares or ADSs pursuant to the exercise of an employee stock option or otherwise as compensation, persons holding ADSs or Class B Shares underlyingshares or ADSs in connection with a trade or business conducted outside of the United States, , persons holding the Class B shares or ADSs as a position in a “straddle” or conversion transaction, or as part of a “synthetic security” or other integrated
financial transaction, persons required to accelerate the recognition of any item of gross income with respect to our Class B shares or ADSs as a result of such income being recognized on an applicable financial statement, or persons that have a functional currency other than the U.S. dollar, all of which may be subject to rules that differ significantly from those described below. This discussion assumes that the Class B shares and ADSs are held as “capital assets” for U.S. federal income tax purposes.
This summarydiscussion is based on the provisions of the Internal Revenue Code of 1986, as amended (“the Code”), Treasury regulations, administrative rulings and judicial authority, all as in effect as of this date. All of these laws and authorities are subject to change, possibly on a retroactive basis. You should consult your own tax advisersadvisors concerning the U.S. federal, state, local andnon-U.S. tax consequences of purchasing, owning and disposing of the Class B shares and ADSs in light of your particular circumstances.
For purposes of this summary, you are a U.S. holder if you are a beneficial owner of Class B shares or ADSs and you are, for U.S. federal income tax purposes, a citizen or resident of the United States, a U.S. domestic corporation, or otherwise subject to U.S. federal income tax on a net income basis with respect to income from the Class B shares and ADSs.
In general, if you are the beneficial owner of ADSs, you will be treated as the beneficial owner of the Class B shares represented by those ADSs for U.S. federal income tax purposes, and no gain or loss will be recognized if you exchange an ADS for the Class B shares represented by that ADS.
The following discussion generally assumes that we are not, and will not become, a passive foreign investment company (“PFIC”). See “Dividends” below for further discussion.
Dividends
Subject to the discussion under “—Passive Foreign Investment Company” below, concerning passive foreign investment company status, thethe gross amount of distributions paid with respect to the Class B shares or ADSs (including the amount of any Argentine taxes withheld) will be treated as dividends to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Because we do not maintain calculations of earnings and profits under U.S. federal income tax principles, it is expected that distributions generally will be reported to you as dividends. TheAny dividends you receive (including any withheld taxes) will be treated as foreign-source income and will not be eligible for the dividends-received deduction generally available to U.S. corporations. Dividends paid in Pesos will be included in a U.S. holder’s income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of a U.S. holder’s receipt, or in the case of ADSs, the depositary’s receipt of the dividend, regardless of whether the payment is in fact converted into U.S. dollars. If such a dividend is converted into U.S. dollars on the date of receipt, you generally should not be required to recognize foreign currency gain or loss in respect of the dividend income. If such a dividend is not converted into U.S. dollars on the date of receipt, a U.S. holder generally will have a basis in thenon-U.S. currency equal to its U.S. dollar value on that date. A U.S. holder generally will be required to recognize foreign currency gain or loss realized on a subsequent conversion or other disposition of such currency, which will be treated as U.S.-source ordinary income or loss.
Dividends received by certainnon-corporate U.S. holders will generally be subject to taxation at reduced rates if the dividends are “qualified dividends.” Subject to applicable limitations (including a minimum holding period requirement), dividends paid on the ADSs will be treated as qualified dividends if (i) the ADSs are readily tradable on an established securities market in the United States and (ii) the issuer was not, in the year prior to the year in which the dividend was paid, and is not, in the year in which the dividend is paid, a PFIC. The ADSs are listed onpassive foreign investment company (a “PFIC”) (see the NYSE and will qualify as readily tradable on an established securities market in the United States so long as they are so listed. Based on our audited consolidated financial statements and current expectations regarding our income, assets, activities and relevant market data, we believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to our 2017 taxable year and we do not anticipate becoming a PFIC for our 2018 taxable year or the foreseeable future. However, because the rules for determining whether a company is a PFIC are not entirely clear when applied to foreign banks and because the composition of our income and assets will vary over time, there can be no assurance that we will not be a PFIC for any taxable year. If we were a PFIC for any taxable year, your tax consequences in owning, receiving distributions in respect of, and disposing of the Class B shares or ADSs could be materially and adversely affected. You should consult your tax advisors concerning the potential application of the PFIC rules, including any filing requirements if we were treated as a PFIC.discussion under “—Passive Foreign Investment Company” below).
Because the Class B shares are not themselves listed on a U.S. exchange, dividends received with respect to the Class B shares orthat are not represented by ADSs maygenerally will not be treated as qualified dividends. U.S. holders of Class B shares or ADSs should consult their own tax advisors regarding the availability of the reduced dividend tax rate in the light of their own particular circumstances.
Dividends received by U.S. holders will generally constitute foreign source and “passive category” income for U.S. foreign tax credit purposes. Subject to limitations under U.S. federal income tax law concerning credits or deductions for foreign taxes, any Argentine taxes withheld from cash dividends on the Class B shares or ADSs will be treated as a foreign income tax eligible for credit against a U.S. holder’s U.S. federal income tax liability if the tax is treated for U.S. federal income tax purposes as imposed on the U.S. holder (or at a U.S. holder’s election, may be deducted in computing taxable income if the U.S. holder has elected to deduct all foreign income taxes for the taxable year). However, amounts withheld on account of the Argentine personal assets tax (as defineddiscussed in“—Material Argentine Tax Considerations”) will not be a foreign income tax eligible for credit against a U.S. holder’s U.S. federal income tax liability. The rules with respect to foreign tax credits are complex and U.S. holders are
urged to consult their independent tax advisorsadvisors regarding the availability of the foreign tax credit under their particular circumstances.
Passive Foreign Investment Company
Based on the past and projected composition of our income and assets, and the valuation of our assets, including goodwill, we do not believe we were a PFIC for our most recent taxable year, and we do not expect to become a PFIC in the current taxable year or in the foreseeable future, although there can be no assurance in this regard.
In general, we will be a PFIC for any taxable year in which:
at least 75% of our gross income is passive income, or
at least 50% of the value (determined based on a quarterly average of our assets is attributable to assets that produce or at held for the production of passive income.
For this purpose, passive income generally includes dividends, interest, royalties and rents (other than royalties and rents derived in the active conduct of a trade or business and not derived from a related person). If we own at least 25% (by value) of the stock of another corporation, for purposes of determining whether we are a PFIC, we will be treated as owning our proportionate share of the other corporation’s assets and receiving our proportionate share of the other corporation’s income.
Our determination with respect to our PFIC status is based in part upon certain proposed U.S. Treasury regulations that are not yet in effect and which are subject to change in the future. Those regulations and other administrative pronouncements from the IRS provide special rules for determining the character of income derived in the active conduct of a banking business for purposes of the PFIC rules. Although we believe we have adopted a reasonable interpretation of the regulations and administrative pronouncements, there can be no assurance that the IRS will follow the same interpretation.
The determination of whether we are a PFIC is made annually. Because we have valued our goodwill based on the market value of our Class B shares and ADSs, a decrease in the price of our Class B shares and ADSs may also result in us becoming a PFIC. Accordingly, it is possible that we may become a PFIC in the current or any future taxable year due to changes in our asset or income composition. If we are a PFIC for any taxable year during which you hold our Class B shares or ADSs, you will be subject to special tax rules discussed below.
If we are a PFIC for any taxable year during which you hold our Class B shares or ADSs and you do not make a timelymark-to-market election, as described below, you will be subject to special tax rules with respect to any “excess distribution” received and any gain realized from a sale or other disposition, including a pledge, of such Class B shares or ADSs. Distributions received in a taxable year will be treated as excess distributions to the extent that they are greater than 125% of the average annual distributions received during the shorter of the three preceding taxable years or your holding period for the Class B shares or ADSs. Under these special tax rules:
the excess distribution will be allocated ratably over your holding period for the Class B shares or ADSs,
the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and
the amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.
Although the determination of whether we are a PFIC is made annually, if we are a PFIC for any taxable year in which youhold our Class B shares or ADSs, you will generally be subject to the special tax rules described above for that year and for each subsequent year in which you hold Class B shares or ADSs (even if we do not qualify as a PFIC in such subsequent years). However, if you own Class B shares or ADSs and we cease to be a PFIC, you may be able to avoid the continuing impact of the PFIC rules by making a special election to recognize gain as if your Class B shares or ADSs had been sold on the last day of the last taxable year during which we were a PFIC. You are urged to consult your own tax advisor about this election.
In lieu of being subject to the special tax rules discussed above, you may make amark-to-market election with respect to your Class B shares or ADSs provided such Class B shares or ADSs are treated as “marketable stock.” Class B shares or ADSs generally will be treated as marketable stock if the Class B shares or ADSs shares are regularly traded on a “qualified exchange or other market” (within the meaning of the applicable Treasury regulations). Under current law, themark-to-market election may be available to holders of ADSs for as long as the ADSs are traded on the NYSE, which constitutes a qualified exchange, although there can be no assurance that the ADSs will be “regularly traded” for purposes of themark-to-market election. The Class B shares are traded on the ByMA, which must meet certain trading, listing, financial disclosure and other requirements to be treated as a qualified exchange for these purposes, and no assurance can be given that the Class B shares will be “regularly traded” for purposes of themark-to-market election.
If you make an effectivemark-to-market election, for each taxable year that we are a PFIC you will include as ordinary income the excess of the fair market value of your Class B shares or ADSs at the end of the year over your adjusted tax basis in the Class B shares or ADSs. You will be entitled to deduct as an ordinary loss in each such year the excess of your adjusted tax basis in the Class B shares or ADSs over their fair market value at the end of the year, but only to the extent of the net amount previously included in income as a result of themark-to-marketelection. Your adjusted tax basis in the Class B shares or ADSs will be increased by the amount of any income inclusion and decreased by the amount of any deductions under themark-to-market rules. In addition, upon the sale or other disposition of your Class B shares or ADSs in a year that we are a PFIC, any gain will be treated as ordinary income and any loss will be treated as ordinary loss, but only to the extent of the net amount of previously included income as a result of themark-to-market election.
If you make amark-to-market election, it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the Class B shares or ADSs are no longer regularly traded on a qualified exchange or other market, or the IRS consents to the revocation of the election. You are urged to consult your tax advisor about the availability of themark-to-market election, and whether making the election would be advisable in your particular circumstances.
Alternatively, holders of shares in a PFIC can sometimes avoid the special tax rules described above by electing to treat the PFIC as a “qualified electing fund” under Section 1295 of the Code. However, this option is not available to you because we do not intend to comply with the requirements necessary to permit you to make this election.
If we are a PFIC for any taxable year during which you hold our Class B shares or ADSs and any of ournon-U.S. subsidiaries is also a PFIC, you will be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of the PFIC rules. You are urged to consult your tax advisors about the application of the PFIC rules to any of our subsidiaries.
You will generally be required to file IRS Form 8621 if you hold our Class B shares or ADSs in any year in which we are classified as a PFIC. You are urged to consult your tax advisors concerning the U.S. federal income tax consequences of holding our Class B shares or ADSs if we are considered a PFIC in any taxable year.
Sale or Other Disposition
Upon a sale or other disposition of the Class B shares or ADSs, U.S. holders will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the U.S. dollar value of the amount realized on the disposition and the U.S. holder’s tax basis, determined in U.S. dollars, in the Class B shares or ADSs. Generally,Subject to the discussion under “—Passive Foreign Investment Company” above, such gain or loss will generally be capital gain or loss, and will belong-term capital gain or loss if the Class B shares or ADSs were held for more than one year. A U.S. holder’s ability to offset capital losses against ordinary income is limited.Long-term capital gain recognized by an individual U.S. holder may be taxable at a preferential rate. If an Argentine tax is withheld on the sale or other disposition of the Class B shares or ADSs, a U.S. holder’s amount realized will include the gross amount of the proceeds of the sale or other disposition before deduction of the Argentine tax. See “—Material Argentine Tax Considerations—Considerations—Capital gains” for a description of when a disposition may be subject to taxation by Argentina. This gain or loss will generally be U.S.—–source gain or loss for foreign tax credit purposes. U.S. holders should consult their tax advisors as to whether the Argentine tax on gains may be creditable against the U.S. holder’s U.S. federal income tax on foreign-source income from other sources.
Foreign Financial Asset Reporting
Certain U.S. holders that own “specified foreign financial assets” with an aggregate value in excess of U.S.$50,000 are generally required to file an information statement along with their tax returns, currently on Form 8938, with respect to such assets. “Specified foreign financial assets” include any financial accounts held at anon-U.S. financial institution, as well as securities issued by anon-U.S. issuer (which would include the Class B shares and ADSs) that are not held in accounts maintained by financial institutions. Higher reporting thresholds apply to certain individuals living abroad and to certain married individuals. Regulations extend this reporting requirement to certain entities that are treated as formed or availed of to hold direct or indirect interests in specified foreign financial assets based on certain objective criteria. U.S. holders that fail to report the required information could be subject to substantial penalties. In addition, the statute of limitations for assessment of tax would be suspended, in whole or part. Prospective investors should consult their own tax advisors concerning the application of these rules to their investment in the Class B shares and ADSs, including the application of the rules to their particular circumstances.
Information Reporting and Backup Withholding
Dividends paid on and proceeds from the sale or other disposition of the Class B shares or ADSs that are made within the United States or through certain U.S.-related financial intermediaries generally will be subject to information reporting unless a U.S. holder is treated as an exempt recipient and may also be subject to backup withholding unless a U.S. holder (i) provides a correct taxpayer identification number and certifies that it is not subject to backup withholding or (ii) otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax. Any amounts withheld may be allowed as a refund or credit against the holder’s U.S. federal income tax liability, provided the holder timely furnishes the required information to the Internal Revenue Service (“IRS”).IRS.
A holder that is a foreign corporation or anon-resident alien individual may be required to comply with certification and identification procedures in order to establish its exemption from information reporting and backup withholding.
FATCA
We have entered into an agreement with the IRS effective April 24, 2014, pursuant to which we have agreed to comply with certain due diligence, information reporting and withholding obligations pursuant to sections 1471 through 1474 of the Code, and the regulations promulgated thereunder (often referred to as the “Foreign Account Tax Compliance Act” or “FATCA”). Therefore, an investor considered to have a financial account that is a “U.S. account” maintained by us may be required to provide certain information regarding such investor (or relevant beneficial owner of the Class B shares or ADSs), including information and tax documentation regarding the identity of such investor as well as that of its direct and indirect owners, and we may be required to report this
information to the IRS. However, our equity is not a U.S. account. Stockstock or other equity or debt instruments issued by a financial institution is not treated as a U.S. account if such stock or other instrument is regularly traded on an established securities market. We expect that the Class B shares and ADSs will be so treated. Further, a U.S. account generally does not include an equity instrument in a financial institution, such as us, that is not an investment entity.
In addition, it is possible that under future guidance, payments on the Class B shares and ADSs may be subject to a withholding tax of up to 30% under rules applicable to foreign “passthru payments.” Regulations implementing this rule have not yet been adopted or proposed and the IRS has indicated that any such regulations would not be effective prior to January 1, 2019 (or, if later,the date that is two years after the date on which final regulations on this issue are published).FATCApublished. FATCA is particularly complex and its application to Argentine financial institutions is uncertain at this time. Although we have registered with the IRS and believe that we are compliant with obligations imposed on us under FATCA, it is unclear to what extent we may be able to comply with FATCA in the future. Each holder of Class B shares or ADSs should consult its own tax advisoradvisor to obtain a more detailed explanation of FATCA and to learn how FATCA might affect each holder in its particular circumstances.
| Item 10.F |
Not applicable.
| Item 10.G |
Not applicable.
| Item 10.H |
We file reports, including annual reports on Form20-F, and other information with the SEC pursuant to the rules and regulations of the SEC that apply to foreign private issuers. You may read and copy any materials filed with the SEC at its public reference rooms in Washington, D.C., at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Foreign private issuers, like us, have beenare required to make filings with the SEC by electronic means since November 4, 2002.means. Any filings we make electronically are available to the public over the Internet at the SEC’s web site at http://www.sec.gov/.
| Item 10.I |
Not applicable.
Item 11.
| Item 11. | Quantitative and Qualitative Disclosures about Market Risk |
Market Risk
Market risk is the risk of loss arising from fluctuations in financial markets variables, such as interest rates, foreign exchange rates and other rates or prices. This risk is a consequence of lending, trading and investments businesses and mainly consists of interest rate risk and foreign exchange risk.
Our market risk arises mainly from our capacity as a financial intermediary.
The Risk Management Committee is responsible for approving and amending our market risk policies.
The Risk Management Committee uses a risk map to explain, in detail, the trades that the trading desk is authorized to close and identifies the officers authorized to close those transactions. The risk map also describes the maximum terms for transactions, maximum amounts for the position in each product,certain products, the maximum amount of losses accepted (“stop loss”), and the maximum expected loss (given a confidence interval) over a specific time period if the portfolio were held unchanged over that period (VaR limit) and. It is structured in a manner that establishes different investment amounts tied to our organizational chart, where the Treasury Manager has the highest authorized amount. Complementarily, the Credit Committee establishes the credit risk limits with all financial counterparties, and it is structured in a manner that establishes different investment amounts tied to our organizational chart, where the Treasury Manager has the highest authorized amount. Our Financial Risk Department conducts a daily control over compliance with the limits established in the risk map. In the event that an exception is needed, the trading desk
must apply for authorization from the CEO while maintaining the Asset &and Liabilility Committee and the Risk Management Committee informed of all developments. In addition, the Risk Management Committee authorizes risk levels in terms of interest rate, foreign exchange rate, inflation and term imbalance risks. The Assets and Liabilities Committee is responsible for monitoring compliance with our market risk policies every two weeks.
In the course of its monthly meetings, our Board of Directors is advised of the full range of resolutions adopted by the Assets and Liabilities Committee, including: liquidity risk, market risk, foreign currency risk and interest rate risk management.
We evaluate, upgrade and improve market risk measurements and controls on a daily basis. In order to measure significant market risks (whether they arise in trading ornon-trading portfolios), we use the value at risk methodology, or “VaR.” This methodology is based on statistical methods that take into account many variables that may cause a change in the value of its portfolios, including interest rates, foreign exchange rates, securities prices, volatility and any correlation among them. VaR is an estimation of potential losses that could arise from reasonably likely adverse changes in market conditions. It expresses the maximum amount of loss expected (given a confidence interval) over a specified time period, or “time horizon,” if that portfolio were held unchanged over that time period.
All VaR models, while forward looking, are based on past events and are dependent upon the quality of available market data. The quality of our VaR models is therefore continuously monitored. As calculated, VaR is an estimate of the expected maximum loss in the market value of a given portfolio over a ten day time horizon at a one tailed 99% confidence interval. We assume a ten day holding period and adverse market movements of 2.32 standard deviations as the standard for risk measurement and comparison. Additional information on our Risk Management is set forth in Note 23 to our audited consolidated financial statements.
The following table shows thefive-day 99% confidence VaR for our combined trading portfolios in 2018, 2017 2016 and 20152016 (in thousands of Pesos):
|
| 2017 |
| 2016 |
| 2015 |
| 2018 | 2017 | 2016 | |||||||||
Minimum |
| 33,561 |
| 36,590 |
| 30,741 |
| 499,968 | 33,561 | 36,590 | |||||||||
Maximum |
| 128,835 |
| 111,622 |
| 59,350 |
| 206,802 | 128,835 | 111,622 | |||||||||
Average |
| 72,739 |
| 72,961 |
| 46,028 |
| 323,948 | 72,739 | 72,961 | |||||||||
As of December 31, |
| 81,986 |
| 45,385 |
| 30,741 |
| 301,724 | 81,986 | 45,385 | |||||||||
The following chart shows the three-monththree-month 99% confidence interest rate risk VaR for our combined trading portfolios for 20172018 (in thousands of Pesos)
Minimum |
| 838,607 | ||
Maximum |
| 645,962 | ||
Average |
| 742,285 | ||
As of December 31, |
| 645,962 |
In order to take advantage of good trading opportunities, the Bank has sometimes increased risk; however, during periods of uncertainty, the Bank has also reduced it.
Interest Rate Risk
Central Bank Communication “A” 5580 did not impact our minimum6397 amended the way in which the Central Bank evaluates capital requirements forneeds related to interest rate risk and other related measures,exposure, by the way adapting its methodology to international best practices. Even though Interest Rate Risk is not being part of the PillarTier I capital requirements. Notwithstandingrequirements in a direct way, this fact,could be the case whenever the bank reaches the status of “outlier bank”. The “outlier bank” test compares the bank’srEVE with 15% of its Tier 1 capital, under a set of prescribed interest rate shock scenarios. Tier I capital requirements will increase by the excess of the bank’srEVE over 15% of its Tier 1 capital. Therefore, the Superintendency of Financial Institutions continues to review such risksrisk and determines if there is a need for additional regulatory capital in case a predetermined threshold is surpassed or it finds clear evidence of an inappropriate management of this type of risk. Additionally, the Central Bank establishes the need to measure interest rate risk considering two dimensions: a) the impact of interest rate fluctuations over the underlying value of a bank’s assets, liabilities andoff-balance sheet items and hence its economic value and b) the impact over the net interest income. In order to tackle the first dimension, the Central Bank established a Standardized Framework considering the impact of six different shock scenarios over the bank’srEVE. To assess the impact over the net interest income, the bank has to make use of its internal measurement systems (SIM). See “Item 4.B Business overview—Argentine Banking Regulation—Liquidity and Solvency Requirements—Limitations.”
We define Interest Rate Risk as the risk relating to changes in the entity’s financial income and economic value as a result of fluctuations in the market’s interest rates. The following are known factors that contribute to this risk:
·
Differences in maturity and adjustment dates of assets, liabilities andoff-balance sheet holdings;
·Foreseeability, evolution and volatility with respect to local interest rates, foreign interest rates and CET;
·The base risk arising out of an imperfect correlation when adjusting asset and liability rates for instruments with similar revaluation characteristics; and
·Implicit options for particular assets, liabilities andoff-balance sheet commitments held by the entity.
The Bank and CCF employ a prudent interest rate risk strategy allowing them to uphold their commitments and maintain desired levels of revenue and capital, both in normal and adverse market conditions.
As of July 1, 2018, the Central Bank Communication “A” 6397 will be in force for the whole local banking system, in compliance with Basel’s new document related to Interest Rate Risk in the Banking Book (IRRBB) (https://www.bis.org/bcbs/publ/d368.htm). The Bank and CCF will adapt their internal models to the requirements listed in that regulation.
Interest Rate Risk Management Model
The Bank and CCF include interest rate gaps in their interest rate risk management model. This approach analyzes mismatches between asset and liability interest rates between reevaluation periods with respect to balance sheetthe financial statements and off-balance sheetoff-financial statements line-items. The result is a basic representation of the balance sheetfinancial statements structure that allows for the detection of interest rate risk concentrations within the different periods. This is also used to estimate the potential impact of interest rates falling outside of the financial margin (NIM-EaR(NIM-EaR method) and the entity’s economic value (MVE-VaR(MVE-VaR method).
Every balance sheetfinancial statements and off-balance sheetoff-financial statements line-item is classified according to its maturity. For asset/liability management accounts without maturity, an internal method of analysis is used to determine possible maturity and sensitivity.
The Asset and Liability Management Committee monitors interest rate risk management and each financial management team is in charge of executing it. The Risk Management team and Financial Planning team are in charge of monitoring compliance, enforcing risk management strategies and issuing periodic reports.
Interest Rate Risk Capital Requirement
The Bank and CCF evaluate theirevaluates its minimum capital requirements relating to interest rate risk through the use of aMVE-EaR internal model, using a holding period of three months and a 99% confidence interval. This quantitative model factors in the economic capital required for our securitization risk. The results are then compared with those obtained from the application of the Standardized Framework, being the resulting capital need the higher of those figures. In the case of CCF, capital needs are calculated directly through the application of the Standardized Framework, adopting local regulations applicable to entities of the size of CCF. The following chart shows the three-monththree month 99% confidence interest rate risk VaR for our combined trading portfolios for 2017, 2016 and 2015 (in thousands of Pesos):
|
| 2017 |
| 2016 |
| 2015 |
|
Minimum |
| 403,872 |
| 223,082 |
| 160,590 |
|
Maximum |
| 591,639 |
| 461,509 |
| 221,237 |
|
Average |
| 495,991 |
| 348,404 |
| 196,582 |
|
As of December 31, |
| 591,639 |
| 373,404 |
| 184,564 |
|
| 2018 | 2017 | 2016 | ||||||||||
Minimum | 838,607 | 403,872 | 223,082 | |||||||||
Maximum | 645,962 | 591,639 | 461,509 | |||||||||
Average | 742,285 | 495,991 | 348,404 | |||||||||
|
|
|
|
|
| |||||||
As of December 31, | 645,962 | 591,639 | 373,404 | |||||||||
The Bank and CCF’s consolidated gap position refers to the mismatch ofinterest-earning assets andinterest-bearing liabilities.
The following tables show the Bank and CCF’s consolidated exposure to a positive interest rate gap, excluding CER adjusted securities:
|
| Remaining Maturity at December 31, 2017 |
| ||||||||
|
| 0-1 Year |
| 1-5 Years |
| 5-10 Years |
| Over 10 Years |
| Total |
|
|
| (in thousands of Pesos, except percentages) |
| ||||||||
Interest-earning assets |
|
|
|
|
|
|
|
|
|
|
|
Investment Portfolio(1) |
| 6,096,738 |
| 686,209 |
| 41,631 |
| 85 |
| 6,824,663 |
|
Loans to the non-financial public sector (2) |
| 4,892 |
| 26,631 |
| — |
| — |
| 31,523 |
|
Loans to the private and financial sector (2) |
| 38,455,834 |
| 15,547,415 |
| 1,707,001 |
| — |
| 55,710,250 |
|
Other assets |
| 105,715 |
| — |
| — |
| — |
| 105,715 |
|
Receivables from financial leases |
| 892,352 |
| 1,609,311 |
| 5,986 |
| — |
| 2,507,649 |
|
Total interest-earning assets |
| 45,555,531 |
| 17,869,566 |
| 1,754,618 |
| 85 |
| 65,179,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
Savings |
| 27,929,157 |
| — |
| — |
| — |
| 27,929,157 |
|
Time deposits |
| 17,891,418 |
| 300 |
| — |
| — |
| 17,891,718 |
|
Investment accounts |
| 900,150 |
| — |
| — |
| — |
| 900,150 |
|
Subordinated notes |
| 772,776 |
| 8,184,445 |
| — |
| — |
| 8,957,221 |
|
Liabilities with Argentine financial institutions |
| 216,154 |
| 387,944 |
| — |
| — |
| 604,098 |
|
Liabilities with international banks and institutions |
| 2,778,116 |
| 5,154 |
| — |
| — |
| 2,783,270 |
|
Total interest-bearing liabilities |
| 50,487,771 |
| 8,577,843 |
| — |
| — |
| 59,065,614 |
|
Asset/liability gap |
| (4,932,240 | ) | 9,291,723 |
| 1,754,618 |
| 85 |
| 6,114,186 |
|
Cumulative asset/liability gap |
| (4,932,240 | ) | 4,359,483 |
| 6,114,101 |
| 6,114,186 |
|
|
|
Cumulative sensitivity gap as a percentage of total interest-earning assets |
| 4.3 | % | 19.3 | % | 20.8 | % | 20.8 | % |
|
|
| Remaining Maturity at December 31, 2018 | ||||||||||||||||||||
| 0-1 Year | 1-5 Years | 5-10 Years | Over 10 Years | Total | ||||||||||||||||
| (in thousands of Pesos, except percentages) | ||||||||||||||||||||
Interest-earning assets | ||||||||||||||||||||
Investment Portfolio(1) | 15,730 | 3,188 | 157 | 11 | 19,086 | |||||||||||||||
Loans to thenon-financial public sector(2) | 4,753 | 25,276 | — | — | 30,029 | |||||||||||||||
Loans to the private and financial sector(2) | 56,411,966 | 12,543,693 | 4,046,330 | — | 73,001,989 | |||||||||||||||
Other assets | 12,992 | — | — | — | 12,992 | |||||||||||||||
Receivables from financial leases | 1,334,732 | 2,045,443 | 2,653 | — | 3,382,828 | |||||||||||||||
Totalinterest-earning assets | 57,780,173 | 14,617,600 | 4,049,140 | 11 | 76,446,924 | |||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||
Savings | 49,600,898 | — | — | — | 49,600,898 | |||||||||||||||
Time deposits | 25,684,326 | 86,577 | — | — | 25,770,903 | |||||||||||||||
Investment accounts | 2,255,000 | 1,357,667 | — | — | 3,612,667 | |||||||||||||||
Subordinated notes | 1,375,597 | 6,394,274 | — | — | 7,769,871 | |||||||||||||||
Liabilities with Argentine financial institutions | 7,147,345 | 886,293 | — | — | 8,033,638 | |||||||||||||||
Liabilities with international banks and institutions | — | — | — | — | — | |||||||||||||||
(1) Includes government securities, instruments issued by the Central Bank and participation in our securitization trusts.
(2) Loan amounts are stated before deducting allowances for loan losses. Non-accrual loans are included with loans as interest-earning assets.
| Remaining Maturity at December 31, 2018 | ||||||||||||||||||||
| 0-1 Year | 1-5 Years | 5-10 Years | Over 10 Years | Total | ||||||||||||||||
| (in thousands of Pesos, except percentages) | ||||||||||||||||||||
Totalinterest-bearing liabilities | 86,063,166 | 8,724,811 | — | — | 94,787,977 | |||||||||||||||
Asset/liability gap | (28,282,992 | ) | 5,892,789 | 4,049,140 | 11 | (18,341,052 | ) | |||||||||||||
Cumulative asset/liability gap | (28,282,992 | ) | (22,390,203 | ) | (18,341,063 | ) | (18,341,052 | ) | ||||||||||||
Cumulative sensitivity gap as a percentage of totalinterest-earning assets | (37.0 | )% | (29.3 | )% | (24.0 | )% | (24.0 | )% | ||||||||||||
| (1) | Includes government securities and instruments issued by the Central Bank. |
| (2) | Loan amounts are stated before deducting allowances for loan losses. |
The following two tables detail the Bank’s consolidated exposure to an interest rate gap, including CER adjusted securities, which may differ from ordinary interest rate securities behavior. Although the Bank maintains a positive gap in CER adjusted securities with maturities over one year, it is not significant.
The table below shows the Bank’s consolidated exposure to an interest rate gap, in Pesos:
|
| Remaining Maturity at December 31, 2017 |
| ||||||||
|
| 0-1 Year |
| 1-5 Years |
| 5-10 Years |
| Over 10 Years |
| Total |
|
|
| (in thousands of Pesos, except percentages) |
| ||||||||
Interest-earning assets in national currency |
|
|
|
|
|
|
|
|
|
|
|
Investment Portfolio(1) |
| 4,693,581 |
| 550,499 |
| — |
| — |
| 5,244,080 |
|
Loans to the non-financial public sector (2) |
| 4,892 |
| 26,631 |
| — |
| — |
| 31,523 |
|
Loans to the private and financial sector (2) |
| 30,981,968 |
| 10,869,346 |
| 1,648,415 |
| — |
| 43,499,729 |
|
Other assets |
| 55,492 |
| — |
| — |
| — |
| 55,492 |
|
Receivables from financial leases |
| 813,674 |
| 1,375,108 |
| 3,390 |
| — |
| 2,192,172 |
|
Total interest-earning assets |
| 36,549,607 |
| 12,821,584 |
| 1,651,805 |
| — |
| 51,022,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities in national currency |
|
|
|
|
|
|
|
|
|
|
|
Savings |
| 21,889,153 |
| — |
| — |
| — |
| 21,889,153 |
|
Time deposits |
| 15,999,857 |
| 300 |
| — |
| — |
| 16,000,157 |
|
Investment accounts |
| 900,150 |
| — |
| — |
| — |
| 900,150 |
|
Subordinated notes |
| 772,776 |
| 7,511,557 |
| — |
| — |
| 8,284,333 |
|
Liabilities with Argentine financial institutions |
| 216,154 |
| 387,944 |
| — |
| — |
| 604,098 |
|
Liabilities with international banks and institutions |
| — |
| — |
| — |
| — |
| — |
|
Total interest-bearing liabilities |
| 39,778,090 |
| 7,899,801 |
| — |
| — |
| 47,677,891 |
|
Asset/liability gap |
| (3,228,483 | ) | 4,921,783 |
| 1,651,805 |
| — |
| 3,345,105 |
|
Cumulative asset/liability gap |
| (3,228,483 | ) | 1,693,300 |
| 3,345,105 |
| 3,345,105 |
|
|
|
Cumulative sensitivity gap as a percentage of total interest-earning assets |
| 6.3 | % | 18.7 | % | 20.3 | % | 20.3 | % |
|
|
(1) Includes government securities, instruments issued by the Central Bank and participation in our securitization trusts.
(2) Loan amounts are stated before deducting allowances for loan losses. Non-accrual loans are included with loans as interest-earning assets.
| Remaining Maturity at December 31, 2018 | ||||||||||||||||||||
| 0-1 Year | 1-5 Years | 5-10 Years | Over 10 Years | Total | ||||||||||||||||
| (in thousands of Pesos, except percentages) | ||||||||||||||||||||
Interest-earning assets in national currency | ||||||||||||||||||||
Investment Portfolio(1) | 12,153 | 3,185 | 65 | — | 15,403 | |||||||||||||||
Loans to thenon-financial public sector(2) | 4,753 | 25,276 | — | — | 30,029 | |||||||||||||||
Loans to the private and financial sector(2) | 43,806,922 | 5,587,084 | 3,955,568 | — | 53,349,574 | |||||||||||||||
Other assets | 2,560 | — | — | — | 2,560 | |||||||||||||||
Receivables from financial leases | 980,349 | 1,245,473 | 256 | — | 2,226,078 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Totalinterest-earning assets | 44,806,737 | 6,861,018 | 3,955,889 | — | 55,623,644 | |||||||||||||||
Interest-bearing liabilities in national currency | ||||||||||||||||||||
Savings | 31,069,174 | — | — | — | 31,069,174 | |||||||||||||||
Time deposits | 20,777,808 | 85,149 | — | — | 20,862,957 | |||||||||||||||
Investment accounts | 2,255,000 | — | — | — | 2,255,000 | |||||||||||||||
Subordinated notes | 1,375,597 | 6,394,274 | — | — | 7,769,871 | |||||||||||||||
Liabilities with Argentine financial institutions | 337,508 | 886,293 | — | — | 1,223,801 | |||||||||||||||
Liabilities with international banks and institutions | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Totalinterest-bearing liabilities | 55,815,087 | 7,365,716 | — | — | 63,180,803 | |||||||||||||||
Asset/liability gap | (11,008,350 | ) | 504,697 | 3,955,889 | — | (7,557,158 | ) | |||||||||||||
Cumulative asset/liability gap | (11,008,350 | ) | (11,513,047 | ) | (7,557,158 | ) | (7,557,158 | ) | ||||||||||||
Cumulative sensitivity gap as a percentage of totalinterest-earning assets | (18.9 | )% | (20.7 | )% | (13.6 | )% | (13.6 | )% | ||||||||||||
| (1) | Includes government securities and instruments issued by the Central Bank. |
| (2) | Loan amounts are stated before deducting allowances for loan losses. |
The table below shows the Bank’s consolidated exposure to an interest rate gap in foreign currency:
|
| Remaining Maturity at December 31, 2017 |
| Remaining Maturity at December 31, 2018 | |||||||||||||||||||||||||||
|
| 0-1 Year |
| 1-5 Years |
| 5-10 Years |
| Over 10 Years |
| Total |
| 0-1 Year | 1-5 Years | 5-10 Years | Over 10 Years | Total | |||||||||||||||
|
| (in thousands of Pesos, except percentages) |
| (in thousands of Pesos, except percentages) | |||||||||||||||||||||||||||
Interest-earning assets in foreign currency |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Investment Portfolio(1) |
| 1,403,157 |
| 135,710 |
| 41,631 |
| 85 |
| 1,580,583 |
| ||||||||||||||||||||
Loans to the private and financial sector(2) |
| 7,473,866 |
| 4,678,069 |
| 58,586 |
| — |
| 12,210,521 |
| ||||||||||||||||||||
Investment Portfolio(1) | 3,577 | 3 | 92 | 11 | 3,683 | ||||||||||||||||||||||||||
Loans to the private and financial sector(2) | 12,605,044 | 6,956,609 | 90,762 | — | 19,652,415 | ||||||||||||||||||||||||||
Other assets |
| 50,223 |
| — |
| — |
| — |
| 50,223 |
| 10,432 | — | — | — | 10,432 | |||||||||||||||
Receivables from financial leases |
| 78,678 |
| 234,203 |
| 2,596 |
| — |
| 315,477 |
| 354,383 | 799,970 | 2,397 | — | 1,156,750 | |||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||
Total interest-earning assets |
| 9,005,924 |
| 5,047,982 |
| 102,813 |
| 85 |
| 14,156,804 |
| 12,973,436 | 7,756,582 | 93,251 | 11 | 20,823,280 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Interest-bearing liabilities in foreign currency |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Savings |
| 6,040,004 |
| — |
| — |
| — |
| 6,040,004 |
| 18,531,724 | — | — | — | 18,531,724 | |||||||||||||||
Time deposits |
| 1,891,561 |
| — |
| — |
| — |
| 1,891,561 |
| 4,906,518 | �� | 1,428 | — | — | 4,907,946 | ||||||||||||||
Subordinated notes |
| — |
| 672,888 |
| — |
| — |
| 672,888 |
| — | 1,357,667 | — | — | 1,357,667 | |||||||||||||||
Liabilities with Argentine financial institutions |
| — |
| — |
| — |
| — |
| — |
| — | — | — | — | — | |||||||||||||||
Liabilities with international banks and institutions |
| 2,778,116 |
| 5,154 |
| — |
| — |
| 2,783,270 |
| 6,809,837 | — | — | — | 6,809,837 | |||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||
Total interest-bearing liabilities |
| 10,709,681 |
| 678,042 |
| — |
| — |
| 11,387,723 |
| 30,248,079 | 1,359,095 | — | — | 31,607,174 | |||||||||||||||
Asset/liability gap |
| (1,703,757 | ) | 4,369,940 |
| 102,813 |
| 85 |
| 2,769,081 |
| (17,274,643 | ) | 6,397,487 | 93,251 | 11 | (10,783,894 | ) | |||||||||||||
Cumulative asset/liability gap |
| (1,703,757 | ) | 2,666,183 |
| 2,768,996 |
| 2,769,081 |
|
|
| (17,274,643 | ) | (10,877,156 | ) | (10,783,905 | ) | (10,783,894 | ) | ||||||||||||
Cumulative sensitivity gap as a percentage of total interest-earning assets |
| -4.1 | % | 22.1 | % | 23.1 | % | 23.1 | % |
|
| (83.0 | )% | (52.2 | )% | (51.8 | )% | (51.8 | )% | ||||||||||||
(1) Includes government securities, instruments issued by the Central Bank and participation in our securitization trusts.
(2) Loan amounts are stated before deducting allowances for loan losses. Non-accrual loans are included with loans as interest-earning assets.
| (1) | Includes government securities and instruments issued by the Central Bank. |
| (2) | Loan amounts are stated before deducting allowances for loan losses. |
Foreign Currency Risk
The Risk Management Committee is responsible for deciding the net position in foreign currency to be maintained at all times according to market conditions and monitoring it regularly.
Policies regarding foreign currency risk are applied at the level of our subsidiaries. Our foreign currency risk arises mainly from our operations in our capacity as a financial intermediary.
Since May 2003, the fluctuation of the U.S. dollar has been included as a risk factor for the calculation of the market risk requirement, considering all assets and liabilities in U.S. dollars. As of December 31, 2017,2018, the Bank’s consolidated total net asset foreign currency position subject to foreign currency risk was Ps.471.6Ps.393.0 million, and this position generated a value at risk of Ps.38.6Ps.32.8 million as of such date.
Liquidity Risk
Policies regarding liquidity risk are applied at the level of our subsidiaries. Our liquidity risk arises mainly from the operations of the Bank and CCF. Our other subsidiaries are also subject to liquidity risk, which is not significant.
The Bank and CCF define liquidity risk as the risk of having to pay additional financial costs due to an unexpected need for liquidity. This risk arises out of the differences in amounts and maturity of the assets and liabilities held by the Bank. There are two types of Liquidity Risk:
·
Funding Liquidity Risk, which results from the inability to obtain funds at market price that are needed to ensure liquidity, mainly due to the market’s perception of the Bank and CCF.
·
Market Liquidity Risk, which occurs when the Bank or CCF cannot trade its position in one or several assets at market price, which is caused by two factors:
·the assets are not sufficiently liquid and cannot be traded in the secondary market; and
·changes in the market where the assets are traded.
To manage liquidity risk, the Bank and CCF focus on their sources of liquidity. The Bank relies on certain financial products that can provide a quick source of liquidity in extreme situations of illiquidity. To this effect, the Bank considers factoring positionsrelies on the control of two core metrics, the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR). The first one, with a maturitymore short term perspective, is aimed at assessing the availability of less than 90 days among its principal liquidity indicatorsenough liquid assets to meet the withdrawal of deposits and continuously monitors its factoring positions. The Bank also uses these indicatorsother liabilities in a stress scenario. Meanwhile, the NSFR aims to determine its liquidity risk policy.promote resilience over a longer time horizon by creating incentives for banks to fund their activities with more stable sources of funding on an ongoing basis.
Following the same prudent risk strategy, the Bank and CCF prioritize the securitization of assets with a maturity of over 180 days, which reflects the Bank’s and CCF’s policy to minimize maturity mismatches.
In addition, theThe Bank and CCF rely on a system of indicators that allows them to detect and take steps to prevent potential liquidity risks. The Bank’s and CCF’s system of indicators and risk limits are established by the Risk Management team and approved by the Board of Directors. These indicators are constantly monitored by the Risk Management Committee.
The Risk Management Committee coordinates and supervises the identification, measuring and monitoring of liquidity risk. The Assets and Liabilities Committee develops the strategies that allow for adequate liquidity risk management. The Assets and Liabilities Committee relies on several different departments within the Bank to develop and enforce these strategies, from issuing reports and risk management proposals to monitoring compliance with the established limits.
In addition, the Bank must comply with the liquidity coverage ratio, a 30-day horizon stress scenario, established by the Central Bank and the net stable funding ratio which will be implemented as of January 1, 2018.
Operational Risk
We define operational risk as the risk of loss resulting from inadequate or failed internal processes due to personnel, systems or external events. The definition includes legal risk but excludes strategic and reputational risk. Legal risk can result from internal or external events and includes exposure to sanctions, penalties or other economic consequences that arise out ofnon-compliance with contractual or regulatory obligations.
We believe that we are pioneers in the design of operational risk management frameworks in Argentina, placing emphasis on risk identification, risk management policies and our organizational model. We have tailored our framework to the requirements established by the Central Bank, the Basel accords and international best practices. The Bank’s operational risk management processes are overseen by a process owner, who is assisted by a network of correspondents, and every branch and service center has a delegate in charge of monitoring risk. The correspondents and delegates report to the Operational Risk Department, ensuring that the Bank’s entire network is working together to monitor operational risk.
Operational Risk Measuring Models
The risk management process is based on complying with several stages designed to evaluate the Bank’s vulnerability to operational risk events, minimizing operational risk. This method allows the Bank to achieve a better understanding of its operational risk profile and adopt the necessary measures to address any vulnerability. The stages are divided into:
·
Measurement and evaluation of operational risk by establishing risk levels, evaluating the effectiveness of control mechanisms and determining residual risk for each of the Bank’s processes and IT assets.
·Mitigation, resulting from the application of plans of action and strategies designed to maintain risks within the levels established by the Board of Directors.
·Monitoring to quickly detect and address deficiencies in the policies, processes and procedures for managing operational risk, and to ensure constant improvement.
·Documenting the incidents and losses related to operational risk by establishing a database that allows for a comparison of the frequency and impact of operational risk events with the risk control self-assessment model.
The Bank and CCF have an Operational Risk Committee that is in charge of the enforcement of the operational risk policies and monitors the operational risks and operational risk events affecting the Bank and CCF. In addition, the Operational Risk Committee issues reports to the Bank’s and CCF’s high management, Risk Management Committee and Board of Directors.
The Bank and CCF internally evaluate their minimum capital requirements regarding operational risk through two different models:
·Banco Supervielle: has adopted a model that calculates (i) expected and unexpected losses, (ii) VaR (at a 99.9% confidence interval) and (iii) the minimum capital required to cover expected and unexpected losses. The holding period used is one year.
·CCF: has adopted a model that calculates (i) expected losses, (ii) VaR (at a 99.0% confidence interval) and (iii) the minimum capital required to cover unexpected losses. The holding period used is one year.
| Item 12. |
|
| Item 12.A |
Not applicable.
| Item 12.B |
Not applicable.
| Item 12.C |
Not applicable.
| Item 12.D | American Depositary Shares |
Item 12.DAmerican Depositary Shares
Fees and Expenses
Holders of our ADRs are generally expected to pay fees to the depositary according to the schedule below:
| Persons depositing or withdrawing shares or ADS holders must pay: | For: | |
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs) | Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property
Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates | |
$0.05 (or less) per ADS | Any cash distribution to ADS holders | |
| Persons depositing or withdrawing shares or ADS holders must pay: | For: | |
A fee equivalent to the fee that would be payable if securities distributed to you had been Class B shares and the Class B shares had been deposited for issuance of ADSs | Distribution of securities distributed to holders of deposited securities (including rights) which are distributed by the depositary to ADS holders | |
| $0.05 (or less) per ADS per calendar year | Depositary services | |
| Registration or transfer fees | Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares | |
| Expenses of the depositary | Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement) converting foreign currency to U.S. dollars | |
| Taxes and other governmental charges the depositary or the custodian have to pay on any ADSs or shares underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes | As necessary | |
| Any charges incurred by the depositary or its agents for servicing the deposited securities | As necessary | |
The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging thebook-entry system accounts of participants acting for them. The depositary may collect any of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that are obligated to pay those fees. The depositary may generally refuse to providefee-attracting services until its fees for those services are paid.
From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance of the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. The depositary for our ADRs is The Bank of New York Mellon. In 2017, we received a dividend revenue share from2018, the depositaryDepositary reimbursed expenses for a totalan amount of Ps.128,684.90.U.S.$.53,291.21 In performing its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency or other service providers that are owned by or affiliated with the depositary and that may earn or share fees, spreads or commissions.
The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account. The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement and the rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that the exchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. The methodology used to determine exchange rates used in currency conversions is available upon request.
PART II
| Item 13. |
None.
| Item 14. |
|
None.
| Item 15. | Controls and Procedures |
Item 15.Controls and Procedures
(a) Disclosure Controls and Procedures.Procedures.
We maintain disclosure controls and procedures as defined in Rules13a-15(e) and15d-15(e) of the Exchange Act, as amended. We performed an evaluation of the effectiveness of our disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file with or submit to the SEC under the Exchange Act, as amended, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and is communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding the required disclosure. Our CEO and CFO concluded that, as of the end of the period covered by this annual report, our disclosure controls and procedures were effective to provide reasonable assurance of their reliability. Notwithstanding the effectiveness of our disclosure controls and procedures, these disclosure controls and procedures cannot provide absolute assurance of achieving their objectives because of their inherent limitations. Disclosure controls and procedures are processes that involve human diligence and compliance and are subject to error in judgment. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by our disclosure controls and procedures.
(b) Management’s Annual Report on Internal Control over Financial Reporting.
1) Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f)for us and 15d-15(f) under the Securities Exchange Act of 1934. The company’s internalour consolidated subsidiaries. Internal control over financial reporting wasis defined in Rule13a-15(f) and15d-15(f) of the Exchange Act, as amended, as a process designed by, or under the supervision of, our principal executive and principal financial officers, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with applicable generally accepted accounting principles. The 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 ofconsolidated financial statements in accordance with applicable generally accepted accounting principles,principles. Internal controls and procedures are processes that receiptsinvolve human diligence and expenditures of the companycompliance and are being made onlysubject to error 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.
judgment. Because of its inherent limitations, internal control over financial reporting may not prevent or detect all 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.
Under the supervision and with the participation of our management, including the Board of Directors, Chief Executive Officer, Chief Financial Officer and other personnel, we conducted an assessment of2) Management assessed the effectiveness of the company’sour internal control over financial reporting as of December 31, 2017.2018. In making this assessment, we and our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-IntegratedControl–Integrated Framework (2013).2013.
3) Based on our assessment, we and our management’s assessment and those criteria, management believeshave concluded that the company maintained effectiveour internal control over financial reporting was effective as of December 31, 2017.2018.
The effectiveness(c)Attestation Report of the company’s internal control over financial reporting as of December 31, 2017 has been audited by Registered Public Accounting Firm.
Price Waterhouse & Co. S.R.L., an independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2018, as stated in their report which appears herein.
(c) Attestation Report of the Registered Public Accounting Firm. Please see “Item 18. Financial Statements.”
to our consolidated financial statements.
Please see “Item 18. Financial Statements-Report of the Independent Registered Public Accounting Firm” for our registered public accounting firm’s attestation report on the effectiveness of our internal control over financial reporting.
(d)Changes in Internal Control over Financial Reporting During the Year Ended December 31, 20172018.
During the period covered by this annual report, there have not been any changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
| Item 16.A | Audit committee financial expert |
Item 16.AAudit committee financial expert
Laurence Nicole Mengin de LoyerRicardo Enrique De Lellis is our audit committee’s financial expert. SheHe is an independent member of the audit committee under Rule 10A-3 and applicable NYSE standards.10A-3.
| Item 16.B |
We have adopted a code of ethics that is applicable to, among others, our CEO, CFO and principal accounting officer and persons performing similar functions, which is posted on our website at:https://www.gruposupervielle.com/English/Corporate-Governance/Corporate-Governance-policies/default.aspx.s21.q4cdn.com/714080446/files/doc_downloads/corporategovernance/Código-de-Etica-(english-version)-(1).pdf. We did not modify our code of ethics during the year ended December 31, 2017.2018. In addition, we did not grant any waivers to our code of ethics during the year ended December 31, 2017.
2018.
We have also adopted the following policies: (i) investor communication, confidentiality and insider trading information, (ii) conflict of interest, (iii) related parties transactions and (iv) travel and gift policies. These policies are posted on our website atwww.gruposupervielle.com/English/Corporate-Governance/Corporate-Governance-policies/default.aspx.
default.aspx.
Information contained or accessible through our website is not incorporated by reference in and should not be considered part of this annual report.
| Item 16.C |
The following table sets forth the total amount billed to us and our subsidiaries by our independent registered public accounting firm, Price Waterhouse & Co. S.R.L., during the fiscal years ended December 31, 20172018 and 2016.2017.
|
| 2017 |
| 2016 |
|
|
| (in thousands of Pesos) |
| ||
Audit Fees |
| 26,812 |
| 16,809 |
|
Audit Related Fees |
| 16,200 |
| 11,309 |
|
Tax Fees |
| 1,510 |
| 1,490 |
|
All Other Fees |
| 969 |
| 1,492 |
|
Total |
| 45,491 |
| 31,100 |
|
| 2018 | 2017 | |||||||
| (in thousands of Pesos) | ||||||||
Audit Fees | 34,925 | 43,029 | ||||||
Audit Related Fees | 11,981 | 26,275 | ||||||
Tax Fees | 486 | 2,500 | ||||||
All Other Fees | 6,562 | 1,588 | ||||||
Total | 53,954 | 73,392 | ||||||
Audit feesare fees for professional services performed by Price Waterhouse & Co. S.R.L for the audit and limited review of Grupo Supervielle’s consolidated annual and quarterly financial statements under local and U.S. GAAPIFRS requirements and services that are normally provided in connection with statutory and regulatory filings.
Audit-related feesconsist of fees for professional services performed by Price Waterhouse & Co S.R.L. related to attestation, review and verification services with respect to our financial information and the provision of services in connection with special reports.
Tax feesare fees billed with respect to tax compliance and advisory services related to tax liabilities.
All other fees include fees paid for professional services other than the services reported above under “audit fees”, “audit related fees” and “tax fees” in each of the fiscal periodsyears above.
Audit CommitteePre-approval
Our audit committee is required topre-approve all audit andnon-audit services to be provided by our independent registered public accounting firm. Our Audit Committee has reviewed and approved audit andnon-audit services fees proposed by our independent auditors.
| Item 16.D |
|
Not applicable.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
None.
| Item 16.F | Change in Registrant’s Certifying Accountant |
None.
| Item 16.G | Corporate Governance |
Item 16.FChange in Registrant’s Certifying Accountant
None.
NYSE Corporate Governance Rules
Under NYSE rules, foreign private issuers are subject to more limited corporate governance requirements than U.S. domestic issuers. As a foreign private issuer, we must comply with four principal NYSE corporate governance rules: (1) we must satisfyhave an audit committee meeting the independence requirements of Rule10A-3, relating subject to audit committees;specified exceptions; (2) our CEO must promptly notify the NYSE in writing after any executive officer becomes aware of anynon-compliance with the applicable NYSE corporate governance rules; (3) we must provide the NYSE with annual and interim written affirmations as required under the NYSE corporate governance rules; and (4) we must provide a brief description of any significant differences between our corporate governance practices and those followed by U.S. companies under NYSE listing standards. The table below briefly describes the significant differences between our domesticcorporate governance practice and the NYSE corporate governance rules.rules, applicable to U.S. domestic companies.
Section | NYSE corporate governance rule for | Our approach | ||||
303A.01 | A listed company must have a majority of independent directors. “Controlled companies” are not required to comply with this requirement. | Neither Argentine law nor our bylaws require us to have a majority of independent directors. However, pursuant to Section 109 of the Argentine Capital Markets Law, our Audit Committee must be composed of at least three members of the Board of Directors, with the majority of | ||||
303A.02 | This section establishes general standards to determine directors’ independence. No director qualifies as “independent” unless the Board of Directors affirmatively determines that the director has no material relationship with the listed company (whether directly or as a partner, shareholder, or officer of an organization that has a relationship with the company), and emphasizes that the concern is independence from management. The board is also required, on a case by case basis, to express an opinion with regard to the independence or lack of independence, of each individual director. |
(ii) In addition, in affirmatively determining the independence of any director who will serve on the compensation committee of the listed company’s board of directors, the board of directors must consider all factors specifically relevant to determining whether a director has a relationship to the listed company which is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: (A) the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the listed company to such director; and (B) whether such director is affiliated with the listed company, a subsidiary of the listed company or an affiliate of a subsidiary of the listed company. (b) In addition, a director is not independent if: | Pursuant to
(b) is or has been associated with the company or any of its shareholders having a direct or indirect “significant participation” on the same, or with corporations with which also the shareholders also have a direct or indirect “signification participation”; or if he or she was associated with them through an employment relationship during the last three years; (c) has any professional relationship or is a member of a corporation that maintains frequent professional relationships of significant nature and volume, or receives remuneration or fees (other than the one received in consideration of his performance as a director) from the issuer or its shareholders having a direct or indirect “significant participation” on the same, or with corporations in which
(d) directly or indirectly owns 5% or more of shares with voting rights and/or a capital stock of the
(e) directly or indirectly sells and/or provides goods and/or services (different from those accounted for in section c)) on a her appointment as director; | |||
Section | NYSE corporate governance rule for | Our approach | |||||
B. the director has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than U.S.$120,000 in direct compensation from the listed company, its parent or a consolidated subsidiary, other than director and committee fees and pension or other forms of deferred compensation for prior services (provided such compensation is not contingent in any way on continued service); 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. | (f) has been a director, manager, administrator or principal executive ofnot-for-profit organizations that have received funds, for amounts greater than those described in section I) of article 12 of Resolution No. 30/2011 of the UIF and its amendments, from the issuer, its parent company and other companies of the same group of which it is a part, as well as of the principal executives of any of them; (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 | ||||||
303A.03 | Thenon-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 holdnon-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. We do not have a compensation | |||||
|
|
| ||
| committee. However, we have a Human Resources committee which advises the Board of Directors on Senior Officers compensation schemes. |
Section | NYSE corporate governance rule for | Our approach | |||
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 Rule10A-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 Rule10A-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 Rule10A-3 of the Exchange Act and the following responsibilities set forth in NYSE Sections303A.07(b)(iii)(A)-H) of the NYSE Manual. 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 auditor’s independence) all relationships between the independent auditor and the listed company; 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 the company’s specific disclosures under Operating and Financial Review and Prospects”; 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 personnel responsible for the internal audit function) and the independent auditors; F. review any issue or difficulty arising from the audit or management’s response with the independent auditor; G. set clear policies for the recruitment of employees or former employees of the independent auditors; and H. report regularly to the board of directors. (c) Rule 303A.07(c) establishes that each listed company must have an internal audit function to provide management and the audit committee with ongoing advice on the company’s risk management processes and internal control systems. | 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.
The responsibilities of an audit committee include but are not limited to, the following:
a) advise on the Board of Directors’ proposal for the designation of external independent accountants and to ensure their independence;
b) oversee our internal control mechanisms and administrative and accounting procedures and assess the reliability of all financial and other relevant information filed with the CNV and other entities to which we report;
c) oversee our information policies concerning risk management;
d) provide the market with complete information on transactions in which there may be a conflict of interest with members of our various corporate bodies or controlling shareholders;
e) advise on the reasonableness of fees or stock option plans for our directors and managers proposed by the Board of Directors;
f) advise 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 whichpre-emptive rights are excluded or limited;
g) verify the fulfillment of any applicable rules of conduct; and
(h) issue grounded opinions on related-party transactions under certain circumstances and file such opinions with regulatory agencies as required by the CNV in the case of possible conflicts of interest |
Section | NYSE corporate governance rule for | Our approach | ||||
If a member of the audit committee is simultaneously a member of the audit committee of more than three public companies the board of directors shall determine whether such simultaneous service would prevent such members from effectively serving on the listed company’s audit committee, and disclose such determination in the order of business of the annual shareholders’ meeting of the listed company or in the company’s annual report on Form10-K filed with the SEC. | ||||||
303A.08 | Shareholders must be given the opportunity to vote on allequity-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 | Neither Argentine law nor our bylaws require the adoption or disclosure of corporate governance guidelines. The CNV Rules contain | ||||
|
|
| ||||
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 anynon-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 |
Not applicable.
| Item 17. |
Not applicable.
| Item 18. |
Our audited consolidated financial statements are included in this annual report beginning at PageF-1.
| Item 19. | Exhibits |
EXHIBIT INDEX
Exhibit | Description | |||
1.1 | ||||
2.1 | ||||
2.2 | ||||
2.3 | ||||
2.4 | ||||
| The Description of Securities. | |||
| 8.1 | List of subsidiaries of Grupo Supervielle as of the date of this annual | |||
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.
SIGNATURES
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form20-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 | |||
| |||
Date: May 10, 2019
GRUPO SUPERVIELLE S.A. AND SUBSIDIARIES
INDEX TO CONSOLIDATEDTHE FINANCIAL STATEMENTS
| Page | ||||
Audited Consolidated Financial Statements of Grupo Supervielle S.A. | ||||
| F-2 | |||
| F-3 | |||
Consolidated Income statement for the years ended December 31, 2018 and 2017 | F-5 | |||
| F-6 | |||
| F-7 | |||
| F-8 | |||
| F-10 | |||
[PwC Office Letterhead]
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 sheetsstatement of financial position of Grupo Supervielle S.A. and its subsidiaries (the “Company”) as of December 31, 2018, December 31, 2017 and 2016,January 1, 2017, and the related consolidated income statement, consolidated statements of comprehensive income, of changes in shareholders’ equity and of cash flows for each of the threetwo years in the period ended December 31, 2017,2018, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2017,2018, based on criteria established in Internal Control - 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, 2018 and 2017 and 2016,January 1, 2017, and the results of theirits operations and theirits cash flows for each of the threetwo years in the period ended December 31, 20172018 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, 2017,2018, based on criteria established in Internal Control - Control—Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’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’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
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/ SEBASTIÁN MORAZZO (Partner)
Sebastián Morazzo
Buenos Aires, Argentina
April 27, 2018
May 10, 2019
We have served as the Company’s auditor since 2008.
GRUPO SUPERVIELLE S.A.
Grupo Supervielle S.A. and SubsidiariesConsolidated Statement of Financial Position
As of December 31, 2018, 2017 and 2016January 1, 2017
(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 |
|
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||
ASSETS | ||||||||||||
Cash and due from banks (Note 1.8) | 33,687,553 | 16,384,924 | 14,795,794 | |||||||||
Cash | 4,789,701 | 4,486,951 | 3,463,786 | |||||||||
Financial institutions and correspondents | ||||||||||||
Argentine Central Bank | 27,388,784 | 10,408,716 | 10,358,422 | |||||||||
Other local financial institutions | 1,498,669 | 1,415,251 | 937,828 | |||||||||
Others | 10,399 | 74,006 | 35,758 | |||||||||
Debt Securities at fair value through profit or loss (Note 1.8, 6 and 17) | 15,112,115 | 16,837,925 | 782,547 | |||||||||
Derivatives (Note 6 and 11) | 15,924 | 39,740 | 52,152 | |||||||||
Repo transactions (Note 10) | — | 4,945,864 | — | |||||||||
Other financial assets (Note 1.8, 6 and 17) | 1,698,054 | 2,388,795 | 3,458,243 | |||||||||
Loans and other financing (Note 6 and 26) | 77,208,464 | 87,108,670 | 69,996,876 | |||||||||
To thenon-financial public sector | 32,802 | 48,143 | 7,934 | |||||||||
To the financial sector | 398,551 | 586,358 | 710,798 | |||||||||
To theNon-Financial Private Sector and Foreign residents | 76,777,111 | 86,474,169 | 69,278,144 | |||||||||
Other debt securities (Note 1.8, 6 and 17) | 4,311,095 | 529,891 | 3,802,747 | |||||||||
Financial assets in guarantee (Note 6 and 17) | 2,007,217 | 1,921,219 | 2,699,392 | |||||||||
Current income tax assets | 592,058 | 180,458 | — | |||||||||
Inventories (Note 17) | 69,918 | 156,306 | 55,829 | |||||||||
Investments in equity instruments (Note 6 and 17) | 10,404 | 68,881 | 6,197 | |||||||||
Property, plant and equipment (Note 14) | 2,183,734 | 2,060,551 | 1,630,618 | |||||||||
Investment Property (Note 15) | 413,357 | 287,072 | 887,242 | |||||||||
Intangible assets (Note 16) | 2,710,837 | 459,420 | 639,705 | |||||||||
Deferred income tax assets (Note 5) | 821,818 | 1,156,980 | 985,294 | |||||||||
Non-current assets held for sale | 2,800 | — | — | |||||||||
Othernon-financial assets (Nota 17) | 888,648 | 703,454 | 328,103 | |||||||||
|
|
|
|
|
| |||||||
TOTAL ASSETS | 141,733,996 | 135,230,150 | 100,120,739 | |||||||||
|
|
|
|
|
| |||||||
The accompanying notesNotes are an integral part of these consolidated financial statementsConsolidated Financial Statements.
TableConsolidated Statement of ContentsFinancial Position
Grupo Supervielle S.A. and Subsidiaries
Consolidated Balance Sheet — Continued
As of December 31, 2018, 2017 and 2016January 1, 2017
(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 |
|
|
|
|
|
|
| ||
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||
LIABILITIES | ||||||||||||
Deposits (Note 17) | 94,906,014 | 83,284,983 | 66,075,709 | |||||||||
Non-financial public sector | 11,105,477 | 9,112,185 | 4,767,148 | |||||||||
Financial sector | 25,236 | 23,183 | 20,902 | |||||||||
Non-financial private sector and foreign residents | 83,775,301 | 74,149,615 | 61,287,659 | |||||||||
Liabilities at fair value through profit or loss (Note 6 and 17) | 268,086 | — | — | |||||||||
Derivatives (Note 6 and 11) | 94,222 | — | — | |||||||||
Repo transactions (Note 10) | — | — | 1,088,747 | |||||||||
Other financial liabilities (Note 6 and 17) | 4,267,239 | 5,774,555 | 5,584,663 | |||||||||
Financing received from the Argentine Central Bank and other financial institutions (Note 6 and 17) | 8,032,837 | 5,205,766 | 3,161,327 | |||||||||
Unsubordinated negotiable Obligations (Note 6 and 24) | 9,307,171 | 12,681,237 | 3,775,525 | |||||||||
Current income tax liability | 791,272 | 1,217,961 | 1,022,463 | |||||||||
Subordinated negotiable obligations (Note 6 and 24) | 1,383,817 | 1,012,661 | 2,540,433 | |||||||||
Provisions (Note 17) | 86,915 | 118,357 | 117,231 | |||||||||
Deferred income tax liabilities (Note 5) | 223,351 | 29,808 | 14,587 | |||||||||
Othernon-financial liabilities (Note 17) | 5,404,998 | 5,613,054 | 4,689,194 | |||||||||
|
|
|
|
|
| |||||||
TOTAL LIABILITIES | 124,765,922 | 114,938,382 | 88,069,879 | |||||||||
|
|
|
|
|
| |||||||
SHAREHOLDERS’ EQUITY | ||||||||||||
Shareholders’ Equity attributable to owners of the parent company | 16,953,987 | 20,069,467 | 11,719,477 | |||||||||
Shareholders’ Equity attributable tonon-controlling interests | 14,087 | 222,301 | 331,383 | |||||||||
|
|
|
|
|
| |||||||
TOTAL SHAREHOLDERS’ EQUITY | 16,968,074 | 20,291,768 | 12,050,860 | |||||||||
|
|
|
|
|
| |||||||
The accompanying notesNotes are an integral part of these consolidatedConsolidated Financial Statements.
Grupo Supervielle S.A. and Subsidiaries
Consolidated Balance Sheet — Continued
As ofyears ended December 31, 20172018 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 |
|
| 12/31/2018 | 12/31/2017 | |||||||
Interest income (Note 17.14) | 30,416,242 | 22,264,831 | ||||||
Interest expenses (Note 17.15) | (17,413,360 | ) | (8,309,665 | ) | ||||
|
|
|
| |||||
Net interest income | 13,002,882 | 13,955,166 | ||||||
|
|
|
| |||||
Net income from financial instruments (NIFFI) at fair value through profit or loss (Note 17.16) | 6,310,371 | 3,545,647 | ||||||
Exchange rate differences on gold and foreign currency | 1,126,705 | 393,112 | ||||||
|
|
|
| |||||
NIFFI And Exchange Rate Differences | 7,437,076 | 3,938,759 | ||||||
|
|
|
| |||||
Net Financial Income | 20,439,958 | 17,893,925 | ||||||
|
|
|
| |||||
Services Fee Income (Note 17.17) | 5,927,689 | 6,063,719 | ||||||
Services Fee Expense (Note 17.18) | (1,418,180 | ) | (1,220,427 | ) | ||||
Income from insurance activities (Note 17.19) | 848,665 | 899,491 | ||||||
|
|
|
| |||||
Net Service Fee Income | 5,358,174 | 5,742,783 | ||||||
|
|
|
| |||||
Subtotal | 25,798,132 | 23,636,708 | ||||||
|
|
|
| |||||
Results from exposure to changes in the purchasing power of money | (6,015,001 | ) | (2,591,255 | ) | ||||
Other operating income (Note 17.20) | 2,473,558 | 1,838,024 | ||||||
Loan loss provisions | (5,179,033 | ) | (4,033,187 | ) | ||||
|
|
|
| |||||
Net operating income | 17,077,656 | 18,850,290 | ||||||
|
|
|
| |||||
Personnel expenses (Note 17.21) | 8,778,580 | 8,736,238 | ||||||
Administration expenses (Note 17.22) | 5,600,508 | 4,918,531 | ||||||
Depreciation and impairment ofnon-financial assets (Note 17.23) | 432,389 | 621,988 | ||||||
Other operating expenses (Note 17.24) | 4,311,940 | 4,156,824 | ||||||
|
|
|
| |||||
Income / (loss) before taxes | (2,045,761 | ) | 416,709 | |||||
|
|
|
| |||||
Income tax (Note 5) | (1,010,888 | ) | (1,171,969 | ) | ||||
|
|
|
| |||||
Net loss for the year | (3,056,649 | ) | (755,260 | ) | ||||
|
|
|
| |||||
Net loss for the year attributable to owners of the parent company | (3,028,003 | ) | (754,370 | ) | ||||
Net loss for the year attributable tonon-controlling interests | (28,646 | ) | (890 | ) | ||||
|
|
|
| |||||
The accompanying notesNotes are an integral part of these consolidated financial statementsConsolidated Financial Statements.
GRUPO SUPERVIELLE S.A.
Grupo Supervielle S.A. and Subsidiaries
Consolidated Statement of Comprehensive Income
As ofFor the years ended December 31, 2017, 20162018 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 |
|
| 12/31/2018 | 12/31/2017 | |||||||
Net loss for the year | (3,056,649 | ) | (755,260 | ) | ||||
|
|
|
| |||||
Components of Other Comprehensive Income not to be reclassified to profit or loss | ||||||||
Revaluation surplus of property, plant and equipment | 308,585 | 53,783 | ||||||
Income tax (Note 5) | (76,334 | ) | (16,135 | ) | ||||
|
|
|
| |||||
Net revaluation surplus of property, plant and equipment | 232,251 | 37,648 | ||||||
|
|
|
| |||||
Income from equity instruments at fair value through other comprehensive income | 1,042 | 12,176 | ||||||
Income tax (Note 5) | (313 | ) | (4,261 | ) | ||||
|
|
|
| |||||
Net income from equity instruments at fair value through other comprehensive income | 729 | 7,915 | ||||||
|
|
|
| |||||
Total Other Comprehensive Income not to be reclassified to profit or loss | 232,980 | 45,563 | ||||||
|
|
|
| |||||
Components of Other Comprehensive Income to be reclassified to profit or loss | ||||||||
Income from financial instruments at fair value through other comprehensive income | 11,932 | 2,007 | ||||||
Income tax (Note 5) | (3,338 | ) | (688 | ) | ||||
|
|
|
| |||||
Net income from financial instruments at fair value through other comprehensive income | 8,594 | 1,319 | ||||||
|
|
|
| |||||
Other Comprehensive Income to be reclassified to profit or loss | 8,594 | 1,319 | ||||||
|
|
|
| |||||
Other Comprehensive Income | 241,573 | 46,882 | ||||||
|
|
|
| |||||
Other comprehensive income attributable to parent company | 241,322 | 46,869 | ||||||
Other comprehensive income attributable tonon-controlling interest | 251 | 13 | ||||||
|
|
|
| |||||
Comprehensive loss | (2,815,076 | ) | (708,378 | ) | ||||
|
|
|
| |||||
Comprehensive loss for the year attributable to owners of the parent company | (2,786,681 | ) | (707,501 | ) | ||||
Comprehensive loss for the year attributable tonon-controlling interest | (28,395 | ) | (877 | ) | ||||
|
|
|
| |||||
The accompanying notes are an integral part of these consolidated financial statementsConsolidated Financial Statements.
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, 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 attributable to parent company | Total Shareholders’ equity attributable tonon-controlling interest | Total shareholders’ equity | ||||||||||||||||||||||||||||||
Balance at January 1, 2017 | 363,777 | 1,178,829 | 6,813,621 | 49,794 | 1,958,241 | 1,355,215 | — | 11,719,477 | 331,383 | 12,050,860 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Contributions from shareholders | 92,945 | 53,104 | 9,022,200 | — | — | — | — | 9,168,249 | — | 9,168,249 | ||||||||||||||||||||||||||||||
Distribution of retained earnings by the shareholders’ meeting on April 27, 2017: | ||||||||||||||||||||||||||||||||||||||||
- Other reserves | — | — | — | 22,961 | 1,222,843 | (1,245,804 | ) | — | — | — | — | |||||||||||||||||||||||||||||
- Dividend distribution | — | — | — | — | — | (110,758 | ) | — | (110,758 | ) | — | (110,758 | ) | |||||||||||||||||||||||||||
Other movements | — | — | — | — | — | — | — | — | (108,205 | ) | (108,205 | ) | ||||||||||||||||||||||||||||
Net loss for the year | — | — | — | — | — | (754,370 | ) | — | (754,370 | ) | (890 | ) | (755,260 | ) | ||||||||||||||||||||||||||
Other comprehensive income for the year | — | — | — | — | — | — | 46,869 | 46,869 | 13 | 46,882 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Balance at December 31, 2017 | 456,722 | 1,231,933 | 15,835,821 | 72,755 | 3,181,084 | (755,717 | ) | 46,869 | 20,069,467 | 222,301 | 20,291,768 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Distribution of retained earnings by the shareholders’ meeting on April 24, 2018: | ||||||||||||||||||||||||||||||||||||||||
- Other reserves (Note 16) | — | — | — | 18,589 | 2,174,764 | (2,193,353 | ) | — | — | — | — | |||||||||||||||||||||||||||||
- Dividend distribution (Note 16) | — | — | — | — | — | (328,363 | ) | — | (328,363 | ) | — | (328,363 | ) | |||||||||||||||||||||||||||
Purchase of subsidiaries ‘shares | — | — | (436 | ) | — | — | — | — | (436 | ) | (161 | ) | (597 | ) | ||||||||||||||||||||||||||
Other movements | — | — | — | — | — | — | — | — | (179,658 | ) | (179,658 | ) | ||||||||||||||||||||||||||||
Net loss for the year | — | — | — | — | — | (3,028,003 | ) | — | (3,028,003 | ) | (28,646 | ) | (3,056,649 | ) | ||||||||||||||||||||||||||
Other comprehensive income for the year | — | — | — | — | — | — | 241,322 | 241,322 | 251 | 241,573 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Balance at December 31, 2018 | 456,722 | 1,231,933 | 15,835,385 | 91,344 | 5,355,848 | (6,305,436 | ) | 288,191 | 16,953,987 | 14,087 | 16,968,074 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
GRUPO SUPERVIELLE S.A.
Consolidated Statement of Cash Flow
For the years ended December 31, 2016, 20152018 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 |
| |||
| 12/31/2018 | 12/31/2017 | |||||||
Cash flow from operating activities | ||||||||
Net loss for the year | (3,056,649 | ) | (755,260 | ) | ||||
Adjustments to obtain flows from operating activities: | ||||||||
Income tax | 1,010,888 | 1,171,969 | ||||||
Depreciation and Impairment of Property, plant and equipment | 432,389 | 621,988 | ||||||
Loan loss provisions | 5,179,033 | 4,033,187 | ||||||
Results from exposure to changes in the purchasing power of money | (9,327,946 | ) | (11,441,536 | ) | ||||
Exchange rate difference on gold and foreign currency | (1,126,705 | ) | (393,112 | ) | ||||
(Increases) / decreases from operating assets: | ||||||||
Debt securities at fair value through profit or loss | (5,979,152 | ) | (5,820,127 | ) | ||||
Derivatives | 23,816 | 12,412 | ||||||
Repo transactions | 4,945,864 | (4,945,864 | ) | |||||
Loans and other financing | ||||||||
To thenon-financial public sector | 15,341 | (40,209 | ) | |||||
To the other financial entities | 187,807 | 124,440 | ||||||
To thenon-financial sector and foreign residents | 4,526,249 | (21,229,212 | ) | |||||
Other debt securities | (3,781,204 | ) | 3,272,856 | |||||
Financial assets in guarantee | (85,998 | ) | 778,173 | |||||
Investments in equity instruments | 58,477 | (62,684 | ) | |||||
Other assets | 2,033,926 | 651,037 | ||||||
Increases / (decreases) from operating liabilities: | ||||||||
Deposits | ||||||||
Non-financial public sector | 1,993,292 | 4,345,037 | ||||||
Financial sector | 2,053 | 2,281 | ||||||
Privatenon-financial sector and foreign residents | 9,625,687 | 12,861,955 | ||||||
Derivatives | 94,222 | — | ||||||
Repo operations | — | (1.088,747 | ) | |||||
Liabilities at fair value through profit or loss | 268,086 | — | ||||||
Other liabilities | (1,729,887 | ) | 1,114,879 | |||||
Income Tax paid | (1,323,633 | ) | (1,313,394 | ) | ||||
Net cash provided by / (used in) operating activities (A) | 3,985,956 | (18,099,931 | ) | |||||
Cash flows from investing activities | ||||||||
Payments related to: | ||||||||
Purchase of PPE, intangible assets and other assets | (1,263,758 | ) | (961,388 | ) | ||||
Purchase of liabilities and equity instruments issued by other entities | (208,252 | ) | (109,082 | ) | ||||
Purchase of investments in subsidiaries | (1,838,080 | ) | — | |||||
Collections: | ||||||||
Disposals related to PPE, intangible assets and other assets | 213,403 | 689,922 | ||||||
Net cash used in investing activities (B) | (3,096,687 | ) | (380,548 | ) | ||||
|
|
|
| |||||
GRUPO SUPERVIELLE S.A.
Consolidated Statement of Cash Flow
For the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
Cash flows from financing activities | ||||||||
Payments: | ||||||||
Changes in investments in subsidiaries that do not result in control loss | (436 | ) | — | |||||
Financing received from Argentine Financial Institutions | (68,373,253 | ) | (63,870,306 | ) | ||||
Unsubordinated negotiable obligations | (7,553,375 | ) | (1,731,483 | ) | ||||
Subordinated negotiable obligations | (12,985 | ) | (1,527,772 | ) | ||||
Dividends | (328,363 | ) | (110,758 | ) | ||||
Collections: | ||||||||
Unsubordinated negotiable obligations | 4,179,312 | 10,637,195 | ||||||
Financing received from Argentine Financial Institutions | 71,200,324 | 65,914,745 | ||||||
Contributions from shareholders | — | 9,168,249 | ||||||
Net cash (used in) / provided by financing activities (C) | (888,776 | ) | 18,479,870 | |||||
Effects of exchange rate changes and exposure to changes in the purchasing power of money on cash and cash equivalents (D) | 15,342,947 | 14,032,791 | ||||||
Net increase in cash and cash equivalents (A+B+C+D) | 15,343,440 | 14,032,182 | ||||||
Cash and cash equivalents at the beginning of the year | 31,633,118 | 17,600,936 | ||||||
Cash and cash equivalents at the end of the year | 46,976,558 | 31,633,118 |
The accompanying notes are an integral part of these consolidated financial statementsConsolidated Financial Statements.
GRUPO SUPERVIELLE S.A.
Grupo Supervielle S.A.Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and SubsidiariesJanuary 1, 2017
Consolidated Statement of Changes in Shareholders’ Equity
Forand for the years ended December 31, 2017, 20162018 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 statementsConsolidated Financial Statements as of December 31, 2018 and 2017 and 2016January 1, 2017 and for the years ended December 31, 2017, 20162018 and 20152017 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 1.3.
|
| 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. | First time adoption of International Financial Reporting Standards (IFRS) |
Intercompany balances and transactions have been eliminated in consolidation.
3.Significant Accounting Policies
The consolidated financial statementsThese Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards issued by the rulesInternational Accounting Standards Board (IASB) (all together, “IFRS”) and the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC). All IFRS applicable as of the Argentine Central Bank (“BCRA”) which prescribesdate of these Consolidated Financial Statements have been applied. The Group adopted IFRS in the generally accepted accounting principles for all banksfiscal year beginning on January 1, 2018, being its transition date January 1st, 2017. Group’s transition to IFRS is described 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”).Note 2.
For purpose of theseThe Group’s consolidated financial statements certain disclosures related to formal legal requirements for reporting in Argentina have been omitted since they are not required for Securities and Exchange Commission (“SEC”) reporting purposes.
The following is a summary of significant policies followed by the Group in the preparation of the consolidated financial statements.
3.1 Presentation of Financial Statements in Constant Argentine Pesos
The consolidated financial statementsfiscal year ended December 31, 2018 have been prepared in constant monetary units, reflecting the overall effects of inflation through August 31, 1995. As from that date, in accordance with Argentine Banking GAAP andIFRS 1 “First-time Adoption of International Financial Reporting Standards”.
In Argentina, the requirementsGroup is subject to the provisions of Article 2 – Section I – Chapter I of Title IV: Periodical Reporting Requirements of the control authorities, restatement of the financial statements was discontinued until December 31, 2001. As from January 1, 2002, in accordance with Argentine Banking GAAP recognition 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.
Grupo Supervielle S.A.National Securities Commission (“C.N.V.”) regulations and Subsidiaries
Notesit is required 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 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 balance sheet date, management evaluated that within this environment, the inflation threshold set by Argentine professional accounting standards, had not been reached, and in consequence, no inflation adjustment has been applied to Financial Statements.
The lack of objective data throughout the historical series, during 2015 and the first four months of 2016, regarding the Consumer Price Index (“CPI”) and the Wholesale Price Index (“WPI”), the existence of other qualitative and quantitative indicators, such as the program established by the BCRA to foster monetary stability that aims to induce 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 allow the Group to estimate that the preparation of the consolidatedpresent its financial statements in accordance with the applicablevaluation 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 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. The Group has filed its financial statements under these rules for local purposes on March 7, 2019. Shareholder’s equity under the Argentine Central Bank’s rules is presented in Note 25.
For comparative purposes certain valuation and presentation accounting policies that were previously applied under the prior accounting framework have been modified in the consolidated financial statements in order to comply with the IFRS. The comparative figures and figures as of the transition date (January 1st, 2017) have been modified to reflect the adjustments to the previous accounting framework.
Note 2.3 includes a reconciliation of shareholders’ equity figures disclosed in the consolidated financial statements prepared in accordance with the prior accounting framework on the transition date (January 1st, 2017) and on the adoption date (December 31, 2017) and the statements of income and other comprehensive income figures for the year ended December 31, 2017 and those presented in accordance with IFRS in these consolidated financial statements, as well as the effects of the adjustments to cash flows.
The Management has concluded that these consolidated financial statements fairly present the Group’s financial position, financial performance and cash flows, in accordance with IFRS.
| 1.2. | Basis of preparation |
These Consolidated Financial Statements have been prepared in accordance with IFRS.
The preparation of Financial Statements at a certain date requires the 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 3.
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
These consolidated financial statements as of December 31, 2018, were approved by resolution of the Board of Directors’ meeting held on May 10, 2019.
| (a) | Going concern |
The consolidated financial statements as of December 31, 2018, 2017 and January 2017 have been prepared on a going concern basis as there is a reasonable expectation that the Group will continue its operational activities in the foreseeable future (and in any event with a time horizon of more than twelve months from the end of the reporting period).
| (b) | Measuring Unit – IAS 29 (Financial reporting in hyperinflationary economies) |
The Consolidated Financial Statements of the Entity are expressed in Argentine pesos which is the 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 thenon-monetary items as from the acquisition date or the revaluation date, as applicable. These requirements also comprise the comparative information of the financial statements.
To determine the existence of a 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%.
It is important to highlight that the three-year accumulated inflation rate as of December 31, 2018 reached 148.0%. On the other hand, the macroeconomic events that have taken place in the country 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 of the financial statements in the terms of IAS 29 for the year ended December 31, 2018.
In relation to the inflation index to be used it will be determined according to the Internal Wholesale Price Index (IWPI) until the year 2016, considering for the months of November and December 2015 the average variation of the Consumer Price Index (CPI) of the City of Buenos Aires, due to the fact that during those two months there were no IWPI measurements at national level. Then, from January 2017, the National Consumer Price Index (National CPI) will be considered. The index as of December 31, 2018 amounts to 2,443.16. The tables below show the evolution of these indexes in the last three years and as of December 31, 2018 according to official statistics (INDEC):
| As of December 31, | ||||||||||||||||
| 2015 | 2016 | 2017 | 2018 | |||||||||||||
Variation in Prices | ||||||||||||||||
Annual | 17.2 | % | 34.6 | % | 24.8 | % | 47.7 | % | ||||||||
Accumulated 3 years | 72.5 | % | 102.3 | % | 96.8 | % | 148.0 | % | ||||||||
As a consequence of the aforementioned, these Consolidated Financial Statements as of December 31, 2018 were restated in accordance with the provisions of IAS 29.
Restatement of the Financial Position
The Group restated all thenon-monetary items in order to reflect the impact of the inflation in terms of the measuring unit current as of December 31, 2018. 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 Equity or since the last revaluation. Monetary items have not been restated because they are stated in terms of the measuring unit current as of December 31, 2018.
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
Comparative figures must also be presented in the current currency of December 31, 2018 and are restated using the general price index of the current year. 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.
As far as results are concerned, there was an increase in amortization and depreciation arising from the restatement ofnon-monetary assets, and a decrease in financial income and expense due to the negative result of the exposure to inflation from the excess of monetary assets over monetary liabilities, with the consequent impact on income tax.
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 required. 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 not in force |
IFRS 16 “Leases”: 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 will 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 andlow-value leases. This standard is effective for fiscal years beginning on or after January 1, 2019.
The Group considershas adopted the IFRS 16’s practical expedients therefore it has applied this standard to contracts that were previously identified as leases applying IAS 17 “Leases” and IFRIC 4 “Determining whether an Arrangement contains a Lease”. For leases previously classified as operating leases, the Group has recognized assets and liabilities as follows:
| • | Lease liability: it was measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at the date of initial application. |
| • | Right-of-use asset: it was measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the statement of financial position immediately before the date of initial application. |
The impact of this conclusionstandard will be an increase in Assets and Liabilities of Ps. 905,945.
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 arere-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 consistent whit that of most companies with operations in Argentina reporting under Argentine GAAP.recognized as revenue over the coverage period. This standard is effective for fiscal years beginning on or after January 1, 2021. The Group reassesses inflation data periodicallyis evaluating the impact of the adoption of this new standard.
Prepayment Features with Negative Compensation – Amendments to determine whether this conclusion continuesIFRS 9:This amendment to be reasonable.IFRS 9 enables entities to measure at amortized cost some prepayable financial assets with negative compensation. The assets affected, that include some loans and debt securities, would otherwise have been measured at fair value
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
However,through profit or loss. To qualify for amortized cost measurement, the negative compensation must be “reasonable compensation for early termination of the contract” and the asset must be held within a ‘held to collect’ business model. Entities are required to apply this amendment to IFRS 9 for fiscal years commencing on or after January 1, 2019. The Group believes that the application of this standard will not have a material impact.
Annual Improvements to IFRS 2015–2017 Cycle:The following improvements were adopted in December 2017.
| ✓ | IFRS 3: The amendments to IFRS 3 clarified that obtaining control of a joint operation is a business combination achieved in stages. |
| ✓ | IAS 12: The amendments to IAS 12 clarified that the tax consequences of dividends on financial instruments classified as equity should be recognized according to where the past transactions or events that generated distributable profits where recognized. These requirements apply to all income tax consequences of dividends. |
| ✓ | IAS 23: The amendments to IAS 23 clarified that if a specific borrowing remains outstanding after the related qualifying asset is ready for its intended use or sale, it becomes part of general borrowings. |
Entities are required to apply these amendments for fiscal years commencing on or after January 1, 2019.
The Group believes that the application of this standards would not have a material impact.
There are no other standards that are not yet effective and that would be expected to have a material impact on the Group.
| 1.3. | 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 provides the subsidiaries included in the recent past years, certain macroeconomic indicators have suffered significant fluctuations, a fact that must be considered when assessing and interpretingconsolidation process:
Company | Main Activity | Percentage of direct or indirect investment in capital stock | ||||||||||||
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||||
Banco Supervielle S.A. | Commercial Bank | 99,89 | % (1) | 99,88 | % (1) | 98,23 | % (1) | |||||||
Cordial Compañía Financiera S.A. | Financial Company | 99,90 | % | 99,89 | % | 98,32 | % | |||||||
Tarjeta Automática S.A. | Credit Card | 99,99 | % | 99,99 | % | 99,78 | % | |||||||
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 | % | — | — | |||||||||
InvertirOnline S.A.U. | Financial Broker | 100,00 | % | — | — | |||||||||
InvertirOnline.Com Argentina S.A.U. | Representations | 100,00 | % | — | — | |||||||||
| (1) | Grupo Supervielle S.A.’s direct and indirect interest in Banco Supervielle S.A votes amounts to 99,87%, 99,86% and 98,21% as of 12/31/2018, 12/31/2017 and 01/01/2017 respectively. |
Financial Statements of controlled companies are for the financial condition and performance as shown in thesesame period of Group´s Financial Statements.
3.2 Foreign Currency
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
AssetsIntercompany 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.
InvertirOnline S.A.U., InvertirOnline.Com Argentina S.A.U. and Micro Lending S.A.U. are consolidated from the date of their acquisition (See Note 29).
The acquisition method of accounting is used to account for business combinations by the Group. 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 fair value of anypre-existing equity interest in the 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.
The Group recognizes anynon-controlling interest in the acquired entity on anacquisition-by-acquisition basis either at fair value or at thenon-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 anynon-controlling interest in the acquired entity and the 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”.
As it is mentioned in Note 2.2. the Company has decided not to apply IFRS 3 retrospectively for those business combinations prior to the transition date.
| 1.4. | Consolidated Structured Entities |
Banco Supervielle S.A., Cordial Compañía Financiera S.A. and Micro Lending S.A.U have securitized certain financial instruments, mainly consumer loans, through financial trusts that issue debt securities and participation certificates.
The Group controls a structured 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. 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 trusts, 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 aforementioned, the Group controls such financial trusts and, therefore, such structured entities have been consolidated.
The following chart details the assets and liabilities of Structured Entities that have been consolidated by the Group as of December 31, 2018 and 2017 and January 1, 2017:
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||
Assets | ||||||||||||
Loans | 1,030,280 | 1,991,228 | 2,667,615 | |||||||||
Financial assets | 139,869 | 206,171 | 317,061 | |||||||||
Other assets | 126,160 | 27,898 | 65,234 | |||||||||
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Total Assets | 1,296,309 | 2,225,297 | 3,049,910 | |||||||||
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Liabilities | ||||||||||||
Financial liabilities | 893,180 | 1,197,202 | 1,757,201 | |||||||||
Other liabilities | 148,550 | 131,570 | 156,108 | |||||||||
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Total Liabilities | 1,041,730 | 1,328,772 | 1,913,309 | |||||||||
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| 1.5. | Transactions withnon-controlling interest |
The Group treats transactions withnon-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 andnon-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment tonon-controlling interests and any consideration paid or received is recognized in a separate reserve within equity attributable to owners of the Group.
| 1.6. | 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.
Operating segments are reported in a manner 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. |
| 1.7. | 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 is, 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 presentation currency of the Group.
| (b) | Transactions and balances |
Transactions 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”. They are deferred in the shareholders’ equity if they relate to qualifying cash flow hedge and qualifying net investment hedge or are attributable to part of the net investment in a foreign operation.
| 1.8. | Cash and due from banks |
3.3 GoldCash 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.
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 amortized cost which is close to its 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 pesosvalue.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
ForAs of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2017, 20162018 and 20152017
(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 settlement 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 Equivalentspesos)
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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| December 31, |
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| 2017 |
| 2016 |
| 2015 |
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Item | 12/31/2018 | 12/31/2017 | 01/01/2017 | |||||||||||||||||||
Cash and due from banks |
| Ps. | 11,129,475 |
| Ps. | 8,166,132 |
| Ps. | 6,808,591 |
| 33,687,553 | 16,384,924 | 14,795,794 | |||||||||
Securities issued by the BCRA — listed |
| 13,611,524 |
| 336,785 |
| 645,218 |
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Investments in money market funds |
| 680,866 |
| 1,185,637 |
| 162,693 |
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Debt securities at fair value through profit or loss | 12,633,443 | 14,242,927 | 620,544 | |||||||||||||||||||
Money Market Funds | 655,562 | 1,005,267 | 2,184,598 | |||||||||||||||||||
Cash and cash equivalents |
| Ps. | 25,421,865 |
| Ps | 9,688,554 |
| Ps | 7,616,502 |
| 46,976,558 | 31,633,118 | 17,600,936 | |||||||||
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 asStatement of Cash and cash equivalents:Flow:
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| December 31, |
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| 2017 |
| 2016 |
| 2015 |
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Cash and due from banks |
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As per the Balance sheet |
| Ps. | 11,129,475 |
| Ps. | 8,166,132 |
| Ps. | 6,808,591 |
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As per the Statement of cash flows |
| Ps. | 11,129,475 |
| Ps. | 8,166,132 |
| Ps. | 6,808,591 |
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Government and corporate securities |
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Securities issued by the BCRA |
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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 | 12/31/2018 | 12/31/2017 | 01/01/2017 | |||||||||
Cash and due from Banks | ||||||||||||
As per Statement of Financial Position | 33,687,553 | 16,384,924 | 14,795,794 | |||||||||
As per the Statement of Cash Flows | 33,687,553 | 16,384,924 | 14,795,794 | |||||||||
Debt securities at fair value through profit or loss | ||||||||||||
As per Statement of Financial Position | 15,112,115 | 16,837,925 | 782,547 | |||||||||
Securities not considered as cash equivalents | (2,478,672 | ) | (2,594,998 | ) | (162,003 | ) | ||||||
As per the Statement of Cash Flows | 12,633,443 | 14,242,927 | 620,544 | |||||||||
Money Market Funds | ||||||||||||
As per Statement of Financial Position – Other financial assets | 1,698,054 | 2,388,795 | 3,458,243 | |||||||||
Other financial assets not considered as cash equivalents | (1,042,492 | ) | (1,383,528 | ) | (1,273,645 | ) | ||||||
As per the Statement of Cash Flow | 655,562 | 1,005,267 | 2,184,598 | |||||||||
| 1.9. | Financial Instruments |
F-15Initial Recognition and measurement
Financial assets and financial liabilities are recognized when the entity becomes a party to the contractual provisions of the 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 accounting loss being recognized in profit or loss when an asset is newly originated.
Table of ContentsGRUPO SUPERVIELLE S.A.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
ForAs of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2017, 20162018 and 20152017
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
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 in3.21non-recourse factoring transactions.
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 business model reflects how the Group manages a group of financial assets in order 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 a 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) UseFinancial assets at amortized cost.
Financial assets shall be measured at amortized cost if both of Estimatesthe 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. |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
The preparationamortized 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.
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 statementsinstruments 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 conformity with Argentine Banking GAAPthe 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 thewrite-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. |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
| 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 payments 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. Awrite-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:
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 managementthe issuer to make estimatesspecified 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 assumptions that affectloan commitments are initially measured at fair value and subsequently measured at the reported amountshigher 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.
| 1.10 | 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 carried 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.
| 1.11 | Repo Transactions |
| i) | Reverse Repo Transactions |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
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 anin-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.
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”.
| 1.12 | Allowance for Loan Losses |
| a) | Definition |
The Group 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 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 statements,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.).
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
| b) | Financial instruments presentation |
For the purposes of estimating the impairment amount, and in accordance with its internal policies, the Group 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.
| 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 at 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, the Group 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: the Group 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, the Group 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.
The Group performs retrospective and monitoring tests to evaluate the reasonableness of the collective estimate.
On the other hand, the methodology required to estimate the expected credit loss due to credit events is based on an unbiased and weighted consideration by the probability of occurrence of a series of scenarios, considering a range of three possible future scenarios which could have an impact on the collection of contractual cash flows, always taking into account the time value of money, as well as all available and relevant information on past events, current conditions and forecasts of the reported amountsevolution of revenues and expenses during the reporting years. Significant estimates include those requiredmacroeconomic factors that are shown to be relevant for the accountingestimation of this amount (for example: GDP (Gross Domestic Product), Interest Rate, unemployment rate, etc.).
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
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 recoverableGroup based its experience in developing internal models for the estimation of parameters both in the regulatory area and for management purposes, adapting the development of the impairment models under IFRS 9.
Exposure at default: is the amount of risk exposure at the date of default by the counterparty.
Probability of default: is the estimated probability that the counterparty will default on its principal and/or interest payment obligations.
Loss given default: is the estimate of the severity of the loss incurred in the event ofnon-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 the Group for the 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 Comercial Loans, this threshold is used as an additional, but not primary, indicator of significant risk increase due to the credit evaluation complexity and as a result of studies that show a low correlation of the significant risk increase with this past due threshold. In order to do so other information is taken into account as financial and economic analysis, repayment capacity, among others.
Assets with low credit risk at the reporting date: the Group 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, the Group considers three prospective macroeconomic scenarios, which are updated periodically, during a time horizon of 12 months. The projected evolution for the next year of the main macroeconomic indicators used by the Group for estimating expected credit losses is presented below:
Segment | Macroeconomic Indicator | Scenario 1 | Scenario 2 | Scenario 3 | ||||||||||
| Retail | Employment Index | 137.3 | 140.2 | 134.5 | ||||||||||
| Monthly Economic Activity Estimator | 150.6 | 153.8 | 146.8 | |||||||||||
| Corporate | Interest Rate | (11.58 | %) | (12.62 | %) | (10.00 | %) | |||||||
| Foreign Currency Private Sector Deposits Variation | 5.99 | % | 6.53 | % | 5.15 | % | ||||||||
Each one of the macroeconomic scenarios is associated with a given probability of occurrence. As for its allocation, the Group associates the Base scenario with the highest weight, and the lower weights to the most extreme scenarios:
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, 2018 | ||||
Reported ECL Allowance | 4,936,275 | |||
Gross carrying amount | 82,144,739 | |||
Reported ECL Coverage | 6.01 | % | ||
ECL amount by scenarios | ||||
Favorable scenario | 4,935,454 | |||
Unfavorable scenario | 4,939,083 | |||
Coverage ratio by scenarios | ||||
Favorable scenario | 6.01 | % | ||
Unfavorable scenario | 6.01 | % | ||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
| 1.13 | Leases |
Leases are classified at their inception as operating or finance leases based on the economic substance of the agreement.
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.
Finance leases
Finance leases are measured at the present value ofon 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 1.12 to determine whether there is objective evidence that an impairment loss has occurred, as for loans carried at amortized cost.
| 1.14 | 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 provisionsuseful life for contingencies, among others. Actual results could differ from those estimates.each item included in property, plant and equipment:
Property, plant and equipment | Estimated useful life | |||
Buildings | 50 Years | |||
Furniture and plant | 10 Years | |||
Machines and equipment | 5 Years | |||
Vehicles | 5 Years | |||
Others | 5 Years | |||
3.22Impairment
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of long-lived assetsDecember 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
The Group periodically evaluatesasset’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.
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.
| 1.15 | Investment properties |
The 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.
| 1.16 | 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.
| 1.17 | Intangible Assets |
| (a) | Goodwill |
The 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 anynon-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.
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
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 the cash-generating unit. The fair value of the reporting unit is estimated using discounted cash flows techniques.
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.
The Group has decided not to apply IFRS 3 retrospectively for those business combinations prior to the transition date.
| (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..
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.
The 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 long-liveddevelopment 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.
| 1.18 | Assets held for sale |
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” will be disclosed separately from the rest of the 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:
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
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.
The balances of financial instruments, deferred taxes and investment properties classified as held for sale are not subject to the valuation methods detailed above.
| 1.19 | Impairment ofnon-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 may not be recoverable. The carryingis the higher of an asset’s fair value less costs of a long-lived asset is considered impaireddisposal 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.
| 1.20 | 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.
| 1.21 | 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.
| 1.22 | 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.
| 1.23 | 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
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
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.
Contingent liabilities are: i) possible obligations that arise from past events and whose existence will be confirmed only by the occurrence ornon-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.
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.
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.
| 1.24 | Othernon-financial liabilities |
Non-financial accounts payable are accrued when the counterparty has fulfilled its contractual obligations and are measured at amortized cost.
| 1.24.1 | 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 OtherNon-Financial Liabilities in the Consolidated Financial Position.
The Group approved a retirement plan based on incentives for members of senior management and the Board of Directors, who will be entitled to receive cash flows, discountedpayments over time if certain performance objectives are met.
In addition, provisions related topre-retirement plans and withoutseniority awards benefits are recognized.
The provisions are measured at the present value of the disbursements that are expected to be required to settle the obligation using apre-tax interest rate that reflects prevailing market conditions on the time value of money and the specific risks for that obligation.
| 1.25 | 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.
| 1.26 | Capital Stock and Capital Adjustments |
Accounts included in this item are expressed in terms of the measuring unit current as of December 31, 2018 as described in Note 1.2.b, except from the item “Capital Stock”, which has been held at nominal value.
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
Common shares are recognized in shareholders’ equity and carried at nominal value. When any subsidiary of the 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.
| 1.27 | Reserves and Dividend distribution |
Pursuant to provisions set by the Argentine Corporations law, the Group and its subsidiaries, other than Banco Supervielle and Cordial Compañía Financiera, are required to appropriate 5% of the net income for the fiscal year to the legal reserve until such reserve is equal to 20% of Capital stock, plus the balance of the Capital Adjustment account.
As concerns Banco Supervielle and Cordial Compañía Financiera, according 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
Financial income are recognized in respect to all financial assets which interest income is calculated by applying the effective interest rate.
Gains or losses included in the effective interest rate includes disbursements or receipts relating to the origination or acquisition of a financial asset.
Fees and commissions
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 Group satisfied a performance obligations by transferring a service to a customer, under this definition an asset is less than its carrying value. Intransferred when the customer obtains control of that event,asset.
The Group transfers control of service over time and, therefore, satisfies a loss would be recognized based onperformance obligation and recognises revenue over time, and/or the Group satisfies the performance obligation at a point in time.
The transaction price is the amount byof consideration to which the carrying value exceeds the fair market valuean entity expects to be entitled in exchange for transferring promised services to a customer, excluding amounts collected on behalf of third parties.
Below is a summary of the long-lived asset. Fair value is determined primarily usingmain commissions earned by the anticipated cash flows discounted atGroup:
Commissions from deposits
Rentals from safety boxes
Credit cards’ commissions
Asset Management Services
Customer loyalty programs
The Group offers reward programs that allow its cardholders to earn points that can be redeemed for a rate commensurate with the risk involved. Previously recognized impairment loss is only reversed when there isbroad range of rewards, including goods and travels among others. This constitutes a subsequent change in estimates used to computeperformance obligation. The Group establishes a liability based on the fair value of the asset. Inpoints issued that event,are expected to be exchanged by customers. Points to be redeemed are estimated based on the new carrying amounthistorical redemption behavior of each program. The liability is reduced and the asset should berevenue is recognized when it satisfies its performance obligation relating to the lowerpoints, in this case when the points are exchanged by customers or at their due dates.
Revenue recognized during the year is adjusted as explained in Note 1.2.b.
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As 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, 2018, 2017 and 2016, the following Group’s assets are restricted:January 1, 2017
|
| 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 securityand 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, 20162018 and 20152017
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
5.Government1.29 Income tax and Corporate Securitiesminimum presumed income tax
Income Tax
The 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 on the basis 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 |
Government
| ii) | such temporary differences are not likely to be reversed in the foreseeable future. |
Deferred income tax assets and corporate securities consistliabilities 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 following:Group or its subsidiaries, where tax balances are intended to be, and may be, settled on a net basis..
|
| 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 |
|
Minimum Presumed Income Tax
The maturitiesGroup determines the minimum presumed income tax at the effective rate of 1% of the computable assets at each fiscalyear-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.
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 of government and corporate securities were as follows:January 1, 2017
|
| 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.Loans
The Group’s lending activities consist of the following:
· Loans to the non-financial public sector: loans to the federal and provincial governments of Argentina.
· 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
Forfor the years ended December 31, 2017, 20162018 and 20152017
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
Automobile2. TRANSITION TO IFRS
2.1 Requirements for the transition to IFRS
The following is a reconciliation between the shareholders’ equity, income statement, other comprehensive income and other secured loansstatement of cash flows amounts related to the consolidated financial statements issued according to the accounting framework prior at the transition date (January 1, 2017) and the adoption date (December 31, 2017), and the amounts presented according to IFRS in these consolidated financial statements.
2.2 IFRS exemptions
IFRS 1 allows first-time adopters to consider certainone-time — loans where collateral is pledged exemptions. Such exemptions have been provided by IASB to simplify the first adoption of certain IFRS, eliminating the mandatory nature of their retroactive application.
| a. | IFRS optional exemptions |
Below are the optional exemptions applicable to the Group under IFRS 1:
| i. | Deemed Cost of Property, Plant and Equipment: |
The fair value of certain items of property, plant and equipment has been adopted as an integral partdeemed cost as of the loan document.date of transition to IFRS.
| ii. | Business combinations |
Personal loans — loansIFRS 1 presents the option of applying IFRS 3 “Business Combinations” prospectively from the date of transition or from a specific date prior to individuals.the date of transition. This allowsnon-retrospective application that would require restatement of all business combinations prior to the transition date. The Group has opted for not applying IFRS 3 “Business Combinations” retrospectively for business combinations prior to the date of transition to IFRS.
| iii. | Designation of previously recognized financial instruments |
Credit card loans — loansAccording to credit card holders.IFRS 1, the Group has designated previously recognized equity investments with active markets as financial instruments measured at fair value through profit or loss, in accordance with IFRS 9 paragraph 5.7.5 based on the facts and circumstances that exist as of the date of transition to IFRS. The other equity investments were designated as financial instruments measured at fair value through other comprehensive income.
The Group has not made use of the other optional exemptions available in IFRS 1.
| b. | IFRS mandatory exemptions |
Foreign Trade loans — loansBelow are the mandatory exemptions applicable to exporters / importers.the Group under IFRS 1:
| i. | Estimates |
Government securities loans — loans where government securitiesThe estimates made by the Group in accordance with IFRS as of January 1, 2017 (date of transition to IFRS) are exchanged.consistent with the estimates made as of the same date according to the prior accounting framework.
| ii. | Non-controlling interest |
Other — includes mainly short-term loansAccording to IFRS 1 the Group applied the requirements of IFRS 10 “Consolidated Financial Statements” prospectively for export prefinancingaccounting for changes in the parent’s ownership interest in a subsidiary that do not result in a loss of control.
| iii. | Derecognition of financial assets and financial liabilities |
The Group applied the derecognition criteria of financial assets and financing.liabilities under IFRS prospectively for transactions occurred after January 1, 2017.
| iv. | Classification and measurement of financial assets |
The Group has considered the facts and circumstances at the date of transition to IFRS (January 1, 2017) to assess the classification of financial assets in the three measurement categories established by IFRS 9.
| v. | Impairment of financial assets: |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and 2016,January 1, 2017
and for the classificationyears ended December 31, 2018 and 2017
(Expressed in thousands 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.pesos)
Loans with “Other preferred guarantees” consist,At the date of transition to IFRSs, the Group used reasonable and supportable information that was available without undue cost or effort to determine the credit risk at the date that financial instruments were initially recognized (or for loan commitments and financial guarantee contracts the date that the entity became a party to the irrevocable commitment) and compare that to the credit risk at the date of transition to IFRSs. If, at the date of transition to IFRSs, determining whether there has been a significant increase in general,credit risk since the initial recognition of loans secured by mortgages and other forms of collateral pledgeda financial instrument required undue cost or effort, the Group recognized a loss allowance at an amount equal to secure the loan amount.
Loans “Without preferred guarantees” consist, in general, of unsecured loans.
lifetime expected credit losses until that financial instrument is derecognized.
The following industry segments comprisedother mandatory exemptions established by IFRS 1 have not been applied because they are not material to the most significant loan concentrationsGroup.
2.3 Required reconciliations
2.3.1 Shareholders’ equity reconciliation as of December 31, 2017 and 2016:January 1, 2017
|
| 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 | % |
ASSETS Cash and due from banks Government and corporate securities Debt securities at fair value through profit or loss Derivatives Repo transactions Other financial assets Loans and other financing Loans Other receivables from financial transactions Receivables from financial leases Other debt securities Financial assets in guarantee Investments in equity instruments Unlisted equity investments Miscellaneous receivables Premises and equipment Property, plant and equipment Miscellaneous assets Investment properties Intangible assets Current income tax assets Deferred income tax assets Othernon-financial assets Inventories Unallocated items TOTAL ASSETS LIABILITIES Deposits Other liabilities from financial transactions Other financial liabilities Financing received from the Argentine Central Bank and other financial institutions Unsubordinated Negotiable obligations Current income tax liability Deferred income tax liability Subordinated negotiable obligations Provisions Othernon-financial liabilities Miscellaneous liabilities Provisions Unallocated items Non-controlling interests TOTAL LIABILITIES SHAREHOLDERS’ EQUITY Shareholders’ Equity attributable to owners of the parent company Shareholders’ Equity attributable tonon-controlling interest TOTAL SHAREHOLDERS’ EQUITY Ref. 12/31/2017
Prior
accounting
framework Reclassification
(1) IFRS
Adjustments
(2) IAS 29
Restatement 12/31/2017
IFRS n. 11,129,475 (38,281 ) 6,275 5,287,455 16,384,924 i. 15,346,036 (15,346,036 ) — — — c. — 11,343,588 60,698 5,433,639 16,837,925 — 26,916 — 12,824 39,740 i. — 3,349,822 — 1,596,042 4,945,864 n. — 1,548,525 69,400 770,870 2,388,795 a., b., g.,
m., n.
— 59,120,298 (121,807 ) 28,110,179 87,108,670 54,954,373 (54,954,373 ) — — — 6,561,396 (6,561,396 ) — — — i. 2,519,201 (2,519,201 ) — — — — 358,894 — 170,997 529,891 — 1,301,237 — 619,982 1,921,219 d. — 39,437 7,216 22,228 68,881 734 (734 ) — — — 1,776,944 (1,776,944 ) — — — 694,431 (694,431 ) — — — e., p — 1,026,501 369,105 664,945 2,060,551 612,264 (610,671 ) (1,593 ) — — f., k., p — 194,433 — 92,639 287,072 j., n., p 324,501 (145,136 ) 131,799 148,256 459,420 — 122,224 — 58,234 180,458 — 49,099 734,521 373,360 1,156,980 p. — 324,439 152,009 227,006 703,454 e., p. — 102,666 3,200 50,440 156,306 51,923 (51,923 ) — — — 93,971,278 (3,791,047 ) 1,410,823 43,639,096 135,230,150 56,487,027 (78,310 ) — 26,876,266 83,284,983 i. 18,443,354 (18,443,354 ) — — — g., m., n. — 2,055,463 1,855,629 1,863,463 5,774,555 — 3,525,853 — 1,679,913 5,205,766 — 8,588,971 — 4,092,266 12,681,237 — 824,922 — 393,039 1,217,961 j. — — 20,189 9,619 29,808 685,873 — — 326,788 1,012,661 — 80,163 — 38,194 118,357 h., l., n. — 2,867,474 934,234 1,811,346 5,613,054 3,058,053 (3,058,053 ) — — — 80,163 (80,163 ) — — — 60,513 (60,513 ) — — — o. 11,497 (7,690 ) (3,807 ) — — 78,826,480 (3,785,237 ) 2,806,245 37,090,894 114,938,382 15,144,798 (13,500 ) (1,538,296 ) 6,476,465 20,069,467 — 7,690 142,874 71,737 222,301 15,144,798 (5,810 ) (1,395,422 ) 6,548,202 20,291,768
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years endedAs of December 31, 2018, 2017 2016 and 2015January 1, 2017
(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, 20162018 and 2015, was as follows:2017
(Expressed in thousands of pesos)
|
| 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 | ) |
| Ref. | 01/01/2017 Prior accounting framework | Reclassifications | IFRS Adjustments | IAS 29 Restatement | 01/01/2017 IFRS | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Cash and due from banks | n. | 8,166,132 | (151,165 | ) | 15,088 | 6,765,739 | 14,795,794 | |||||||||||||||||
Government and corporate securities | i. | 2,360,044 | (2,360,044 | ) | — | — | — | |||||||||||||||||
Debt securities at fair value through profit or loss | c. | — | 362,338 | 62,370 | 357,839 | 782,547 | ||||||||||||||||||
Derivatives | — | 28,304 | — | 23,848 | 52,152 | |||||||||||||||||||
Other financial assets | n. | — | 1,775,764 | 101,113 | 1,581,366 | 3,458,243 | ||||||||||||||||||
Loans and other financing | | a., b., g., m., n. | | — | 37,535,330 | 453,761 | 32,007,785 | 69,996,876 | ||||||||||||||||
Loan | 34,896,509 | (34,896,509 | ) | — | — | — | ||||||||||||||||||
Other receivables from financial intermediation | 3,772,736 | (3,772,736 | ) | — | — | — | ||||||||||||||||||
Receivables from financial leases | i. | 1,527,855 | (1,527,855 | ) | — | — | — | |||||||||||||||||
Other debt securities | — | 2,302,305 | (238,457 | ) | 1,738,899 | 3,802,747 | ||||||||||||||||||
Financial assets in guarantee | — | 1,465,029 | — | 1,234,363 | 2,699,392 | |||||||||||||||||||
Investments in equity instruments | d. | — | 3,363 | — | 2,834 | 6,197 | ||||||||||||||||||
Unlisted equity investments | 3,501 | (3,501 | ) | — | — | — | ||||||||||||||||||
Miscellaneous receivables | 1,110,316 | (1,110,316 | ) | — | — | — | ||||||||||||||||||
Premises and equipment | 621,575 | (621,575 | ) | — | — | — | ||||||||||||||||||
Property, plant and equipment | e., p. | — | 685,369 | 199,609 | 745,640 | 1,630,618 | ||||||||||||||||||
Miscellaneous assets | 425,501 | (425,501 | ) | — | — | — | ||||||||||||||||||
Investment properties | p. | — | 481,529 | — | 405,713 | 887,242 | ||||||||||||||||||
Intangible assets | f., k., p. | 285,462 | (114,802 | ) | 176,524 | 292,521 | 639,705 | |||||||||||||||||
Deferred income tax assets | j., n. | — | 41,657 | 493,087 | 450,550 | 985,294 | ||||||||||||||||||
Othernon-financial assets | e., p. | — | 19,993 | 158,077 | 150,033 | 328,103 | ||||||||||||||||||
Inventories | p. | — | 29,565 | 735 | 25,529 | 55,829 | ||||||||||||||||||
Unallocated items | 36,411 | (36,411 | ) | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
TOTAL ASSETS | 53,206,042 | (289,869 | ) | 1,421,907 | 45,782,659 | 100,120,739 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
LIABILITIES | ||||||||||||||||||||||||
Deposits | 35,897,864 | (35,734 | ) | (1,156 | ) | 30,214,735 | 66,075,709 | |||||||||||||||||
Other liabilities from financial intermediation | i. | 6,514,834 | (6,514,834 | ) | — | — | — | |||||||||||||||||
Repo operations | — | 590,891 | — | 497,856 | 1,088,747 | |||||||||||||||||||
Other financial liabilities | | g., m., n. | | — | 1,663,352 | 1,367,587 | 2,553,724 | 5,584,663 | ||||||||||||||||
Financing received from the Argentine Central Bank and others | — | 1,715,733 | — | 1,445,594 | 3,161,327 | |||||||||||||||||||
Negotiable obligations issued | — | 2,049,074 | — | 1,726,451 | 3,775,525 | |||||||||||||||||||
Current income tax liability | — | 554,917 | — | 467,546 | 1,022,463 | |||||||||||||||||||
Deferred income tax liability | j., n | — | — | 7,917 | 6,670 | 14,587 | ||||||||||||||||||
Subordinated negotiable obligations | — | 1,378,758 | — | 1,161,675 | 2,540,433 | |||||||||||||||||||
Provisions | — | 63,624 | — | 53,607 | 117,231 | |||||||||||||||||||
Othernon-financial liabilities | h., l., n. | — | 1,967,935 | 577,009 | 2,144,250 | 4,689,194 | ||||||||||||||||||
Miscellaneous liabilities | 2,182,228 | (2,182,228 | ) | — | — | — | ||||||||||||||||||
Provisions | 63,252 | (63,252 | ) | — | — | — | ||||||||||||||||||
Subordinated negotiable obligations | 1,378,758 | (1,378,758 | ) | — | — | — | ||||||||||||||||||
Unallocated items | 134,158 | (134,158 | ) | — | — | — | ||||||||||||||||||
Non-controlling interest | o. | 103,397 | (103,397 | ) | — | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
TOTAL LIABILITIES | 46,274,491 | (428,077 | ) | 1,951,357 | 40,272,108 | 88,069,879 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||
Shareholders’ Equity attributable to owners of the parent company | 6,931,551 | 34,811 | (605,903 | ) | 5,359,018 | 11,719,477 | ||||||||||||||||||
Shareholders’ Equity attributable tonon-controlling interest | — | 103,397 | 76,453 | 151,533 | 331,383 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
TOTAL SHAREHOLDERS’ EQUITY | 6,931,551 | 138,208 | (529,450 | ) | 5,510,551 | 12,050,860 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
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.
| (1) | “Reclassifications” includes reclassifications only related to clasisification differences between prior accounting framework and IFRS |
| (2) | “IFRS Adjustments” includes measurement adjustments and changes in the consolidation conclusions. |
GRUPO SUPERVIELLE S.A.
8.Other Receivables and Liabilities fromNotes to Consolidated Financial Transactions, Miscellaneous Receivables and Miscellaneous LiabilitiesStatements
The composition of other receivables from financial transactions, by type of guarantee, asAs of December 31, 2018, 2017 and 2016 was as follows:January 1, 2017
|
| 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
Forfor the years ended December 31, 2017, 20162018 and 20152017
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
The breakdown2.3.2 Reconciliation of net income for the caption “other” included in “Other liabilities from financial transactions” in the balance sheet was as follows:year ended on December 31, 2017
|
| 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 |
|
Ref. | 12/31/2017 Prior accounting framework | Reclassification (1) | IFRS Adjustments (2) | IAS 29 Restatement | 12/31/2017 IFRS | |||||||||||||||||
Financial income | 15,494,671 | (15,468,124 | ) | (26,547 | ) | — | — | |||||||||||||||
Interest Income | a., b., l., m., n., p. | — | 12,821,562 | 2,258,354 | 7,184,915 | 22,264,831 | ||||||||||||||||
Financial expenses | (6,194,288 | ) | 6,194,288 | — | — | — | ||||||||||||||||
Interest Expenses | m., n., p. | — | (5,010,485 | ) | (617,631 | ) | (2,681,549 | ) | (8,309,665 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net interest income | 9,300,383 | (1,462,759 | ) | 1,614,176 | 4,503,366 | 13,955,166 | ||||||||||||||||
Net income from financial instruments at fair value through profit or loss (NIFFI) | c., n., p. | — | 2,185,851 | 215,607 | 1,144,189 | 3,545,647 | ||||||||||||||||
Exchange rate differences on gold and foreign currency | p. | — | 250,758 | 15,496 | 126,858 | 393,112 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
NIFFI And Exchange rate differences | — | 2,436,609 | 231,103 | 1,271,047 | 3,938,759 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net financial income | 9,300,383 | 973,850 | 1,845,279 | 5,774,413 | 17,893,925 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Services fee income | a., n., p. | — | 4,235,477 | (128,535 | ) | 1,956,777 | 6,063,719 | |||||||||||||||
Services fee expenses | n., p. | — | (614,220 | ) | (212,372 | ) | (393,835 | ) | (1,220,427 | ) | ||||||||||||
Income from insurance activities | p. | — | 479,061 | 130,162 | 290,268 | 899,491 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income from commissions | — | 4,100,318 | (210,745 | ) | 1,853,210 | 5,742,783 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Subtotal | 9,300,383 | 5,074,168 | 1,634,534 | 7,627,623 | 23,636,708 | |||||||||||||||||
Results from exposure to changes in the purchasing power of money | p. | — | — | (1,755,051 | ) | (836,204 | ) | (2,591,255 | ) | |||||||||||||
Other operating income | e., g., n., p. | — | 1,357,456 | (112,567 | ) | 593,135 | 1,838,024 | |||||||||||||||
Loan loss provisions | m., n., p. | (1,820,169 | ) | (4,152 | ) | (907,347 | ) | (1,301,519 | ) | (4,033,187 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net operating income | 7,480,214 | 6,427,472 | (1,140,431 | ) | 6,083,035 | 18,850,290 | ||||||||||||||||
Service fee income | 4,973,272 | (4,973,272 | ) | — | — | — | ||||||||||||||||
Service fee expenses | (1,495,848 | ) | 1,495,848 | — | — | — | ||||||||||||||||
Income from insurance activities | 479,061 | (479,061 | ) | — | — | — | ||||||||||||||||
Administration expenses | (8,390,622 | ) | 8,390,622 | — | — | — | ||||||||||||||||
Personnel Expenses | b., h., p. | — | (4,952,898 | ) | (964,135 | ) | (2,819,205 | ) | (8,736,238 | ) | ||||||||||||
Administration expenses | a., n., p. | — | (3,179,426 | ) | (151,883 | ) | (1,587,222 | ) | (4,918,531 | ) | ||||||||||||
Depreciations and impairmentnon-financial assets | e., f., p. | — | (264,835 | ) | (156,436 | ) | (200,717 | ) | (621,988 | ) | ||||||||||||
Other operating expenses | b., k., p. | — | (2,300,622 | ) | (514,784 | ) | (1,341,418 | ) | (4,156,824 | ) | ||||||||||||
Miscellaneous income | 545,842 | (545,842 | ) | — | — | — | ||||||||||||||||
Miscellaneous losses | (376,480 | ) | 376,480 | — | — | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income from financial intermediation | 3,215,439 | (5,534 | ) | (2,927,669 | ) | 134,473 | 416,709 | |||||||||||||||
Profit of associates and joint ventures | — | — | — | — | — | |||||||||||||||||
Non-controlling interest result | (5,897 | ) | 5,897 | — | — | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income before taxes from continuing operations | 3,209,542 | 363 | (2,927,669 | ) | 134,473 | 416,709 | ||||||||||||||||
Income tax | j., n., p. | (772,483 | ) | (363 | ) | (20,927 | ) | (378,197 | ) | (1,171,969 | ) | |||||||||||
Net loss for the year | 2,437,059 | — | (2,948,596 | ) | (243,723 | ) | (755,260 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net loss for the year attributable to owners of the parent company | 2,437,059 | 5,897 | (2,953,890 | ) | (243,436 | ) | (754,370 | ) | ||||||||||||||
Net loss for the year attributable tonon-controlling interest | — | (5,897 | ) | 5,294 | (287 | ) | (890 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Other comprehensive income | c., d., d. | — | — | 31,753 | 15,129 | 46,882 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Comprehensive income for the year | 2,437,059 | — | (2,916,843 | ) | (228,594 | ) | (708,378 | ) | ||||||||||||||
Comprehensive income for the year attributable to owners of the parent company | 2,437,059 | 5,897 | (2,922,146 | ) | (228,311 | ) | (707,501 | ) | ||||||||||||||
Comprehensive income for the year attributable tonon-controlling interest | — | (5,897 | ) | 5,303 | (283 | ) | (877 | ) | ||||||||||||||
The breakdown of the caption “other” included in “Miscellaneous receivables” in the balance sheet was as follows:
| (1) | “Reclassifications” includes reclassifications only related to clasisification differences between prior accounting framework and IFRS |
| (2) | “IFRS Adjustments” includes measurement adjustments and changes in the consolidation conclusions. |
|
| 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 |
|
GRUPO SUPERVIELLE S.A.
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
ForAs of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2017, 20162018 and 20152017
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
The Group enters into forward transactions related to government securities2.3.3 Reconciliation of cash and foreign currencies. The Group recognizes cash security or currency amount to be exchanged inequivalents of the future as a receivablestatement of cash flow
Cash and payable at the original transaction date. The assets and liabilities related to such transactions are as follows:cash equivalents
|
| 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 |
|
| 12/31/2017 Prior accounting framework | Reclassifications | IFRS Adjustments and Restatement | 12/31/2017 IFRS | |||||||||||||
Cash and due from Banks | 11,129,475 | (31,672 | ) | 5,287,121 | 16,384,924 | |||||||||||
Bills and Notes issued by the Central Bank | 13,611,524 | (3,964,824 | ) | 4,596,227 | 14,242,927 | |||||||||||
Mutual Funds | 680,865 | — | 324,402 | 1,005,267 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 25,421,864 | (3,996,496 | ) | 10,207,750 | 31,633,118 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 01/01/2017 Prior accounting framework | Reclassifications | IFRS Adjustments and Restatement | 01/01/2017 IFRS | |||||||||||||
Cash and due from Banks | 8,166,132 | (136,140 | ) | 6,643,276 | 14,795,794 | |||||||||||
Bills and Notes issued by the Central Bank | 336,785 | — | 283,759 | 620,544 | ||||||||||||
Mutual Funds | 1,185,637 | — | 998,961 | 2,184,598 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 9,688,554 | (136,140 | ) | 7,925,996 | 17,600,936 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
These instruments consistStatement of foreign currency and securities contracts (spot and forward purchases and sales), whose valuation method is disclosed in Note 3.8).cash flow
Premiums on these instruments have been included in the “Financial income” and “Financial expense” captions of the consolidated statements of income of each year.
| 12/31/2017 Prior accounting framework | Adjustments | 12/31/2017 IFRS | ||||||||||
Operating activities (a.) | 3,145,024 | (21,244,955 | ) | (18,099,931 | ) | |||||||
Investing activities (b.) | (282,816 | ) | (97,732 | ) | (380,548 | ) | ||||||
Financing activities (c.) | 11,869,581 | 6,610,289 | 18,479,870 | |||||||||
Effects of exchange rate changes and exposure to changes in the purchasing power of money on cash and cash equivalents (d.) | 1,001,522 | 13,031,269 | 14,032,791 | |||||||||
|
|
|
|
|
| |||||||
Total | 15,733,311 | (1.701.129 | ) | 14,032,182 | ||||||||
|
|
|
|
|
| |||||||
9.Unlisted equity Investments
Operating activities (a.) | ||||
Prior accounting framework | 3,145,024 | |||
Reclasification from other activities | (2,356,882 | ) | ||
Reclasification of Cash and Cash Equivalents | 3,996,496 | |||
Intangible Assets | 230,783 | |||
Adjustments that affect cash flow from operating activities | (17,274,460 | ) | ||
IAS 29 Restatement | (5,840,892 | ) | ||
Cash flow under IFRS 12/31/2017 | (18,099,931 | ) | ||
GRUPO SUPERVIELLE S.A.
Equity investments in other companies consisted of the following asNotes to Consolidated Financial Statements
As of December 31, 2018, 2017 and 2016:January 1, 2017
|
| 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
Forfor the years ended December 31, 2017, 20162018 and 20152017
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
|
| 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 |
|
Investing activities (b.) | ||||
| ||||
Prior accounting framework | (282,816 | ) | ||
Adjustments that affect cash flow from operating activities | 25,072 | |||
IAS 29 Restatement | (122,804 | ) | ||
Cash flow under IFRS 12/31/2017 | (380,548 | ) | ||
Financing activities (c.) | ||||
Prior accounting framework | 11,869,581 | |||
Reclasification from other activities | 2,356,882 | |||
Adjustments that affect cash flow from operating activities | (1,710,092 | ) | ||
IAS 29 Restatement | 5,963,499 | |||
Cash flow under IFRS 12/31/2017 | 18,479,870 | |||
Effects of exchange rate changes and exposure to changes in the purchasing power of money on cash and cash equivalents (d.) | ||||
Prior accounting framework | 1,001,522 | |||
Exposure to changes in the purchasing power of money on cash and cash equivalents | 12,626,546 | |||
IAS 29 Restatement | 404,724 | |||
Cash flow under IFRS 12/31/2017 | 14,032,791 | |||
2.3.4 IFRS adjustments
(a) Adjustment in the recognition of interest income through the effective interest rate method
Pursuant to IFRS, origination fees and transaction costs are added to the loan interest rate and accrued during the expected life of such loan. As a result of the application of the effective interest rate, income from commissions and administration expenses have decreased and interest income has increased, recognized in the assets recorded in loans and other financings.
(b) Initial Recognition at Fair Value
Under IFRS, financial instruments are measured at their fair value on initial recognition. In the event that the Company originates loans with interest rate as transaction price that differs from their fair value, the entity will recognize the loan at its fair value. The difference between the asset’s fair value and the carrying amount is accounted as a gain or loss in the income statement.
The interestsCompany originates some financing that meets the conditions established by the IFRS, as a result the Group recognized an increase or decrease of assets corresponding to the pending to accrued interest rate.
(c) Valuation of investments at fair value
Pursuant to the prior accounting framework, the Entity valuated its investments in mutual guarantee companies aregovernment bonds according to the Argentine Central Bank rules. According to the mentioned rules, instruments which appeared in lists of volatilities or present values issued by the Argentine Central Bank were valuated at their market value, while those instruments which 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 includedappeared in the above categories was Ps. 474,654aforementioned lists has been value at cost increased by their internal return rate.
IFRS 9 “Financial instruments” establishes that an entity must classify its financial assets according to the entity’s business model for managing the financial assets and Ps. 356,060 as of December 31, 2017the contractual cash flows characteristics. Based on the aforementioned, the Group has classified its investment portfolio into those held for trading, which were valued at fair value through profit and 2016, respectively. Depreciation expense was Ps. 118,594, Ps. 81,558loss and Ps. 56,637 as of December 31, 2017, 2016 and 2015, respectively.those held for investment, which were valued at fair value with changes in other comprehensive income.
GRUPO SUPERVIELLE S.A.
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
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and 2016 goodwill breakdown is as follows:January 1, 2017
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
Forfor the years ended December 31, 2017, 20162018 and 20152017
(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 Assetspesos)
(d) Investments equity instruments
Under IFRS, any and all investments in which the Group has no control or significant influence must be measured at fair value. Under the prior accounting framework, such investments are measured at cost value or through equity method the lower. The adjustment at fair value of the investment meant an increase that was recognized in other comprehensive income by application of the exception in IFRS 1.
(e) Property, plant and equipment and othernon-financial assets
The fair value of certain items of property, plant and equipment has been adopted as deemed cost as of the date of transition to IFRS, as described in note 2.2, net of the related impact on accumulated depreciation.
Under the prior accounting framework, othernon-financial assets were recognized, as well as stationery expenses which do not comply with IFRS requirements to be recognized as assets. The derecognition of such assets originated an increase in administrative expenses.
(f) Intangible assets
According to IFRS, an intangible asset is an identifiablenon-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 the prior accounting framework, 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 the accumulated amortization.
(g) Financial Guarantees
Under IFRS, the financial guarantees granted must be recognized initially at their fair value, which equals to the commission charged in most of the cases. Such amount is later amortized at a straight line throughout the life of the contract. Upon each closing, the financial guarantees are measured by the higher between: (i) the amount of the loss allowance determined and (ii) the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of IFRS 15.
Pursuant to previous accouting framewrok, commissions collected in financial guarantee agreements are imputed to results upon collection.
As a result of IFRS application, the Group recognized financial assets and liabilities. The impact on results was a decrease in other operating income.
(h) Employee Benefits
Pursuant to IFRS, short-term benefits for employees such as vacations, salaries and social security contributions, are recognized as liabilities equivalent to the undiscounted amount the Group expects to pay for such benefit. Likewise, long-term benefits such as seniority awards andpre-retirements, are recognized as liabilities equivalent to the amount discounted from the benefit the Group expects to pay.
The recognition of these liabilities generated an increase in othernon-financial liabilities and a negative result within employee benefits.
(i) Reverse repo
Pursuant to IFRS, a reverse repo transaction is recognized as a secured borrowing. Pursuant to the prior accounting framework, the bond received as collateral with the counterparty is recorded in other obligations through financial intermediation for an agreed upon amount of the sale future reverse operation.
As a result, the financing that was previously recorded in other receivables through financial intermediation was reclassified to repo transactions item and assets of received securities by repo transactions were recognized, consequently, with the reversion of the obligation through financial intermediation.
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and 2016, the organization January 1, 2017
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
Forfor the years ended December 31, 2017, 20162018 and 20152017
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
14.Other Liabilities from(j) Income tax
Pursuant to IFRS, tax charges for the financial year includes current and deferred taxes. The current income tax is calculated pursuant to passed laws and substantially passed as of these Financial Transactions - BanksStatements. The deferred tax is recognized pursuant to the liabilities method, given the temporary differences that arise between tax basis of assets and International Institutions,liabilities and Loans from Domesticamounts recorded in books in the Consolidated Financial InstitutionsStatements. Pursuant to the prior accounting framework, the Group recognized the current tax for the financial year.
The Tax effect of the recognition of the deferred tax accounts for an increase in deferred tax assets, an adjustment in results in income tax and an adjustment in other comprehensive results for the tax pursuant to the results recorded therein.
(k) Goodwill
Pursuant to the prior accounting framework, the recognized goodwill is amortized over a maximum120-month term. Pursuant to IFRS, goodwill is not amortized, instead, it is subject to an annual assessment for impairment. As a result, the value of intangible assets with their counterparty in other operating expenses has increased.
(l) Loyalty Programs
As part of the Bank’s loyalty programs, the Group relies on a point reward program based on credit and debit card consumption. Such points can be redeemed into different products or tourism services. Such points can be redeemed over a specific term and after such term they expire and cannot be redeemed.
Pursuant to IFRS 15, 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 when it satisfies its performance obligation relating to the points, in this case when the points are redeemed by customers or expired.
The adjustment to liabilities has increased othernon-financial liabilities. Interest income was also adjusted to recognize a deferred revenue that will be accounted for as revenue once points are redeemed or expired.
(m) Transfer of Financial Assets
Pursuant to the previous accounting framework, the Entity records a derecognition of assets of the portfolios transfer for the constitution of financial trusts and the portfolios sales with recourse for the transferor. Pursuant to IFRS 9 “Financial Instruments” it is necessary to analyze if the Entity has substantially transferred all the risks and rewards inherent to the transferred asset. From the analysis performed it can be drawn that this is not fulfilled, therefore, the Entity will continue recognizing such transferred asset in its entirety and will recognize financial liabilities for the received consideration.
Therefore, the Company does not derecognize the assets for transferred portfolios and recognize a liability for the received consideration and an adjustment of interest incomes, interest expenses and uncollectibility charges.
(n) Financial trusts
The Group borrows funds under different credit arrangementscontrols a financial trust when the Group is exposed to, or has rights to, variable returns from localits involvement with the trust and foreign banks and international lending agencies as follows:has the ability to affect those returns through its power to direct the activities of the trust. Financial Trusts 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 trusts, the Group has evaluated the following:
|
| 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 |
|
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 the ability to affect those returns through its power over the trust
In accordance with the aforementioned, the Group controls such financial trusts and, therefore, such structured entities have been consolidated.
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
(o)Non-controlling interest
Pursuant to IFRS 10, thenon-controlling interests will be reported in the consolidated financial statement, within shareholders’ equity, separately from the shareholder’s equity attributable to owners of the Group. Under the previous accounting framework,non-controlling interest is reported within liabilities.
As a result, the entity has made the appropriate reclassification. Additionally, the financial trust property from which the Bank does not own participation certificates has been imputed in this line.
(p) Measuring Unit
As described in Note 1.2.b. the Group adjusted all thenon-monetary items in order to reflect the impact of the inflation adjustment reporting in term of the current measuring unit as of the end of the year.
| 3. | 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:
| 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 ofNon-Financial Assets |
Intangible assets with definite useful life and property, plant and equipment are amortized or depreciated on a straight-line basis during their estimated useful life. The Group monitors the conditions associated with these assets to determine whether the events and circumstances require a review of the remaining amortization or depreciation term and whether there are factors or circumstances indicating impairment in the value of the assets which might not be recoverable.
Identifying the indicators of impairment of property, plant and equipment and intangible 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.
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.
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
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:
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 the ability to affect those returns through its power over the trust
If Structured Entities were not consolidated by the Group, the consolidated income statement would record a loss of 59,303 and 38,454 as of December 31, 2018 and 2017 respectively. See Note 1.4 for further information on the Group’s exposure to structured entities.
| e- | Income tax and deferred tax |
A significant level of judgment is required to determine current and deferred tax assets and liabilities. Current income tax is measured at the amount expected to be paid while deferred income tax is measured based on the temporary differences between the carrying amount of assets and liabilities and their tax base, at the rates expected to be in force at the time of reversal of such differences.
Deferred tax assets and Loss Carryforward are recognized when future taxable income is expected to exist to offset such temporary differences or losses, based on the Senior Management’s assumptions about the amounts and timing of such future taxable income. Then, it is necessary to determine whether tax assets are likely to be used and offset against future taxable income. Current results may differ from these estimates, such as changes in the applicable tax laws or the outcome of the final review of the tax returns by tax authorities and tax courts.
Future taxable income and the number of tax benefits likely to be available in the future are based on a medium term business plan prepared by management on the basis of reasonable expectations.
| 4. | SEGMENT REPORTING |
The Group determines operating segments based on performance reports which are reviewed by the Board and key personnel of the 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 of physical persons. |
| 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 andnon-financial products and services. |
| e- | Insurance: Includes insurance products, with a focus on life insurance, to targeted customers segments |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
| 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, 2018 and 2017:
| 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 | 4,706,116 | 325,248 | 28,505,898 | 61,414 | 3,135 | 582,102 | (496,360 | ) | 33,687,553 | |||||||||||||||||||||||
Debt securities at fair value through profit or loss | — | — | 14,941,290 | — | 100,041 | 70,784 | — | 15,112,115 | ||||||||||||||||||||||||
Loans and other financing | 30,785,552 | 38,850,543 | 2,824,590 | 6,411,427 | 459,404 | 602,207 | (2,725,259 | ) | 77,208,464 | |||||||||||||||||||||||
Other Assets | 1,141,320 | 80,182 | 5,663,252 | 1,735,186 | 372,487 | 630,880 | 6,102,557 | 15,725,864 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Assets | 36,632,988 | 39,255,973 | 51,935,030 | 8,208,027 | 935,067 | 1,885,973 | 2,880,938 | 141,733,996 | ||||||||||||||||||||||||
| Liabilities by segments | Retail Banking | Corporate Banking | Treasury | Consumer | Insurance | Adm. MF and other segments | Adjustments | Total as of 12.31.2018 | ||||||||||||||||||||||||
Deposits | 51,679,015 | 9,420,938 | 32,906,386 | 1,667,995 | — | — | (768,320 | ) | 94,906,014 | |||||||||||||||||||||||
Financing received from the Argentine Central Bank and others | 10,828 | 7,212,869 | 786,362 | 2,542,577 | — | 184,546 | (2,704,345 | ) | 8,032,837 | |||||||||||||||||||||||
Negotiable obligations | — | — | 7,418,947 | 1,304,004 | — | 51,116 | 533,104 | 9,307,171 | ||||||||||||||||||||||||
Other liabilities | 3,192,162 | 1,010,667 | 1,938,464 | 1,725,794 | 387,267 | 1,128,369 | 3,137,177 | 12,519,900 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Liabilities | 54,882,005 | 17,644,474 | 43,050,159 | 7,240,370 | 387,267 | 1,364,031 | 197,616 | 124,765,922 | ||||||||||||||||||||||||
| Result by segments | Retail Banking | Corporate Banking | Treasury | Consumer | Insurance | Adm. MF and other segments | Adjustments | Total as of 12.31.2018 | ||||||||||||||||||||||||
Interests income | 13,131,593 | 10,736,816 | 1,805,457 | 5,265,312 | 39,149 | 297,551 | (859,636 | ) | 30,416,242 | |||||||||||||||||||||||
Interest Expense | (3,896,708 | ) | (1,326,316 | ) | (10,891,110 | ) | (1,947,948 | ) | — | (226,343 | ) | 875,065 | (17,413,360 | ) | ||||||||||||||||||
Distribution of results by Treasury | 746,366 | (4,287,089 | ) | 3,540,723 | — | — | — | — | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net interest income | 9,981,251 | 5,123,411 | (5,544,930 | ) | 3,317,364 | 39,149 | 71,208 | 15,429 | 13,002,882 | |||||||||||||||||||||||
Net income from financial instruments at fair value through profit or loss | 45,603 | — | 5,607,007 | (584,895 | ) | 172,338 | 55,090 | 1,015,228 | 6,310,371 | |||||||||||||||||||||||
Exchange rate differences on gold and foreign currency | 826,135 | 80,067 | 215,047 | 4,451 | (5 | ) | 23,032 | (22,022 | ) | 1,126,705 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
NIFFI And Exchange Rate Differences | 871,738 | 80,067 | 5,822,054 | (580,444 | ) | 172,333 | 78,122 | 993,206 | 7,437,076 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net Financial Income | 10,852,989 | 5,203,478 | 277,124 | 2,736,920 | 211,482 | 149,330 | 1,008,635 | 20,439,958 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Services Fee Income | 3,522,097 | 540,213 | 26,331 | 1,440,166 | — | 440,723 | (41,841 | ) | 5,927,689 | |||||||||||||||||||||||
Services Fee Expenses | (801,044 | ) | (67,045 | ) | (55,342 | ) | (492,776 | ) | — | (20,899 | ) | 18,926 | (1,418,180 | ) | ||||||||||||||||||
Income from insurance activities | — | — | — | — | 666,954 | — | 181,711 | 848,665 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net Service Fee Income | 2,721,053 | 473,168 | (29,011 | ) | 947,390 | 666,954 | 419,824 | 158,796 | 5,358,174 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Subtotal | 13,574,042 | 5,676,646 | 248,113 | 3,684,310 | 878,436 | 569,154 | 1,167,431 | 25,798,132 | ||||||||||||||||||||||||
Result from exposure to changes in the purchasing power of money | (1,192,909 | ) | (1,537,428 | ) | (1,015,651 | ) | (575,725 | ) | (259,689 | ) | (121,061 | ) | (1,312,538 | ) | (6,015,001 | ) | ||||||||||||||||
Other operating income | 966,474 | 920,204 | 76,165 | 528,138 | 4,314 | 91,902 | (113,639 | ) | 2,473,558 | |||||||||||||||||||||||
Loan loss provisions | (1,662,584 | ) | (865,972 | ) | (16,248 | ) | (2,557,571 | ) | — | (76,658 | ) | — | (5,179,033 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net operating income | 11,685,023 | 4,193,450 | (707,621 | ) | 1,079,152 | 623,061 | 463,337 | (258,746 | ) | 17,077,656 | ||||||||||||||||||||||
Personnel expenses | (5,722,747 | ) | (1,023,583 | ) | (353,169 | ) | (1,164,882 | ) | (111,685 | ) | (191,674 | ) | (210,840 | ) | (8,778,580 | ) | ||||||||||||||||
Administration expenses | (3,674,773 | ) | (474,633 | ) | (184,528 | ) | (934,095 | ) | (151,893 | ) | (195,517 | ) | 14,931 | (5,600,508 | ) | |||||||||||||||||
Depreciations and impairment ofnon-financial assets | (258,912 | ) | (83,085 | ) | (18,364 | ) | (45,519 | ) | (4,890 | ) | (1,700 | ) | (19,919 | ) | (432,389 | ) | ||||||||||||||||
Other operating expenses | (2,312,340 | ) | (1,020,900 | ) | (285,678 | ) | (626,069 | ) | (664 | ) | (53,348 | ) | (12,941 | ) | (4,311,940 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Operating income | (283,749 | ) | 1,591,249 | (1,549,360 | ) | (1,691,413 | ) | 353,929 | 21,098 | (487,515 | ) | (2,045,761 | ) | |||||||||||||||||||
Income from associates and joint ventures | — | — | — | (4,473 | ) | — | — | 4,473 | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Result before taxes | (283,749 | ) | 1,591,249 | (1,549,360 | ) | (1,695,886 | ) | 353,929 | 21,098 | (483,042 | ) | (2,045,761 | ) | |||||||||||||||||||
Income tax | (219,356 | ) | (413,415 | ) | (90,217 | ) | 235,248 | (153,460 | ) | (38,152 | ) | (331,536 | ) | (1,010,888 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net income | (503,105 | ) | 1,177,834 | (1,639,577 | ) | (1,460,638 | ) | 200,469 | (17,054 | ) | (814,578 | ) | (3,056,649 | ) | ||||||||||||||||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
| Result by segments | Retail Banking | Corporate Banking | Treasury | Consumer | Insurance | Adm. MF and other segments | Adjustments | Total as of 12.31.2018 | ||||||||||||||||||||||||
Net income for the year attributable to owners of the parent company | (476,637 | ) | 1,177,834 | (1,639,577 | ) | (1,460,638 | ) | 200,469 | (17,054 | ) | (812,400 | ) | (3,028,003 | ) | ||||||||||||||||||
Net income for the year attributable tonon-controlling interest | (26,468 | ) | — | — | — | — | — | (2,178 | ) | (28,646 | ) | |||||||||||||||||||||
Other comprehensive income | (16,157 | ) | 123,287 | 121,040 | 207 | (1,078 | ) | — | 14,274 | 241,573 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Other comprehensive income attributable to owners of the parent company | (16,157 | ) | 123,287 | 121,040 | 207 | (1,078 | ) | — | 14,023 | 241,322 | ||||||||||||||||||||||
Other comprehensive income attributable tonon-controlling interest | — | — | — | — | — | — | 251 | 251 | ||||||||||||||||||||||||
Comprehensive income for the year | (519,262 | ) | 1,301,121 | (1,518,537 | ) | (1,460,431 | ) | 199,391 | (17,054 | ) | (800,304 | ) | (2,815,076 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Comprehensive income attributable to owners of the parent company | (492,794 | ) | 1,301,121 | (1,518,537 | ) | (1,460,431 | ) | 199,391 | (17,054 | ) | (798,377 | ) | (2,786,681 | ) | ||||||||||||||||||
Comprehensive income attributable tonon-controlling interest | (26,468 | ) | — | — | — | — | — | (1,927 | ) | (28,395 | ) | |||||||||||||||||||||
| 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 | 4,132,699 | 384,037 | 11,769,085 | 107,691 | 4,447 | 352 | (13,387 | ) | 16,384,924 | |||||||||||||||||||||||
Debt securities at fair value through profit or loss | — | — | 16,285,616 | 111,979 | — | — | 440,330 | 16,837,925 | ||||||||||||||||||||||||
Loans and other financing | 31,805,596 | 44,801,483 | 3,336,981 | 9,824,802 | 140,593 | 25,564 | (2,826,709 | ) | 87,108,670 | |||||||||||||||||||||||
Other Assets | 623,355 | 17,877 | 7,741,867 | 2,113,635 | 750,829 | 283,211 | 3,367,857 | 14,898,631 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Assets | 36,561,650 | 45,203,397 | 39,133,549 | 12,158,107 | 896,229 | 309,127 | 968,091 | 135,230,150 | ||||||||||||||||||||||||
| Liabilities by segments | Retail Banking | Corporate Banking | Treasury | Consumer | Insurance | Adm. MF and other segments | Adjustments | Total as of 12.31.2017 | ||||||||||||||||||||||||
Deposits | 52,021,850 | 6,814,206 | 23,662,029 | 1,040,635 | — | — | (253,737 | ) | 83,284,983 | |||||||||||||||||||||||
Financing received from the Argentine Central Bank and others | 9,618 | 4,064,831 | 909,178 | 285,637 | — | — | (63,498 | ) | 5,205,766 | |||||||||||||||||||||||
Negotiable obligations | — | — | 9,499,207 | 2,822,175 | — | — | 359,855 | 12,681,237 | ||||||||||||||||||||||||
Other liabilities | 5,053,328 | 1,266,538 | 7,412,959 | 6,198,430 | 360,637 | 132,543 | (6,658,039 | ) | 13,766,396 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Liabilities | 57,084,796 | 12,145,575 | 41,483,373 | 10,346,877 | 360,637 | 132,543 | (6,615,419 | ) | 114,938,382 | |||||||||||||||||||||||
| Result by segments | Retail Banking | Corporate Banking | Treasury | Consumer | Insurance | Adm. MF and other segments | Adjustments | Total as of 12.31.2017 | ||||||||||||||||||||||||
Interest Income | 10,066,299 | 5,976,487 | 1,397,697 | 5,453,694 | — | — | (629,346 | ) | 22,264,831 | |||||||||||||||||||||||
Interest Expense | (2,429,498 | ) | (293,503 | ) | (4,547,332 | ) | (1,721,411 | ) | — | (19 | ) | 682,098 | (8,309,665 | ) | ||||||||||||||||||
Distribution of results by Treasury | 1,730,815 | (3,415,120 | ) | 1,684,305 | — | — | — | — | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net interest income | 9,367,616 | 2,267,864 | (1,465,330 | ) | 3,732,283 | — | (19 | ) | 52,752 | 13,955,166 | ||||||||||||||||||||||
Net income from financial instruments at fair value through profit or loss | (18,791 | ) | — | 2,876,573 | (412,659 | ) | 153,099 | 42,195 | 905,230 | 3,545,647 | ||||||||||||||||||||||
Exchange rate differences on gold and foreign currency | 237,560 | (67,938 | ) | 211,820 | 5,432 | — | 1,190 | 5,048 | 393,112 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
NIFFI and Exchange rate Differences | 218,769 | (67,938 | ) | 3,088,393 | (407,227 | ) | 153,099 | 43,385 | 910,278 | 3,938,759 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net Financial Income | 9,586,385 | 2,199,926 | 1,623,063 | 3,325,056 | 153,099 | 43,366 | 963,030 | 17,893,925 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Income from commissions | 3,719,832 | 734,603 | 27,297 | 1,118,895 | — | 333,620 | 129,472 | 6,063,719 | ||||||||||||||||||||||||
Expenses from commissions | (812,597 | ) | (38,732 | ) | (28,615 | ) | (115,779 | ) | — | — | (224,704 | ) | (1,220,427 | ) | ||||||||||||||||||
Income from insurance activities | — | — | — | — | 639,524 | — | 259,967 | 899,491 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net service fee income | 2,907,235 | 695,871 | (1,318 | ) | 1,003,116 | 639,524 | 333,620 | 164,735 | 5,742,783 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Subtotal | 12,493,620 | 2,895,797 | 1,621,745 | 4,328,172 | 792,623 | 376,986 | 1,127,765 | 23,636,708 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Result from exposure to changes in the purchasing power of money | (616,471 | ) | (749,946 | ) | (305,043 | ) | (171,901 | ) | (141,417 | ) | (26,325 | ) | (580,152 | ) | (2,591,255 | ) | ||||||||||||||||
Other operating income | 1,174,305 | 393,281 | 94,700 | 896,005 | 3,179 | (2,451 | ) | (720,995 | ) | 1,838,024 | ||||||||||||||||||||||
Loan loss provisions | (1,407,882 | ) | (289,347 | ) | (6,874 | ) | (2,324,630 | ) | — | — | (4,454 | ) | (4,033,187 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net operating income | 11,643,572 | 2,249,785 | 1,404,528 | 2,727,646 | 654,385 | 348,210 | (177,836 | ) | 18,850,290 | |||||||||||||||||||||||
Personnel expenses | (5,801,979 | ) | (1,074,860 | ) | (397,063 | ) | (1,227,028 | ) | (109,876 | ) | (60,539 | ) | (64,893 | ) | (8,736,238 | ) | ||||||||||||||||
Administration expenses | (3,516,643 | ) | (444,892 | ) | (210,404 | ) | (1,116,313 | ) | (139,651 | ) | (15,940 | ) | 525,312 | (4,918,531 | ) | |||||||||||||||||
Depreciations and impairmentnon-financial assets | (383,239 | ) | (84,659 | ) | (99,302 | ) | (49,988 | ) | (4,566 | ) | (173 | ) | (61 | ) | (621,988 | ) | ||||||||||||||||
Other operating expenses | (2,596,100 | ) | (668,837 | ) | (228,784 | ) | (626,902 | ) | (1,689 | ) | (13,510 | ) | (21,002 | ) | (4,156,824 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Operating income | (654,389 | ) | (23,463 | ) | 468,975 | (292,585 | ) | 398,603 | 258,048 | 261,520 | 416,709 | |||||||||||||||||||||
Income from associates and joint ventures | — | — | — | 6,768 | — | — | (6,768 | ) | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Result before taxes | (654,389 | ) | (23,463 | ) | 468,975 | (285,817 | ) | 398,603 | 258,048 | 254,752 | 416,709 | |||||||||||||||||||||
Income tax | (120,218 | ) | (144,883 | ) | (379,043 | ) | (258,905 | ) | (159,238 | ) | (98,045 | ) | (11,637 | ) | (1,171,969 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net income | (774,607 | ) | (168,346 | ) | 89,932 | (544,722 | ) | 239,365 | 160,003 | 243,115 | (755,260 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
| Result by segments | Retail Banking | Corporate Banking | Treasury | Consumer | Insurance | Adm. MF and other segments | Adjustments | Total as of 12.31.2017 | ||||||||||||||||||||||||
Net income for the year attributable to owners of the parent company | (775,453 | ) | (168,346 | ) | 89,932 | (544,722 | ) | 239,365 | 160,003 | 244,851 | (754,370 | ) | ||||||||||||||||||||
Net income for the year attributable tonon-controlling interest | 846 | — | — | — | — | — | (1,736 | ) | (890 | ) | ||||||||||||||||||||||
Other comprehensive income | 4,549 | 5,122 | 1,878 | (72 | ) | 37,648 | — | (2,243 | ) | 46,882 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Other comprehensive income attributable to owners of the parent company | 4,549 | 5,122 | 1,878 | (72 | ) | 37,648 | — | (2,256 | ) | 46,869 | ||||||||||||||||||||||
Other comprehensive income attributable tonon-controlling interest | — | — | — | — | — | — | 13 | 13 | ||||||||||||||||||||||||
Comprehensive income for the year | (770,058 | ) | (163,224 | ) | 91,810 | (544,794 | ) | 277,013 | 160,003 | 240,872 | (708,378 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Comprehensive income attributable to owners of the parent company | (770,904 | ) | (163,224 | ) | 91,810 | (544,794 | ) | 277,013 | 160,003 | 242,595 | (707,501 | ) | ||||||||||||||||||||
Comprehensive income attributable tonon-controlling interest | 846 | — | — | — | — | — | (1,723 | ) | (877 | ) | ||||||||||||||||||||||
| 5. | INCOME TAX |
On December 29, 2017, the National Executive enacted Income Tax Law 27430. This law has introduced several changes to the previous income tax treatment. Some of the key changes involved in the reform include:
Income tax rate: Income tax rate for Argentine corporations will be gradually reduced from 35% to 30% for fiscal years beginning on January 1, 2018 until December 31, 2019 and to a 25% for fiscal years beginning on, and including, January 1, 2020.
Tax on dividends: The law has introduced a tax on dividends or profits distributed by Argentine corporations to individuals, undivided interests or foreign beneficiaries, subject to the following conditions: (i) dividends resulting from income earned during fiscal years beginning on January 1, 2018 until December 31, 2019 shall be subject to a 7% withholding rate and (ii) dividends resulting from income earned in fiscal years beginning on January 1, 2020 shall be subject to a 13% withholding rate.
Dividends distributed from profits earned until the fiscal year before that commenced on January 1, 2018 shall remain subject, in respect of all beneficiaries, to withholding at the 35% rate on the amount in excess oftax-free distributable accumulated profits (equalization tax transition period).
The following table reconciles the statutory income tax rate in Argentina to the Group’s effective tax rate as of December 31, 2018 and 2017:
| 12/31/2018 | 12/31/2017 | |||||||
Current income tax | (482,183 | ) | (1,328,434 | ) | ||||
Income tax – deferred method | (528,705 | ) | 156,465 | |||||
|
|
|
| |||||
Income tax allotted in the Income Statement | (1,010,888 | ) | (1,171,969 | ) | ||||
|
|
|
| |||||
Income tax allotted in Other comprehensive income | (79,985 | ) | (21,084 | ) | ||||
|
|
|
| |||||
Total Income Tax Charge | (1,090,873 | ) | (1,193,053 | ) | ||||
|
|
|
| |||||
The following is a reconciliation between the income tax charged to income as of December 31, 2018 and that which would result from applying the current tax rate on the accounting profit
| 12/31/2018 | 12/31/2017 | |||||||
Income before taxes | (2,045,761 | ) | 416,709 | |||||
Tax rate | 30 | % | 35 | % | ||||
|
|
|
| |||||
Income for the year at tax rate | 613,728 | (145,848 | ) | |||||
Permanent differences at tax rate: | ||||||||
Result from exposure to changes in the purchasing power of money | (1,831,996 | ) | (906,939 | ) | ||||
Deductible investments | 210,311 | 26,852 | ||||||
Changes in tax rate | — | (258,337 | ) | |||||
Others | (2,931 | ) | 112,302 | |||||
|
|
|
| |||||
Income tax | (1,010,888 | ) | (1,171,969 | ) | ||||
|
|
|
| |||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
| 5.1 | Deferred tax |
The net position of the deferred tax is as follows:
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||
Deferred tax assets | 821,818 | 1,156,980 | 985,294 | |||||||||
Deferred tax liability | (223,351 | ) | (29,808 | ) | (14,587 | ) | ||||||
|
|
|
|
|
| |||||||
Net assets by deferred tax | 598,467 | 1,127,172 | 970,707 | |||||||||
|
|
|
|
|
| |||||||
Deferred taxes to be recovered in more than 12 months | 1,231,278 | 1,570,527 | 1,384,627 | |||||||||
|
|
|
|
|
| |||||||
Deferred taxes to be recovered in 12 months | 71,189 | 8,704 | 24,211 | |||||||||
|
|
|
|
|
| |||||||
Subtotal – Deferred tax assets | 1,302,467 | 1,579,231 | 1,408,838 | |||||||||
|
|
|
|
|
| |||||||
Deferred taxes to be paid in more than 12 months | (635,084 | ) | (428,059 | ) | (438,131 | ) | ||||||
|
|
|
|
|
| |||||||
Deferred taxes to be paid in 12 months | (68,916 | ) | (24,000 | ) | — | |||||||
|
|
|
|
|
| |||||||
Subtotal – Deferred tax liabilities | (704,000 | ) | (452,059 | ) | (438,131 | ) | ||||||
|
|
|
|
|
| |||||||
Total Net Assets by deferred Tax | 598,467 | 1,127,172 | 970,707 | |||||||||
|
|
|
|
|
| |||||||
Deferred tax assets / (liabilities) are summarized as follows:
| Balance at 12/31/2017 | (Charge)/ Credit to Income | Balance at 12/31/2018 | ||||||||||
Intangible assets | (48,236 | ) | (201,845 | ) | (250,081 | ) | ||||||
Retirement plans | 265,000 | (207,491 | ) | 57,509 | ||||||||
Loan Loss Reserves | 852,640 | 193,638 | 1,046,278 | |||||||||
Property, plant and equipment | (177,910 | ) | (158,537 | ) | (336,447 | ) | ||||||
Foreign Currency | (79,306 | ) | (2,631 | ) | (81,937 | ) | ||||||
Loss Carry Forward | — | 160,618 | 160,618 | |||||||||
Others | 314,984 | (312,457 | ) | 2,527 | ||||||||
|
|
|
|
|
| |||||||
Total | 1,127,172 | (528,705 | ) | 598,467 | ||||||||
|
|
|
|
|
| |||||||
| Balance at 01/01/2017 | (Charge)/ Credit to Income | Balance at 12/31/2017 | ||||||||||
Intangible assets | (114,802 | ) | 66,566 | (48,236 | ) | |||||||
Retirement plans | 187,036 | 77,964 | 265,000 | |||||||||
Loan Loss Reserves | 867,277 | (14,637 | ) | 852,640 | ||||||||
Property, plant and equipment | (209,375 | ) | 31,465 | (177,910 | ) | |||||||
Foreign Currency | (13,241 | ) | (66,065 | ) | (79,306 | ) | ||||||
Others | 253,812 | 61,172 | 314,984 | |||||||||
|
|
|
|
|
| |||||||
Total | 970,707 | 156,465 | 1,127,172 | |||||||||
|
|
|
|
|
| |||||||
| 6. | FINANCIAL INSTRUMENTS |
Financial instruments held by the Group as of December 31, 2018 and 2017, and January 1, 2017:
Financial Instruments as of 12/31/2018 | Fair value - PL | Amortized Cost | Fair value - OCI | Total | ||||||||||||
Assets | ||||||||||||||||
- Debt securities at fair value through profit or loss | 15,112,115 | — | — | 15,112,115 | ||||||||||||
- Derivatives | 15,924 | — | — | 15,924 | ||||||||||||
- Other financial assets | 15,069 | 1,682,985 | — | 1,698,054 | ||||||||||||
- Loans and other financing | — | 77,208,464 | — | 77,208,464 | ||||||||||||
- Other debt securities | — | 4,198,548 | 112,547 | 4,311,095 | ||||||||||||
- Financial assets in guarantee | 1,882,600 | 124,617 | — | 2,007,217 | ||||||||||||
- Investments in Equity Instruments | 1,603 | — | 8,801 | 10,404 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | 17,027,311 | 83,214,614 | 121,348 | 100,363,273 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
Financial Instruments as of 12/31/2018 | Fair value - PL | Amortized Cost | Fair value - OCI | Total | ||||||||||||
Liabilities | ||||||||||||||||
- Deposits | — | 94,906,014 | — | 94,906,014 | ||||||||||||
- Liabilities at fair value through profit or loss | 268,086 | — | — | 268,086 | ||||||||||||
- Derivates | 94,222 | — | — | 94,222 | ||||||||||||
- Other financial liabilities | 2,907,704 | 1,359,535 | — | 4,267,239 | ||||||||||||
- Financing received from the Argentine Central Bank and other financial institutions | 14,966 | 8,017,871 | — | 8,032,837 | ||||||||||||
- Unsubordinated Negotiable obligations | — | 9,307,171 | — | 9,307,171 | ||||||||||||
- Subordinated Negotiable Obligations | — | 1,383,817 | — | 1,383,817 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | 3,284,978 | 114,974,408 | — | 118,259,386 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Instruments as of 12/31/2017 | Fair value - PL | Amortized Cost | Fair value - OCI | Total | ||||||||||||
Assets | ||||||||||||||||
- Debt securities at fair value through profit or loss | 16,837,925 | — | — | 16,837,925 | ||||||||||||
- Derivatives | 39,740 | — | — | 39,740 | ||||||||||||
- Repo Transactions | — | 4,945,864 | — | 4,945,864 | ||||||||||||
- Other financial assets | 1,393,368 | 995,427 | — | 2,388,795 | ||||||||||||
- Loans and other financing | — | 87,108,670 | — | 87,108,670 | ||||||||||||
- Other debt securities | — | 529,844 | 47 | 529,891 | ||||||||||||
- Financial assets in guarantee | 1,745,496 | 175,723 | — | 1,921,219 | ||||||||||||
- Investments in Equity Instruments | 57,191 | — | 11,690 | 68,881 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | 20,073,720 | 93,755,528 | 11,737 | 113,840,985 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
- Deposits | — | 83,284,983 | — | 83,284,983 | ||||||||||||
- Other financial liabilities | 3,946,320 | 1,828,235 | — | 5,774,555 | ||||||||||||
- Financing received from the Argentine Central Bank and other financial institutions | 73,978 | 5,131,788 | — | 5,205,766 | ||||||||||||
- Unsubordinated Negotiable obligations | — | 12,681,237 | — | 12,681,237 | ||||||||||||
- Subordinated negotiable obligations | — | 1,012,661 | — | 1,012,661 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | 4,020,298 | 103,938,904 | — | 107,959,202 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Instruments as of 01/01/2017 | Fair value - PL | Amortized Cost | Fair value - OCI | Total | ||||||||||||
Assets | ||||||||||||||||
- Debt securities at fair value through profit or loss | 782,547 | — | — | 782,547 | ||||||||||||
- Derivatives | 52,152 | — | — | 52,152 | ||||||||||||
- Other financial assets | 652,545 | 2,805,698 | — | 3,458,243 | ||||||||||||
- Loans and other financing | — | 69,996,876 | — | 69,996,876 | ||||||||||||
- Other debt securities | — | 1,334,886 | 2,467,861 | 3,802,747 | ||||||||||||
- Financial assets in guarantee | 2,508,935 | 190,457 | — | 2,699,392 | ||||||||||||
- Investments in Equity Instruments | 4,846 | — | 1,351 | 6,197 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | 4,001,025 | 74,327,917 | 2,469,212 | 80,798,154 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
Financial Instruments as of 01/01/2017 | Fair value - PL | Amortized Cost | Fair value - OCI | Total | ||||||||||||
Liabilities | ||||||||||||||||
- Deposits | — | 66,075,709 | — | 66,075,709 | ||||||||||||
- Repo Transactions | — | 1,088,747 | — | 1,088,747 | ||||||||||||
- Other financial liabilities | 4,420,199 | 1,164,464 | — | 5,584,663 | ||||||||||||
- Financing received from the Argentine Central Bank and other financial institutions | 9,150 | 3,152,177 | — | 3,161,327 | ||||||||||||
- Unsubordinated Negotiable obligations | — | 3,775,525 | — | 3,775,525 | ||||||||||||
- Subordinated negotiable obligations | — | 2,540,433 | — | 2,540,433 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | 4,429,349 | 77,797,055 | — | 82,264,404 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 7. | FAIR VALUES |
| 7.1 | 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 quote 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 asover-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 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.
The Group’s financial instruments measured at fair value as of December 31, 2018 and 2017 are detailed below:
Financial Instruments as of 12/31/2018 | FV level 1 | FV level 2 | FV level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
- Debt securities at fair value through profit or loss | 3,745,222 | 11,366,893 | — | 15,112,115 | ||||||||||||
- Derivatives | 15,924 | — | — | 15,924 | ||||||||||||
- Other financial assets | 15,069 | — | — | 15,069 | ||||||||||||
- Other debt securities | 112,547 | — | — | 112,547 | ||||||||||||
- Financial assets in guarantee | 1,882,600 | — | — | 1,882,600 | ||||||||||||
- Investments in Equity Instruments | 1,603 | 8,801 | — | 10,404 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | 5,772,965 | 11,375,694 | — | 17,148,659 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
- Liabilities at fair value through profit or loss | 268,086 | — | — | 268,086 | ||||||||||||
- Derivative instruments | — | 94,222 | — | 94,222 | ||||||||||||
- Other financial liabilities | 2,907,704 | — | — | 2,907,704 | ||||||||||||
- Financing received from the Argentine Central Bank and other financial institutions | 14,966 | — | — | 14,966 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | 3,190,756 | 94,222 | — | 3,284,978 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
Financial Instruments as of 12/31/2017 | FV level 1 | FV level 2 | FV level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
- Debt securities at fair value through profit or loss | 16,110,519 | 727,406 | — | 16,837,925 | ||||||||||||
- Derivatives | 39,740 | — | — | 39,740 | ||||||||||||
- Other financial assets | 1,393,368 | — | — | 1,393,368 | ||||||||||||
- Other debt securities | 47 | — | — | 47 | ||||||||||||
- Financial assets in guarantee | 1,745,496 | — | — | 1,745,496 | ||||||||||||
- Investments in Equity Instruments | 57,191 | 11,690 | — | 68,881 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | 19,346,361 | 739,096 | — | 20,085,457 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
- Other financial liabilities | 3,946,320 | — | — | 3,946,320 | ||||||||||||
- Financing received from the Argentine Central Bank and other financial institutions | 73,978 | — | — | 73,978 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | 4,020,298 | — | — | 4,020,298 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Instruments as of 01/01/2017 | FV level 1 | FV level 2 | FV level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
- Debt securities at fair value through profit or loss | 782,547 | — | — | 782,547 | ||||||||||||
- Derivatives | 52,152 | — | — | 52,152 | ||||||||||||
- Other financial assets | 652,545 | — | — | 652,545 | ||||||||||||
- Other debt securities | 2,467,861 | — | — | 2,467,861 | ||||||||||||
- Financial assets in guarantee | 2,508,935 | — | — | 2,508,935 | ||||||||||||
- Investments in Equity Instruments | 4,846 | 1,351 | — | 6,197 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | 6,468,886 | 1,351 | — | 6,470,237 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
- Other financial liabilities | 4,420,199 | — | — | 4,420,199 | ||||||||||||
- Financing received from the Argentine Central Bank and other financial institutions | 9,150 | — | — | 9,150 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | 4,429,349 | — | — | 4,429,349 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Valuation Techniques
Valuation techniques to determine fair values Level 2 include the following:
Market or quoted prices for similar instruments.
The estimated present value of instruments.
The valuation technique to determine the 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).
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.
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
| 7.2 | 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 the 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 issued, fair value was determined based on market prices.
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, 2018 and 2017 and January 1, 2017, respectively:
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 | 33,687,553 | 33,687,553 | 33,687,553 | — | — | |||||||||||||||
- Other financial assets | 1,682,985 | 1,682,985 | 1,682,985 | — | — | |||||||||||||||
- Loans and other financing | 77,208,464 | 90,052,089 | — | — | 90,052,089 | |||||||||||||||
- Other Debt Securities | 4,198,548 | 4,203,711 | 4,203,711 | — | — | |||||||||||||||
- Financial assets in guarantee | 124,617 | 124,617 | 124,617 | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 116,902,167 | 129,750,955 | 39,698,866 | — | 90,052,089 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial Liabilities | ||||||||||||||||||||
- Deposits | 94,906,014 | 94,667,583 | — | — | 94,667,583 | |||||||||||||||
- Other financial liabilities | 1,359,535 | 1,359,535 | 1,359,535 | — | — | |||||||||||||||
- Financing received from the BCRA and other financial institutions | 8,017,871 | 6,587,763 | 34,489 | — | 6,553,274 | |||||||||||||||
- Unsubordinated Negotiable obligations | 9,307,171 | 7,952,052 | 7,952,052 | — | — | |||||||||||||||
- Subordinated Negotiable Obligations | 1,383,817 | 1,371,488 | 1,371,488 | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 114,974,408 | 111.938.421 | 10,717,564 | — | 101,220,857 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other Financial Instruments as of 12/31/2017 | Book value | Fair value | FV Level 1 | FV Level 2 | FV Level 3 | |||||||||||||||
Financial Assets | ||||||||||||||||||||
- Cash and due from Banks | 16,384,924 | 16,384,924 | 16,384,924 | — | — | |||||||||||||||
- Repo transactions | 4,945,864 | 4,945,864 | 4,945,864 | — | — | |||||||||||||||
- Other financial assets | 995,427 | 995,594 | 995,594 | — | — | |||||||||||||||
- Loans and other financing | 87,108,670 | 92,829,727 | — | — | 92,829,727 | |||||||||||||||
- Other Debt Securities | 529,844 | 529,887 | 529,887 | — | — | |||||||||||||||
- Financial assets delivered as guarantee | 175,723 | 175,738 | 175,738 | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 105,194,588 | 110,915,870 | 18,086,143 | — | 92,829,727 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Financial Liabilities | ||||||||||||||||||||
- Deposits | 83,284,983 | 83,235,616 | — | — | 83,235,616 | |||||||||||||||
- Other financial liabilities | 1,828,235 | 1,828,235 | 1,828,235 | — | — | |||||||||||||||
- Financing received from the BCRA and other financial institutions | 5,131,788 | 5,131,788 | 5,131,788 | — | — | |||||||||||||||
- Unsubordinated Negotiable obligations | 12,681,237 | 12,681,237 | 12,681,237 | — | — | |||||||||||||||
- Subordinated Negotiable Obligations | 1,012,661 | 1,012,661 | 1,012,661 | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 103,938,904 | 103,889,537 | 20,653,921 | — | 83,235,616 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other Financial Instruments as of 01/01/2017 | Book value | Fair value | FV Level 1 | FV Level 2 | FV Level 3 | |||||||||||||||
Financial Assets | ||||||||||||||||||||
- Cash and due from Banks | 14,795,794 | 14,760,035 | 14,760,035 | — | — | |||||||||||||||
- Other financial assets | 2,805,698 | 4,332,908 | 4,332,908 | — | — | |||||||||||||||
- Loans and other financing | 69,996,876 | 72,119,588 | — | — | 72,119,588 | |||||||||||||||
- Other Debt Securities | 1,334,886 | 1,364,494 | 1,329,557 | — | 34,937 | |||||||||||||||
- Financial assets in guarantee | 190,457 | 190,457 | 190,457 | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 89,123,711 | 98,383,961 | 26,229,436 | — | 72,154,525 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
Other Financial Instruments as of 01/01/2017 | Book value | Fair value | FV Level 1 | FV Level 2 | FV Level 3 | |||||||||||||||
Financial Liabilities | ||||||||||||||||||||
- Deposits | 66,075,709 | 66,075,709 | — | — | 66,075,709 | |||||||||||||||
- Repo transactions | 1,088,747 | 1,088,747 | 1,088,747 | — | — | |||||||||||||||
- Other financial liabilities | 1,164,464 | 1,164,464 | 1,164,464 | — | — | |||||||||||||||
- Financing received from the BCRA and other financial institutions | 3,152,177 | 3,152,177 | 434,807 | — | 2,717,370 | |||||||||||||||
- Unsubordinated Negotiable obligations | 3,775,525 | 3,793,025 | 3,793,025 | — | — | |||||||||||||||
- Subordinated Negotiable Obligations | 2,540,433 | 2,583,806 | 2,583,806 | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 76,708,308 | 76,769,181 | 7,976,102 | — | 68,793,079 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 7.3 | Fair Value of Equity instruments |
The following are the equity instruments measured at Fair Value with changes in Other Comprehensive Income as of December 31, 2018 and 2017:
| FV at 12/31/2017 | Income through OCI | Exposure to changes in Purchasing Power | FV at 12/31/2018 | |||||||||||||
MAE | 6,806 | — | (2,196 | ) | 4,610 | |||||||||||
SEDESA | 2,383 | — | (769 | ) | 1,614 | |||||||||||
COELSA | 1,357 | — | (438 | ) | 919 | |||||||||||
PROVINCANJE | 400 | — | (129 | ) | 271 | |||||||||||
CUYO AVAL SGR | 328 | 799 | (228 | ) | 899 | |||||||||||
ARGENCONTROL | 185 | — | (60 | ) | 125 | |||||||||||
LOS GROBO SGR | 100 | 166 | (57 | ) | 209 | |||||||||||
IEBA SA | 90 | — | (29 | ) | 61 | |||||||||||
Others | 41 | 77 | (25 | ) | 93 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 11,690 | 1,042 | (3,931 | ) | 8,801 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| FV at 01/01/2017 | Income through OCI | Exposure to changes in Purchasing Power | FV at 12/31/2017 | |||||||||||||
MAE | 112 | 7,681 | (987 | ) | 6,806 | |||||||||||
SEDESA | 72 | 2,659 | (348 | ) | 2,383 | |||||||||||
COELSA | 99 | 1,460 | (202 | ) | 1,357 | |||||||||||
PROVINCANJE | 927 | (391 | ) | (136 | ) | 400 | ||||||||||
CUYO AVAL SGR | 18 | 357 | (47 | ) | 328 | |||||||||||
ARGENCONTROL | 46 | 168 | (29 | ) | 185 | |||||||||||
LOS GROBO SGR | — | 115 | (15 | ) | 100 | |||||||||||
IEBA SA | — | 103 | (13 | ) | 90 | |||||||||||
Others | 77 | 24 | (60 | ) | 41 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 1,351 | 12,176 | (1,837 | ) | 11,690 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 8. | FINANCE LEASES |
The following is a breakdown of the maturities of the above long-term loans for eachGroup’s leases receivables acting as lessor and of the fiscalcurrent values as of December 31, 2018 and 2017:
Receivable royalties | 12/31/2018 | 12/31/2017 | ||||||
Up to 1 year | 1,708,103 | 1,979,647 | ||||||
More than a year up to two years | 1,321,057 | 1,622,947 | ||||||
From two to three years | 745,846 | 1,026,313 | ||||||
From three to five years | 442,841 | 622,918 | ||||||
More than five years | 9,396 | 8,776 | ||||||
|
|
|
| |||||
Total | 4,227,243 | 5,260,601 | ||||||
|
|
|
| |||||
Unearned financial income | (881,198 | ) | (1,610,376 | ) | ||||
|
|
|
| |||||
Net investment in the lease | 3,346,045 | 3,650,225 | ||||||
|
|
|
| |||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years 2019 through 2021ended December 31, 2018 and thereafter2017
(Expressed in thousands of pesos)
The balance of allowance for loan losses related to finance leases amounts to 63,140 and 52,579 as of December 31, 2018 and 2017.
| 9. | 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, 2018 and 2017:
| 12/31/2018 | 12/31/2017 | |||||||
Securitized Personal Loans | ||||||||
Asset | 770,104 | 1,986,604 | ||||||
Liabilities | 537,697 | 1,329,614 | ||||||
Transfers of receivables with recourse | ||||||||
Asset | 141,243 | 842,765 | ||||||
Liabilities | 74,073 | 999,180 | ||||||
| (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.
| 10. | 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” atyear-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, 2018 and 2017 and January 1, 2017 are detailed below:
Repo Transactions:
| Nominal Value | Book Value | |||||||
December 31, 2018 | — | — | ||||||
December 31, 2017 | 4,100,000,000 | 4,945,864 | ||||||
January 1, 2017 | — | — | ||||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
Reverse Repo Transactions:
| Nominal Value | Book Value | |||||||
December 31, 2018 | — | — | ||||||
December 31, 2017 | — | — | ||||||
January 1, 2017 | 600,000,000 | 1,088,747 | ||||||
| 11. | 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, 2018, 2017 and January 1, 2017, the following amounts were recorded for operations related to derivatives:
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||
Amounts receivable for spot and forward transactions pending settlement | 15,924 | 39,740 | 52,152 | |||||||||
Amounts payable for spot and forward transactions pending settlement | (94,222 | ) | — | — | ||||||||
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| (78,298 | ) | 39,740 | 52,152 | |||||||||
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The following table shows, the notional value of options and outstanding forward and futures contracts as of December 31, 2018, 2017 and January 1, 2017:
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||
Forward sales of foreign exchange without delivery of underlying assets | 149,678 | 4,478,941 | 523,749 | |||||||||
Forward sales of gold without delivery of underlying assets | — | 87,309 | 12,137 | |||||||||
Forward purchases of foreign exchange without delivery of underlying assets | 1,014,339 | 839,055 | 825,690 | |||||||||
The expenses generated by derivative financial instruments during the years ended December 31, 2018 and 2017 amounted to 1,693,849 and 108,225 respectively.
| 12. | 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.
| 12/31/2018 | 12/31/2017 | |||||||
Income attributable to shareholders of the group | (3,028,003 | ) | (754,370 | ) | ||||
Weighted average of ordinary shares (thousands) | 456,722 | 392,832 | ||||||
Income per share | (6.63 | ) | (1.92 | ) | ||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
| 13. | POST EMPLOYMENT BENEFITS |
Special termination arrangements are principally postemployment benefits that a group of eligible employees receive during the period between their effective termination date and their retirement age, when they voluntarily accepts an irrevocable termination arrangement.
As of December 31, 2018 and 2017 and January 1, 2017, post-employment benefits amounted to Ps. 396,082, Ps. 666,627 and Ps. 344,883, respectively. The amounts charged to profit or loss regarding these benefits as of December 31, 2018 and 2017 were Ps. 81,613 and Ps. 415,111, respectively.
The evolution during each period is detailed below:
| 12/31/2018 | 12/31/2017 | |||||||
Balances at the beginning | 666,627 | 344,883 | ||||||
Charged to profit or loss | 81,613 | 415,111 | ||||||
Benefits paid to participants | (352,158 | ) | (93,367 | ) | ||||
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| |||||
Balances at closing | 396,082 | 666,627 | ||||||
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| |||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
| 14. | PROPERTY, PLANT AND EQUIPMENT |
Changes in property, plant and equipment for financial years ended on December 31, 2018, 2017 and January 1, 2017 are as follows:
| Gross carrying amount | Depreciation | Net carrying amount 12/31/2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||||||||
Cost model | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Furniture and facilities | 605,177 | 10 | — | 45,061 | 5,939 | (468 | ) | 655,709 | (406,185 | ) | — | (4,188 | ) | (37,956 | ) | (2,619 | ) | (450,948 | ) | 204,761 | ||||||||||||||||||||||||||||||||||||||
Machinery and equipment | 1,902,046 | 5 | — | 119,486 | 12,856 | (16,480 | ) | 2,017,908 | (1,449,192 | ) | 13,185 | (11,366 | ) | (163,851 | ) | (11,302 | ) | (1,622,526 | ) | 395,382 | ||||||||||||||||||||||||||||||||||||||
Vehicles | 93,129 | 5 | — | 35,468 | 1,800 | (17,428 | ) | 112,969 | (39,779 | ) | 10,207 | (257 | ) | (7,856 | ) | (541 | ) | (38,226 | ) | 74,743 | ||||||||||||||||||||||||||||||||||||||
Construction in progress | 428,017 | — | — | 122,642 | — | (194,412 | ) | 356,247 | — | — | — | — | — | — | 356,247 | |||||||||||||||||||||||||||||||||||||||||||
Revaluation model | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Land and Buildings | 1,027,834 | 50 | 308,585 | — | — | (124,957 | ) | 1,211,462 | (100,496 | ) | 41,635 | — | — | — | (58,861 | ) | 1,152,601 | |||||||||||||||||||||||||||||||||||||||||
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Total | 4,056,203 | 308,585 | 322,657 | 20,595 | (353,745 | ) | 4,354,295 | (1,995,652 | ) | 65,027 | (15,811 | ) | (209,663 | ) | (14,462 | ) | (2,170,561 | ) | 2,183,734 | |||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Gross carrying amount | Depreciation | Net carrying | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Item | At the | 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 | 12/31/2017 | 01/01/2017 | |||||||||||||||||||||||||||||||||||||||||||
Cost model | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Furniture and facilities | 557,454 | 10 | — | 47,723 | — | — | 605,177 | (344,211 | ) | — | — | (53,451 | ) | (8,523 | ) | (406,185 | ) | 198,992 | 213,243 | |||||||||||||||||||||||||||||||||||||||
Machinery and equipment | 1,554,656 | 5 | — | 347,390 | — | — | 1,902,046 | (1,143,368 | ) | — | — | (270,075 | ) | (35,749 | ) | (1,449,192 | ) | 452,854 | 411,289 | |||||||||||||||||||||||||||||||||||||||
Vehicles | 90,773 | 5 | — | 19,027 | — | (16,671 | ) | 93,129 | (35,917 | ) | — | — | (3,331 | ) | (531 | ) | (39,779 | ) | 53,350 | 54,856 | ||||||||||||||||||||||||||||||||||||||
Furniture under financial lease | 2,170 | 5 | — | — | — | (2,170 | ) | — | (1,558 | ) | 1,785 | — | (179 | ) | (48 | ) | — | — | 611 | |||||||||||||||||||||||||||||||||||||||
Construction in progress | 41,507 | — | — | 392,550 | — | (6,040 | ) | 428,017 | — | — | — | — | — | — | 428,017 | 41,507 | ||||||||||||||||||||||||||||||||||||||||||
Revaluation model | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Land and Buildings | 979,267 | 50 | 53,783 | — | — | (5,216 | ) | 1,027,834 | (70,155 | ) | — | — | (30,341 | ) | — | (100,496 | ) | 927,338 | 909,112 | |||||||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||
Total | 3,225,827 | 53,783 | 806,690 | — | (30,097 | ) | 4,056,203 | (1,595,209 | ) | 1,785 | — | (357,377 | ) | (44,851 | ) | (1,995,652 | ) | 2,060,551 | 1,630,618 | |||||||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
| 14.1 | Revaluation of Property, Plant and Equipment |
The Group’s properties, plant and equipment measured at revaluation model were valued at each reporting date. 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, 2018.
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 | 12/31/2018 | 1,152,601 | 742,885 | 409,716 | ||||||||||||
Land and buildings | 12/31/2017 | 927,338 | 669,529 | 257,809 | ||||||||||||
For all Land and Buildings with a total valuation of 1,152 million as of December 31, 2018, 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, 2018 would have reduced the value of the Land and Buildings on 55.1 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.
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
| 15. | INVESTMENT PROPERTIES |
The movements in investment properties for the years ended December 31, 2018 and 2017 were as follows:
Contractual long-term Liabilities |
|
|
| |
2020 |
| Ps. | 116,323 |
|
2021 |
| 104,207 |
| |
Thereafter |
| 172,582 |
| |
|
| Ps. | 393,112 |
|
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 | 287,072 | 50 | 143,928 | 10,468 | (28,111 | ) | 413,357 | |||||||||||||||||
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| |||||||||||||
TOTAL INVESTMENT PROPERTIES | 287,072 | 143,928 | 10,468 | (28,111 | ) | 413,357 | ||||||||||||||||||
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Item | At the Beginning of the year | Total useful life | P/L for changes in the FV | Additions | Disposals | As of 12/31/2017 | ||||||||||||||||||
Measurement at fair value |
| |||||||||||||||||||||||
Rented properties | 887,242 | 50 | (17,976 | ) | 14,294 | (596,488 | ) | 287,072 | ||||||||||||||||
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| |||||||||||||
TOTAL INVESTMENT PROPERTIES | 887,242 | (17,976 | ) | 14,294 | (596,488 | ) | 287,072 | |||||||||||||||||
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Investment properties are measured at their fair value determined by professionally qualified valuers.
For all Investment Propertiest with a total valuation of 413 million as of December 31, 2018, 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, 2018 would have reduced the value of the Investment Properties by 20.7 million, which would impact, net of its tax effect on the “Other Operating Income” item in the Income statement.
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018, 2017 and January 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
| 16. | INTANGIBLE ASSETS |
15.Other Liabilities fromIntangible assets of the Group for fiscal years ended on December 31, 2018, 2017 and January 1, 2017 are as follows:
Item | Gross carrying amount | Depreciation | Net carrying amount at 12/31/2018 | |||||||||||||||||||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||||||||||||
Measurement at cost | ||||||||||||||||||||||||||||||||||||||||||||
Goodwill | 165,975 | 1,575,508 | — | — | 1,741,483 | — | — | — | — | — | 1,741,483 | |||||||||||||||||||||||||||||||||
Brands | — | 95,498 | — | — | 95,498 | — | — | — | — | — | 95,498 | |||||||||||||||||||||||||||||||||
Other intangible assets | 1,120,315 | 845,603 | 1,638 | (519,191 | ) | 1,448,365 | (826,871 | ) | 402,261 | (1,393 | ) | (148,506 | ) | (574,509 | ) | 873,856 | ||||||||||||||||||||||||||||
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TOTAL | 1,286,290 | 2,516,609 | 1,638 | (519,191 | ) | 3,285,346 | (826,871 | ) | 402,261 | (1,393 | ) | (148,506 | ) | (574,509 | ) | 2,710,837 | ||||||||||||||||||||||||||||
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Item | Gross carrying amount | Depreciation | Net carrying amount at | |||||||||||||||||||||||||||||||||||||||||||||
| 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 | 12/31/2017 | 01/01/2017 | |||||||||||||||||||||||||||||||||||||
Measurement at cost | ||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill | 165,975 | — | — | — | 165,975 | — | — | — | — | — | 165,975 | 165,975 | ||||||||||||||||||||||||||||||||||||
Other intangible assets | 2,337,137 | 154,698 | — | (1,371,520 | ) | 1,120,315 | (1,863,407 | ) | 1,283,332 | — | (246,796 | ) | (826,871 | ) | 293,445 | 473,730 | ||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
TOTAL | 2,503,112 | 154,698 | — | (1,371,520 | ) | 1,286,290 | (1,863,407 | ) | 1,283,332 | — | (246,796 | ) | (826,871 | ) | 459,420 | 639,705 | ||||||||||||||||||||||||||||||||
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GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Transactions - UnsubordinatedStatements
As of December 31, 2018, 2017 and Subordinated Negotiable ObligationsJanuary 1, 2017
and for the years ended December 31, 2018 and 2017
(Expressed in thousands of pesos)
| 16.1 | Goodwill impairment |
The goodwills are assigned to the Group’s cash generating units on the basis of the operating segments.
| 12/31/2018 | 12/31/2017 | |||||||
Supervielle Seguros S.A. | 4,625 | 4,625 | ||||||
Cordial Compañía Financiera S.A. | 115,436 | 115,436 | ||||||
Banco Regional de Cuyo S.A. | 41,226 | 41,226 | ||||||
InvertirOnline S.A.U. / InvertirOnline.Com Argentina S.A.U. | 881,467 | — | ||||||
Micro Lending S.A.U. | 694,041 | — | ||||||
Others | 4,688 | 4,688 | ||||||
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| |||||
TOTAL | 1,741,483 | 165,975 | ||||||
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| |||||
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.
Goodwill have been tested annually for impairment. No 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.
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018 presented in comparative format
(Expressed in thousands of pesos)
17. COMPOSITION OF THE MAIN ITEMS OF THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION AND CONSOLIDATED INCOME STATEMENT
| 17.1 | Debt securities at fair value through profit or loss |
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||
Government securities | 3,732,263 | 2,297,021 | 356,753 | |||||||||
Corporate securities | 74,528 | 77,849 | — | |||||||||
Securities issued by the BCRA | 11,305,324 | 14,463,055 | 425,794 | |||||||||
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| |||||||
| 15,112,115 | 16,837,925 | 782,547 | ||||||||||
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| |||||||
| 17.2 | Other financial assets |
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||
Participation Certificates in Financial Trusts | 10,947 | 5,308 | — | |||||||||
Investments in Mutual Funds | 655,562 | 1,005,267 | 2,184,598 | |||||||||
Other investments | 7,938 | — | — | |||||||||
Receivable from spot sales pending settlement | 4,122 | 33,470 | 8,743 | |||||||||
Several debtors | 646,755 | 874,912 | 1,049,672 | |||||||||
Miscellaneous debtors for credit card operations | 372,730 | 469,838 | 215,230 | |||||||||
|
|
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|
|
| |||||||
| 1,698,054 | 2,388,795 | 3,458,243 | ||||||||||
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| |||||||
| 17.3 | Other debt securities |
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||
Negotiable obligations | 2,560 | 5,368 | 67,259 | |||||||||
Debt securities from Financial trusts | 1,211 | 86,810 | 65,604 | |||||||||
Government securities | 4,307,292 | 437,666 | 3,669,884 | |||||||||
Others | 32 | 47 | — | |||||||||
|
|
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|
|
| |||||||
| 4,311,095 | 529,891 | 3,802,747 | ||||||||||
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| |||||||
| 17.4 | Financial assets in guarantee |
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||
Securities pledged as collateral for repo transactions | — | — | 1,087,596 | |||||||||
Special guarantees accounts in the Argentine Central Bank | 1,357,904 | 1,262,755 | 986,414 | |||||||||
Deposits in guarantee | 649,313 | 658,464 | 625,382 | |||||||||
|
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| |||||||
| 2,007,217 | 1,921,219 | 2,699,392 | ||||||||||
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| |||||||
| 17.5 | Inventories |
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||
Electronics | 60,084 | 127,793 | 31,050 | |||||||||
Home and Health care | 10,774 | 28,385 | 25,113 | |||||||||
Tools and Workshop Equipment | 237 | 700 | 361 | |||||||||
Obsolescence Reserve | (1,177 | ) | (572 | ) | (695 | ) | ||||||
|
|
|
|
|
| |||||||
| 69,918 | 156,306 | 55,829 | ||||||||||
|
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| |||||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018 presented in comparative format
(Expressed in thousands of pesos)
| 17.6 | Investments in equity instruments |
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||
At fair value through profit or loss | 1,603 | 57,191 | 4,846 | |||||||||
At fair value through Other Comprehensive Income | 8,801 | 11,690 | 1,351 | |||||||||
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| |||||||
| 10,404 | 68,881 | 6,197 | ||||||||||
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| |||||||
| 17.7 | Othernon-financial assets |
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||
Other Miscellaneous assets | 721,012 | 542,891 | 42,058 | |||||||||
Loans to employees | 131,581 | 125,992 | 279,172 | |||||||||
Payments in advance | 31,572 | 29,051 | 507 | |||||||||
Works of art and collector’s pieces | 4,483 | 5,520 | 6,366 | |||||||||
|
|
|
|
|
| |||||||
| 888,648 | 703,454 | 328,103 | ||||||||||
|
|
|
|
|
| |||||||
| 17.8 | Deposits |
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||
Non-financial sector | 11,105,477 | 9,112,185 | 4,767,148 | |||||||||
Financial sector | 25,236 | 23,183 | 20,902 | |||||||||
Current accounts | 6,687,156 | 8,385,982 | 8,025,250 | |||||||||
Savings accounts | 46,859,639 | 43,672,080 | 28,971,875 | |||||||||
Time deposits and investments accounts | 27,184,300 | 19,592,401 | 22,567,275 | |||||||||
Others | 3,044,206 | 2,499,152 | 1,723,259 | |||||||||
|
|
|
|
|
| |||||||
| 94,906,014 | 83,284,983 | 66,075,709 | ||||||||||
|
|
|
|
|
| |||||||
| 17.9 | Liabilities at fair value through profit or loss |
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||
Liabilities for transactions in local currency | 115,200 | — | — | |||||||||
Liabilities for transactions in foreign currency | 152,886 | — | — | |||||||||
| 268,086 | — | — | ||||||||||
| 17.10 | Other financial liabilities |
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||
Amounts payable for spot transactions pending settlement | 552,612 | 37,317 | 2,067 | |||||||||
Collections and other operations on behalf of third parties | 3,216,778 | 3,686,085 | 4,220,551 | |||||||||
Fees accrued to pay | 36,460 | 12,557 | 30,319 | |||||||||
Financial guarantee contracts | 36,572 | 500,892 | 425,867 | |||||||||
Liabilities associated with the transfer of financial assets not derecognized | 385,545 | 1,537,704 | 905,859 | |||||||||
Others | 39,272 | — | — | |||||||||
|
|
|
|
|
| |||||||
| 4,267,239 | 5,774,555 | 5,584,663 | ||||||||||
|
|
|
|
|
| |||||||
| 17.11 | Financing received from the Argentine Central Bank and other financial institutions |
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||
Financing received from local financial institutions | 1,247,264 | 1,094,049 | 1,925,670 | |||||||||
Financing received from international institutions | 6,785,573 | 4,111,717 | 1,235,657 | |||||||||
|
|
|
|
|
| |||||||
| 8,032,837 | 5,205,766 | 3,161,327 | ||||||||||
|
|
|
|
|
| |||||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018 presented in comparative format
(Expressed in thousands of pesos)
| 17.12 | Provisions |
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||
Social Security’s Provision | 82,720 | 109,665 | 107,592 | |||||||||
Tax and Legal Provision | 288 | 480 | 1,771 | |||||||||
Others | 3,907 | 8,212 | 7,868 | |||||||||
|
|
|
|
|
| |||||||
| 86,915 | 118,357 | 117,231 | ||||||||||
|
|
|
|
|
| |||||||
| 17.13 | Othernon-financial liabilities |
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||
Payroll and social securities | 2,274,800 | 2,618,880 | 2,438,384 | |||||||||
Sundry creditors | 1,496,847 | 1,779,547 | 972,917 | |||||||||
Revenue from contracts with customers | 124,407 | 75,584 | 81,240 | |||||||||
Tax payable | 1,138,559 | 860,839 | 954,271 | |||||||||
Social security payment orders pending settlement | 221,797 | 182,398 | 152,491 | |||||||||
Other | 148,588 | 95,806 | 89,891 | |||||||||
|
|
|
|
|
| |||||||
| 5,404,998 | 5,613,054 | 4,689,194 | ||||||||||
|
|
|
|
|
| |||||||
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, 2018, December 31, 2017 and January 1, 2017, the amounts of 124,407, 75,584 and 81,240, 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, 2018:
| Maturity | Total | |||||||||||||||
Item | Up to 12 months | Up to 24 months | More than 24 months | |||||||||||||
Revenue from contracts with customers | 55,124 | 39,968 | 29,315 | 124,407 | ||||||||||||
| 17.14 | Interest Income |
| 12/31/2018 | 12/31/2017 | |||||||
Interest on overdrafts | 3,250,648 | 1,886,213 | ||||||
Interest on promissory notes | 4,077,348 | 2,448,911 | ||||||
Interest on personal loans | 10,928,385 | 10,757,018 | ||||||
Interest on corporate unsecured loans | 3,018,809 | 1,989,510 | ||||||
Interest on credit card loans | 3,412,689 | 3,285,212 | ||||||
Interest on mortgage loans | 1,968,843 | 171,077 | ||||||
Interest on automobile and other secured loan | 492,218 | 49,185 | ||||||
Interest on foreign trade loans | 1,169,104 | 584,527 | ||||||
Interest on financial leases | 921,149 | 742,115 | ||||||
Others | 1,177,049 | 351,063 | ||||||
|
|
|
| |||||
Total | 30,416,242 | 22,264,831 | ||||||
|
|
|
| |||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018 presented in comparative format
(Expressed in thousands of pesos)
| 17.15 | Interest Expenses |
| 12/31/2018 | 12/31/2017 | |||||||
Interest on current accounts deposits | 5,129,252 | 1,017,089 | ||||||
Interest on time deposits | 6,495,145 | 3,761,294 | ||||||
Interest on other financial liabilities | 4,743,168 | 2,899,854 | ||||||
Interest from financing from financial sector | 739,476 | 248,796 | ||||||
Others | 306,319 | 382,632 | ||||||
|
|
|
| |||||
Total | 17,413,360 | 8,309,665 | ||||||
|
|
|
| |||||
| 17.16 | Net income from financial instruments at fair value through profit or loss |
| 12/31/2018 | 12/31/2017 | |||||||
Income from corporate and government securities | 1,828,166 | 815,069 | ||||||
Income from securities issued by the Argentine Central Bank | 6,176,054 | 2,838,803 | ||||||
Derivatives | (1,693,849 | ) | (108,225 | ) | ||||
|
|
|
| |||||
Total | 6,310,371 | 3,545,647 | ||||||
|
|
|
| |||||
| 17.17 | Service fee income |
| 12/31/2018 | 12/31/2017 | |||||||
Commissions from deposits accounts | 2,209,321 | 2,334,411 | ||||||
Commissions from credit and debit cards | 2,185,031 | 2,339,449 | ||||||
Commissions from loans operations | 391,181 | 353,234 | ||||||
Others | 1,142,156 | 1,036,625 | ||||||
|
|
|
| |||||
Total | 5,927,689 | 6,063,719 | ||||||
|
|
|
| |||||
| 17.18 | Service fee expenses |
| 12/31/2018 | 12/31/2017 | |||||||
Commissions paid | 1,364,684 | 1,178,993 | ||||||
Export and foreign currency operations | 53,496 | 41,434 | ||||||
|
|
|
| |||||
Total | 1,418,180 | 1,220,427 | ||||||
|
|
|
| |||||
| 17.19 | Income from insurance activities |
| 12/31/2018 | 12/31/2017 | |||||||
Accrued premiums | 1,471,543 | 1,585,113 | ||||||
Accrued losses | (332,040 | ) | (405,501 | ) | ||||
Production expenses | (290,839 | ) | (280,121 | ) | ||||
|
|
|
| |||||
Total | 848,665 | 899,491 | ||||||
|
|
|
| |||||
| 17.20 | Other operating income |
| 12/31/2018 | 12/31/2017 | |||||||
Loans recovered and allowances reversed | 317,799 | 303,409 | ||||||
Insurance commissions | 397,148 | 353,778 | ||||||
Rental from safety boxes | 239,282 | 232,974 | ||||||
Commissions from trust services | 7,620 | 159,193 | ||||||
Returns of risk funds | 280,487 | 106,944 | ||||||
Commissions from financial guarantees | 470,612 | 29,615 | ||||||
Default interests | 241,457 | 151,193 | ||||||
Others | 519,153 | 500,918 | ||||||
|
|
|
| |||||
Total | 2,473,558 | 1,838,024 | ||||||
|
|
|
| |||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018 presented in comparative format
(Expressed in thousands of pesos)
| 17.21 | Personnel expenses |
| 12/31/2018 | 12/31/2017 | |||||||
Payroll and social securities | 6,506,885 | 6,668,299 | ||||||
Others expenses | 2,271,695 | 2,067,939 | ||||||
|
|
|
| |||||
Total | 8,778,580 | 8,736,238 | ||||||
|
|
|
| |||||
| 17.22 | Administration expenses |
| 12/31/2018 | 12/31/2017 | |||||||
Directors´ and statutory auditors’fees | 163,507 | 129,523 | ||||||
Professional fees | 1,651,977 | 1,098,685 | ||||||
Advertising and publicity | 411,692 | 437,572 | ||||||
Taxes | 1,071,587 | 1,087,403 | ||||||
Maintenance, security and services | 550,507 | 522,748 | ||||||
Rent | 464,861 | 403,858 | ||||||
Others | 1,286,377 | 1,238,742 | ||||||
|
|
|
| |||||
Total | 5,600,508 | 4,918,531 | ||||||
|
|
|
| |||||
| 17.23 | Depreciation and impairment ofnon-financial assets |
| 12/31/2018 | 12/31/2017 | |||||||
Depreciation of property, plant and equipment | 209,663 | 357,377 | ||||||
Depreciation of othernon-financial assets | 73,942 | 17,815 | ||||||
Depreciation of intangible assets | 148,506 | 246,796 | ||||||
Impairment ofother-non financial assets | 278 | — | ||||||
|
|
|
| |||||
Total | 432,389 | 621,988 | ||||||
|
|
|
| |||||
| 17.24 | Other operating expenses |
| 12/31/2018 | 12/31/2017 | |||||||
Promotions related with credit cards | 423,199 | 423,746 | ||||||
Turnover tax | 2,802,684 | 2,248,817 | ||||||
Fair value on initial recognition of loans | 386,313 | 426,963 | ||||||
Contributions made to deposit insurance system | 154,629 | 134,948 | ||||||
Others | 545,115 | 922,350 | ||||||
|
|
|
| |||||
Total | 4,311,940 | 4,156,824 | ||||||
|
|
|
| |||||
| 18. | COMMITMENTS AND CONTINGENCIES |
Capital Commitments
During the financial year ended on December 31, 2018, 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, 2018 and 2017 and January 1, 2017, there were no contingent events entailing remote likelihood and which equity effects have not been recorded.
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018 presented in comparative format
(Expressed in thousands of pesos)
| 19. | 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 1.3.
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 2018 was approximately Ps.165.9 million, 248.4 million and Ps.2.1 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, 2018 and 2017 and January 1, 2017:
| As of December 31, 2018 | As of December 31, 2017 | As of January 1, 2017 | ||||||||||
Aggregate total financial exposure | 783,183 | 633,042 | 518,899 | |||||||||
Number of recipient related parties | 75 | 76 | 78 | |||||||||
(a) Individuals | 68 | 68 | 69 | |||||||||
(b) Companies | 7 | 8 | 9 | |||||||||
Average total financial exposure | 13,897 | 10,200 | 9,056 | |||||||||
Single largest exposure | 735,463 | 496,252 | 150,800 | |||||||||
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, 2018 and December 31, 2017 amounts to the 35,86% and 69,60%, respectively.
| 20. | MUTUAL FUNDS |
As of December 31, 2018 and 2017, Banco Supervielle S.A. is the depository of the Mutual Funds managed by Supervielle Asset Management S.A.
| Portfolio | Net Worth | Number of Units | ||||||||||||||||||||||
Mutual Fund | 12/31/2018 | 12/31/2017 | 12/31/2018 | 12/31/2017 | 12/31/2018 | 12/31/2017 | ||||||||||||||||||
Premier Renta C.P. Pesos | 5,383,139 | 4,161,212 | 5,373,434 | 2,814,953 | 1,475,029,312 | 310,154,313 | ||||||||||||||||||
Premier Renta Plus en Pesos | 372,537 | 5,181,498 | 360,626 | 3,491,099 | 49,671,811 | 388,251,454 | ||||||||||||||||||
Premier Renta Fija Ahorro | 3,351,833 | 12,143,284 | 3,275,490 | 8,071,548 | 136,640,472 | 304,239,464 | ||||||||||||||||||
Premier Renta Fija Crecimiento | 43,644 | 491,381 | 43,322 | 328,987 | 4,369,322 | 23,616,268 | ||||||||||||||||||
Premier Renta Variable | 159,411 | 314,984 | 146,952 | 208,183 | 8,130,311 | 8,180,868 | ||||||||||||||||||
Premier FCI Abierto Pymes | 410,434 | 801,872 | 409,705 | 542,038 | 99,122,237 | 114,190,778 | ||||||||||||||||||
Premier Commodities | 5,793 | 15,023 | 5,155 | 9,942 | 1,599,150 | 2,217,205 | ||||||||||||||||||
Premier Capital | 180,572 | 677,451 | 180,362 | 454,807 | 67,052,867 | 129,624,410 | ||||||||||||||||||
Premier Inversión | 179,267 | 1,315,348 | 179,023 | 889,141 | 888,100,323 | 3,590,757,014 | ||||||||||||||||||
Premier Balanceado | 612,858 | 696,010 | 612,374 | 470,440 | 359,887,367 | 238,318,110 | ||||||||||||||||||
Premier Renta Mixta | 58,586 | — | 58,557 | — | 44,863,120 | — | ||||||||||||||||||
Premier Renta Mixta en USD | 471,329 | 5,187,996 | 4,695,131 | 3,391,707 | 13,892,155 | 110,928,210 | ||||||||||||||||||
Premier Performance en USD | 2,372,279 | — | 2,360,235 | — | 62,805,294 | — | ||||||||||||||||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018 presented in comparative format
(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, established the maximum amount for this insurance system to demand deposits and time deposits denominated either in Pesos and/or in foreign currency. Such limit was 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 at an interest rate exceeding the one established regularly by the Argentine Central Bank. Those deposits acquired through endorsement and those deposits made as a result of incentives other than 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 Argentine Central Bank and the financial institutions, in the proportion determined for each one by the Argentine Central Bank based on the contributions made to the fund.
The monthly contribution institutions should make to the FGD is 0.015% on the monthly average of total deposits.
| 22. | RESTRICTED ASSETS |
As of December 31, 2018, 2017 and January 1, 2017, the following Grupo Supervielle’s assets are restricted:
| Item | 12/31/2018 | 12/31/2017 | 01/01/2017 | |||||||||
Loans and other financing | ||||||||||||
In guarantee of secured borrowings | — | 41,451 | 245,745 | |||||||||
Credit Line | — | — | 83,818 | |||||||||
|
|
|
|
|
| |||||||
| — | 41,451 | 329,563 | ||||||||||
|
|
|
|
|
| |||||||
Financial assets in guarantee | ||||||||||||
Special guarantee accounts in the Argentine Central Bank | 1,357,904 | 1,262,755 | 986,414 | |||||||||
Trust guarantee deposits | 3,333 | 22,231 | 14,543 | |||||||||
Guarantee deposits for currency forward transactions | 282,207 | 362,544 | 211,562 | |||||||||
Guarantee deposits for credit cards transactions | 244,417 | 237,826 | 249,292 | |||||||||
Other guarantee deposits | 119,356 | 35,863 | 41,249 | |||||||||
Guarantee deposits for repo transactions | — | — | 108,736 | |||||||||
|
|
|
|
|
| |||||||
| 2,007,217 | 1,921,219 | 1,611,796 | ||||||||||
|
|
|
|
|
| |||||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018 presented in comparative format
(Expressed in thousands of pesos)
| 23. | FINANCIAL TRUSTS |
The Group acts as trustee or settler in financial trusts:
| i) | As Trustee: |
Guarantee Management Trusts
Trustee: Banco Supervielle.
Financial trust | Indenture executed on | Due of principal | Original principal amount | Principal balance | Beneficiaries | Settlers | ||||||
Credimas | 01/11/2013 | 12/26/2018 | 16,000 | 4,616 | Banco Supervielle S.A. | Credimas S.A. | ||||||
| 01/24/2019 | 7,000 | 4,867 | ||||||||||
Asministration trust Interconnection 500 KV | 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. |
The group acts also as trustee in the following trusts:
Mendoza Trust: 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 31,2018, mainly originating from the exclusion of assets, amount to 18,462 and have been backed by assets in trust (loans, other miscellaneous loans, and other15.1 Unsubordinated Negotiable Obligationsnon-financial assets, etc.) in the amount of 507. This trust will be liquidated following the procedures established by Law 24,441.
Luján Trust: The term of the contract has expired and all documentation relating to the liquidation has been delivered. To date, only the final deregistration in tax matters is still pending.
| ii) | As Settler |
Publicly offered and listed financial trusts as of December 31, 2018 and December 31, 2017:
Supervielle Créditos Financial Trust
Assets in Trust: Personal Loans
Trustee: Equity TMF Trust Company (Argentina) S.A.
The following are financial trusts where Banco Supervielle S.A acts as settler as of December 31, 2018 and 2017:
Financial Trust | Set up on | Value initially assigned in trust | Securities issued | |||||||||
| Type | Amount | Type | Amount | |||||||||
Serie 96 | 09/19/2017 | $236,867 | VDF TV A Mat: 06/20/19 | VN$ 220,285 | CP Mat: 04/20/22 | VN$ 16,581 | ||||||
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 Financial Trust
Assets in Trust: Personal Loans
Trustee: Equity TMF Trust Company (Argentina) S.A.
There are no financial trusts of these series in effect as of December 31, 2018.
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018 presented in comparative format
(Expressed in thousands of pesos)
The following are financial trusts where Cordial Compañía Financiera S.A acts as settler as of December 31, 2017:
Financial Trust | Set-up on | Securitized Amount | Issued Securities | |||||||||||||||||
| Type | Amount | Type | Amount | |||||||||||||||||
XIV | 10/04/2016 | $ | 266,322 | VDF TV A Mat: 12/15/17 | VN $207,731 | CP Mat: 08/16/21 | VN $ 58,591 | |||||||||||||
XV | 03/07/2017 | $ | 400,000 | VDF TV A Mat: 06/15/18 | VN $316,000 | CP Mat: 11/15/19 | VN $ 84,000 | |||||||||||||
XVI | 04/07/2017 | $ | 398,000 | VDF TV A Mat: 06/15/18 | VN $ 314,420 | CP Mat: 02/17/20 | VN $ 83,580 | |||||||||||||
XVII | 05/17/2017 | $ | 499,100 | VDF TV A Mat: 08/15/18 | VN $ 394,289 | CP Mat: 05/15/20 | VN $ 104,811 | |||||||||||||
XVIII | 06/13/2017 | $ | 500,000 | VDF TV A Mat: 10/15/18 | VN $ 395,000 | CP Mat: 04/15/20 | VN $ 105,000 | |||||||||||||
Micro Lending Financial Trust
The following are financial trusts where Micro Lending S.A.U acts as settler:
Financial Trust | Set-up on | Securitized Amount | Issued Securities | |||||||||||||
| Type | Amount | Amount | Type | Amount | ||||||||||||
III | 06/08/2011 | $ 39,779 | VDF TV A Vto: 03/12/13 | VN$ 31,823 | VDF B Vto: 11/12/13 | VN $ 6,364 | CP Vto: 10/12/16 | VN $ 1,592 | ||||||||
IV | 09/01/2011 | $ 40,652 | VDF TV A Vto: 06/20/13 | VN$ 32,522 | VDF B Vto: 10/20/13 | VN $ 6,504 | CP Vto: 01/20/17 | VN $ 1,626 | ||||||||
V | 08/21/2014 | $ 42,258 | VDF TV A Vto: 09/20/15 | VN$ 33,807 | VDF B Vto: 02/20/16 | VN $ 6,761 | CP Vto: 05/20/18 | VN $ 1,690 | ||||||||
VI | 12/02/2014 | $ 40,375 | VDF TV A Vto: 12/20/15 | VN$ 32,300 | VDF TV B Vto: 07/20/16 | VN $ 6,460 | CP Vto: 07/20/18 | VN $ 1,615 | ||||||||
VII | 04/01/2015 | $ 40,062 | VDF TV A Vto: 08/20/16 | VN$ 32,851 | VDF TV B Vto: 12/20/18 | VN $ 4,006 | CP Vto: 07/20/18 | VN $ 3,205 | ||||||||
VIII | 07/24/2015 | $ 59,173 | VDF TV A Vto: 11/15/16 | VN $ 48,522 | VDF TV B Vto: 05/15/17 | VN $ 8,284 | CP Vto: 07/16/18 | VN $ 2,367 | ||||||||
IX | 05/18/2015 | $ 58,606 | VDF TV A Vto: 03/15/17 | VN $ 48,057 | VDF TV B Vto: 10/16/17 | VN $ 7,033 | CP Vto: 07/16/20 | VN $ 3,516 | ||||||||
X | 08/24/2015 | $ 56,357 | VDF TV A Vto: 07/20/17 | VN $ 46,213 | VDF TV B Vto: 01/20/18 | VN $ 7,890 | CP Vto: 10/20/20 | VN $ 2,254 | ||||||||
XI | 10/30/2015 | $ 67,310 | VDF TV A Vto: 09/15/17 | VN $ 55,194 | VDF TV B Vto: 02/15/18 | VN $ 9,423 | CP Vto: 01/15/21 | VN $ 2,693 | ||||||||
XII | 01/14/2016 | $ 64,843 | VDF TV A Vto: 11/15/17 | VN $ 58,358 | VDF TV B Vto: 01/15/18 | VN $ 3,891 | CP Vto: 05/17/21 | VN $ 2,594 | ||||||||
XIII | 05/13/2016 | $ 69,988 | VDF TV A Vto: 06/15/18 | VN $ 63,689 | VDF TV B Vto: 08/15/18 | VN $ 3,499 | CP Vto: 09/15/21 | VN $ 2,800 | ||||||||
XIV | 09/01/2016 | $ 69,144 | VDF TV A Vto: 06/15/18 | VN $ 62,230 | VDF TV B Vto: 08/15/18 | VN $ 4,149 | CP Vto: 11/15/21 | VN $ 2,766 | ||||||||
XV | 10/27/2016 | $ 79,342 | VDF TV A Vto: 10/15/18 | VN $ 67,758 | VDF TV B Vto: 02/15/19 | VN $ 8,093 | CP Vto: 01/15/22 | VN $ 3,491 | ||||||||
XVI | 01/10/2017 | $ 88,354 | VDF TV A Vto: 11/15/18 | VN $ 76,868 | VDF TV B Vto: 02/15/19 | VN $ 7,598 | CP Vto: 03/15/22 | VN $ 3,888 | ||||||||
XVII | 08/23/2017 | $ 129,952 | VDF TV A Vto: 01/15/19 | VN $ 97,464 | VDF TV B Vto: 04/15/19 | VN $ 7,940 | CP Vto: 07/22/22 | VN $ 24,548 | ||||||||
XVIII | 06/16/2017 | $ 119,335 | VDF TV A Vto: 05/15/19 | VN $ 89,501 | VDF TV B Vto: 08/15/19 | VN $ 7,291 | CP Vto: 10/15/22 | VN $ 22,543 | ||||||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018 presented in comparative format
(Expressed in thousands of pesos)
24. ISSUANCE OF NEGOTIABLE OBLIGATIONS
| a. | Unsubordinated Negotiable Obligations |
Grupo Supervielle S.A.’s Negotiable Obligations Issuance Program
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 (one thousand 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 ofre-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 thousand million pesos), under which different classes and/or series of Negotiable Obligations denominated in pesos, dollar or other foreign currencies can be issued.
Banco 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.
On December 21, 2018, the Board of Directors approved the issuance ofNon-Subordinated Corporate Bonds for an amount of up to $ 3,000,000,000 (three billion pesos) within the global program of negotiable obligations. The subscription period ended on January 31, 2019.
Here are the main terms and conditions of the issuance:
Class: F
Amount: $ 3,899,161,779 (Pesos three thousand eight hundred ninety nine million one hundred sixty one thousand seven hundred and seventy nine)
Due date: November 4, 2019
Interest rate: Floating Badlar of Private Banks + 4.85%
Interest payment date: Interest accrued by Negotiable Obligations will be paid on a three-month basis making the first payment on May 4, 2019.
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018 presented in comparative format
(Expressed in thousands of pesos)
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.
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 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 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.
As of December 31, 2018, 2017 and January 1, 2017, 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 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Class | Issue Date | Maturity Date | Annual Interest Rate | 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||||||||||||||||
Grupo Supervielle Class XIII | 01/31/2014 | 01/31/2019 | Badlar + Spread 6,25% | 28,023 | 37,794 | 46,919 | ||||||||||||||||||||||||
Grupo Supervielle Class XX |
| 07/28/2015 |
| 01/28/2017 |
| Mixed |
| Ps. | — |
| 129,389 |
| 07/28/2015 | 01/28/2017 | Mixed | — | — | 249,185 | ||||||||||||
Banco Supervielle Class V | 11/20/2015 | 05/20/2017 | Badlar + Spread 4,5% | — | — | 643,900 | ||||||||||||||||||||||||
Banco Supervielle Class VI | 10/12/2016 | 10/12/2016 | Badlar + Spread 3,5% | — | 658,017 | 817,307 | ||||||||||||||||||||||||
Banco Supervielle Class VI | 11/17/2016 | 11/17/2017 | Badlar + Spread 3,5% | — | — | 510,048 | ||||||||||||||||||||||||
Banco Supervielle Class A | 02/09/2017 | 08/09/2020 | Badlar + Spread 4,5% | 4,200,603 | 7,256,569 | — | ||||||||||||||||||||||||
Banco Supervielle Class B | 12/22/17 | 12/22/2019 | Floating TM20 + Spread 3,25% | 600,155 | 930,628 | — | ||||||||||||||||||||||||
Banco Supervielle Class C | 12/22/17 | 12/22/2021 | Badlar + Spread 4,25% | 667,236 | 976,054 | — | ||||||||||||||||||||||||
Banco Supervielle Class D | 02/14/18 | 08/14/2019 | Badlar + Spread 3,5% | 768,861 | — | — | ||||||||||||||||||||||||
Banco Supervielle Class E | 02/14/18 | 02/14/2023 | Badlar + Spread 4,05% | 1,687,173 | — | — | ||||||||||||||||||||||||
Cordial Compañía Financiera Class IX |
| 10/06/2015 |
| 10/06/2017 |
| Badlar + Spread 5.95% |
| Ps. | — |
| 83,750 |
| 10/06/2015 | 04/06/2017 | Badlar + Spread 5,95% | — | — | 174,092 | ||||||||||||
Cordial Compañía Financiera Class X |
| 05/19/2016 |
| 11/19/2017 |
| Badlar + Spread 5.50% |
| Ps. | — |
| 197,000 |
| 05/19/2016 | 11/19/2017 | Badlar + Spread 5,5% | — | — | 377,843 | ||||||||||||
Cordial Compañía Financiera Class XI | 10/25/2016 | 04/24/2018 | Badlar + Spread 3,57% | — | 309,734 | 386,875 | ||||||||||||||||||||||||
Cordial Compañía Financiera Class XII |
| 12/23/2016 |
| 12/23/2017 |
| 24.90% |
| Ps. | — |
| 154,214 |
| 12/23/2016 | 12/23/2017 | Fixed 24,90% | — | — | 287,252 | ||||||||||||
Cordial Compañía Financiera Class XIII |
| 12/16/2016 |
| 06/23/2018 |
| Badlar + Spread 4,00% |
| Ps. | 151,429 |
| — |
| 12/23/2016 | 06/23/2018 | Badlar + Spread 4% | — | 225,087 | 282,104 | ||||||||||||
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 |
| — |
| ||||||||||||||||||
Cordial Compañía Financiera Class XIV | 05/11/2017 | 05/11/2019 | Badlar + Spread 3,5% | 397,590 | 850,654 | — | ||||||||||||||||||||||||
Cordial Compañía Financiera Class XV | 08/24/2017 | 02/23/2019 | Badlar + Spread 3,75% | 365,401 | 625,210 | — | ||||||||||||||||||||||||
Cordial Compañía Financiera Class XVI | 11/22/2017 | 11/21/2019 | Floating TM20 + Spread 4,25% | 541,013 | 811,490 | — | ||||||||||||||||||||||||
Micro Lending Class II | 08/16/2016 | 08/16/2019 | Badlar + Spread 5% | 20,004 | — | — | ||||||||||||||||||||||||
Micro Lending Class III | 10/04/2017 | 10/05/2020 | Badlar + Spread 7% | 31,112 | — | — | ||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||
Total | Total | 9,307,171 | 12,681,237 | 3,775,525 | ||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||
| b. | Subordinated Negotiable Obligations |
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 Argentine pesos — unless otherwise stated)pesos)
|
|
|
|
|
| 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 |
|
Program for the issuance of Negotiable Obligations for up to nominal value $ 750,000,000 (increased to nominal value $ 2,000,000,000)
As of December 31, 2017March 25, 2013, the Bank’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, interestthe Ordinary and principal on allExtraordinary Shareholders’ meeting approved the increase the maximum outstanding amount of the above debt securities were payableProgram to 2,000,000,000 (two billion pesos) or its equivalent in Pesos.foreign currency, passed by Resolution N° 18,224 from the National Securities Commission on September 22, 2016.
Accrued interest onThe following chart provides the above liabilities for Ps. 282,183main terms and Ps. 74,749conditions of issuances underway as of December 31, 2018, 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,January 1, 2017:
Issuance date | Currency | Class | Amount | Amortization | Term | Maturity date | Rate | Book Value | ||||||||||||||||||||
| 12/31/2018 | 12/31/2017 | 01/01/2017 | ||||||||||||||||||||||||||
11/11/2010 | U$S | I | 50,000 | 100% at mat, | 84 Months | 11/11/2017 | 11,375 | % | — | — | 1,475,283 | |||||||||||||||||
08/20/2013 | U$S | III | 22,500 | 100% at mat, | 84 Months | 08/20/20 | 7 | % | 871,571 | 637,387 | 669,994 | |||||||||||||||||
11/18/2014 | U$S | IV | 13,441 | 100% at mat, | 84 Months | 11/18/21 | 7 | % | 512,246 | 375,274 | 395,156 | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
Total |
| 1,383,817 | 1,012,661 | 2,540,433 | ||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
TableOn August 6, 2018, the Board of Contents
Grupo Supervielle S.A.Directors resolved to request the CNV the Bank’s registration as a frequent issuer of negotiable obligations, and Subsidiaries
Notesit’s consequent authorization to issue negotiable obligations under the Consolidated Financial Statements
Foraforementioned regime, in the years ended December 31, 2017, 2016terms set forth in the Resolution and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)submitting before said body all the necessary documentation for such purposes.
25. |
| |||
| ||||
|
|
| ||
|
| |||
|
| |||
|
| |||
|
|
| RESTRICTIONS IMPOSED ON THE DISTRIBUTION OF DIVIDENDS | |
(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 governed by the Argentine Corporations Law. These rules require Grupo Supervielle to transfer 5% of 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 to Banco Supervielle and Cordial Compañía Financiera, the regulations in force at December 31, 2017 provide as follows:
a) 20% of the profits shown by the income statement for the fiscal year, plus - 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 Bank´s legal reserve.
b) No profits may be distributed or remitted prior toFurthermore, the approvaldistribution of the results for the year anddividends in these entities shall comply with a series 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, issuedrequirements established by the BCRA.
d)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.
22.Capital StockShareholders’ equity under the rules of the Argentine Central Bank comprise the following captions:
| At December 31, 2018 | ||||
Capital Stock | 456,722 | |||
Paid in Capital | 8,996,882 | |||
Legal Reserve | 91,344 | |||
Other Reserves | 5,355,848 | |||
Retained earnings | (775,223 | ) | ||
Net Income for the year | 3,029,982 | |||
Total shareholders’ equity under the rules of the Argentine Central Bank | 17,155,555 | |||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
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 and2018 presented 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 2015comparative format
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
| 26. | LOANS AND OTHER FINANCING |
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, Banco Supervielle and Cordial Compañía Financiera must maintain a minimum capital, which is calculated by weighting the risks related to assets, bank premises and equipment, miscellaneous and intangible assets.
Under BCRA regulations, as of December 31, 2018 and 2017 and 2016,January 2017 the minimum capital requirements as applied tocomposition of the Bank wereloan portfolio 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 |
|
| Assets Before Allowances | Total as of December 31, 2018 | |||||||||||||||
| Stage 1 | Stage 2 | Stage 3 | ||||||||||||||
Promissory notes | 7,177,104 | 473,676 | 242,381 | 7,893,161 | ||||||||||||
Unsecured corporate loans | 6,218,529 | 1,375,347 | 180,464 | 7,774,340 | ||||||||||||
Overdrafts | 4,477,760 | 712,868 | 117,677 | 5,308,305 | ||||||||||||
Mortgage loans | 5,436,111 | 141,024 | 9,710 | 5,586,845 | ||||||||||||
Automobile and other secured loans | 1,264,490 | 106,242 | 181,807 | 1,552,539 | ||||||||||||
Personal loans | 16,064,479 | 2,203,003 | 1,710,042 | 19,977,524 | ||||||||||||
Credit card loans | 8,125,029 | 595,713 | 508,028 | 9,228,770 | ||||||||||||
Foreign Trade Loans | 12,202,668 | 555,279 | 1,015,216 | 13,773,163 | ||||||||||||
Other financings | 5,205,674 | 901,476 | 114,367 | 6,221,517 | ||||||||||||
Other receivables from financial transactions | 1,325,729 | 12,086 | 21,293 | 1,359,108 | ||||||||||||
Receivables from financial leases | 3,213,033 | 172,515 | 83,919 | 3,469,467 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | 70,710,606 | 7,249,229 | 4,184,904 | 82,144,739 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Allowances for loan losses | (1,438,103 | ) | (1,146,020 | ) | (2,352,152 | ) | (4,936,275 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 69,272,503 | 6,103,209 | 1,832,752 | 77,208,464 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| Assets Before Allowances | Total as of December 31, 2017 | Total as of January 1, 2017 | ||||||||||||||||||
| Stage 1 | Stage 2 | Stage 3 | ||||||||||||||||||
Promissory notes | 14,001,854 | 198,000 | 41,673 | 14,241,527 | 11,962,242 | |||||||||||||||
Unsecured corporate loans | 7,694,980 | 230,789 | 62,098 | 7,987,867 | 5,976,688 | |||||||||||||||
Overdrafts | 5,714,366 | 88,990 | 63,972 | 5,867,328 | 5,990,750 | |||||||||||||||
Mortgage loans | 2,354,797 | 61,753 | 1,344 | 2,417,894 | 147,388 | |||||||||||||||
Automobile and other secured loans | 451,268 | 16,951 | 997 | 469,216 | 121,712 | |||||||||||||||
Personal loans | 20,437,327 | 2,507,042 | 2,830,638 | 25,775,007 | 22,468,411 | |||||||||||||||
Credit card loans | 10,410,793 | 857,782 | 514,502 | 11,783,078 | 10,673,948 | |||||||||||||||
Foreign Trade Loans | 12,264,554 | 83,781 | 4,429 | 12,352,765 | 6,233,342 | |||||||||||||||
Other financings | 5,782,869 | 44,534 | 41,184 | 5,868,587 | 5,876,641 | |||||||||||||||
Other receivables from financial transactions | 1,177,816 | 19,048 | 16,805 | 1,213,669 | 1,067,562 | |||||||||||||||
Receivables from financial leases | 3,635,703 | 66,143 | 55,497 | 3,757,343 | 2,922,999 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Subtotal | 83,926,327 | 4,174,815 | 3,633,139 | 91,734,281 | 73,441,683 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Allowances for loan losses | (1,691,344 | ) | (1,002,757 | ) | (1,931,510 | ) | (4,625,611 | ) | (3,444,807 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | 82,234,983 | 3,172,058 | 1,701,629 | 87,108,670 | 69,996,876 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2017 and 2016, the Bank and CCF, met all capital adequacy requirements to which are subject.
23.Earnings per Share
Basic 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 and 151,839,052, for the years ended December 31, 2017, 2016 and 2015, respectively.
24.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,2018 presented 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, extended this insurance system to demand deposits and time deposits of up to Ps. 30 denominated either in pesos and/or in foreign currency. In May 2016, the amount was updated to Ps. 450, through Communication “A” 5943.
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. 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 2015comparative format
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
those deposits made as a resultExpected Credit Loss Allowances
An analysis of incentives other thanchanges in 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 BCRAgross carrying amount and the financial institutions, in the proportion determined by the BCRA based on the contributions made to the fund.
25.Financial Instruments with Off-Balance Sheet Risk
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 acceptancescorresponding ECL allowance 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 |
|
| 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 | 83,926,327 | 4,174,815 | 3,633,139 | 91,734,281 | 1,691,344 | 1,002,757 | 1,931,510 | 4,625,611 | ||||||||||||||||||||||||
Transfers | ||||||||||||||||||||||||||||||||
1 to 2 | (2,203,903 | ) | 2,203,903 | — | — | (72,358 | ) | 424,159 | — | 351,801 | ||||||||||||||||||||||
1 to 3 | (1,228,517 | ) | — | 1,228,517 | — | (73,906 | ) | — | 1,045,830 | 971,924 | ||||||||||||||||||||||
2 to 3 | — | (467,009 | ) | 467,009 | — | — | (152,605 | ) | 281,957 | 129,352 | ||||||||||||||||||||||
2 to 1 | 709,082 | (709,082 | ) | — | — | 23,057 | (94,117 | ) | — | (71,060 | ) | |||||||||||||||||||||
3 to 2 | — | 112,990 | (112,990 | ) | — | — | 17,780 | (76,002 | ) | (58,222 | ) | |||||||||||||||||||||
3 to 1 | 30,404 | — | (30,404 | ) | — | 2,874 | — | (36,858 | ) | (33,984 | ) | |||||||||||||||||||||
Net changes of financial assets | (17,194,694 | ) | 1,700,507 | 1,578,410 | (13,915,777 | ) | (139,216 | ) | (53,642 | ) | 1,812,007 | 1,619,149 | ||||||||||||||||||||
Write-Offs | — | — | (2,611,824 | ) | (2,611,824 | ) | — | — | (2,611,824 | ) | (2,611,824 | ) | ||||||||||||||||||||
Exchange Differences and Others | 6,671,907 | 233,105 | 33,047 | 6,938,059 | 6,308 | 1,688 | 5,532 | 13,528 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Gross carrying amount at December 31, 2018 | 70,710,606 | 7,249,229 | 4,184,904 | 82,144,739 | 1,438,103 | 1,146,020 | 2,352,152 | 4,936,275 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
| 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 | 64,805,764 | 5,658,692 | 2,977,227 | 73,441,683 | 1,086,336 | 785,340 | 1,573,131 | 3,444,807 | ||||||||||||||||||||||||
Transfers | ||||||||||||||||||||||||||||||||
1 to 2 | (1,154,403 | ) | 1,154,403 | — | — | (43,917 | ) | 343,391 | — | 299,474 | ||||||||||||||||||||||
1 to 3 | (806,548 | ) | — | 806,548 | — | (36,608 | ) | — | 825,860 | 789,252 | ||||||||||||||||||||||
2 to 3 | — | (381,037 | ) | 381,037 | — | — | (94,572 | ) | 262,639 | 168,067 | ||||||||||||||||||||||
2 to 1 | 988,267 | (988,267 | ) | — | — | 22,113 | (98,791 | ) | — | (76,678 | ) | |||||||||||||||||||||
3 to 2 | — | 109,932 | (109,932 | ) | — | — | 17,963 | (68,160 | ) | (50,197 | ) | |||||||||||||||||||||
3 to 1 | 67,366 | — | (67,366 | ) | — | 3,969 | — | (62,859 | ) | (58,890 | ) | |||||||||||||||||||||
Net changes of financial assets | 14,445,700 | (1,575,906 | ) | 1,461,348 | 14,331,142 | 652,140 | 48,704 | 1,237,979 | 1,938,823 | |||||||||||||||||||||||
Write-Offs | — | — | (1,837,941 | ) | (1,837,941 | ) | — | — | (1,837,941 | ) | (1,837,941 | ) | ||||||||||||||||||||
Exchange Differences and Others | 5,580,181 | 196,998 | 22,218 | 5,799,397 | 7,311 | 722 | 861 | 8,894 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Gross carrying amount at December 31, 2017 | 83,926,327 | 4,174,815 | 3,633,139 | 91,734,281 | 1,691,344 | 1,002,757 | 1,931,510 | 4,625,611 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
| 27. | RISK MANAGEMENT POLICIES |
Financial risk factors
Credit risk
The Group accounts for checks drawn on other banks, as well as other itemsIntegral Risk Committee approves credit risk strategies and policies submitted in processaccordance 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 collection, such as notes, billscommercial opportunities within the framework and miscellaneous items,conditions of the Group’s business plan, while keeping suitable caution levels in memorandum accounts until such time asface of 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:risk.
|
| 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 endedAs of December 31, 2017, 2016 and 20152018 presented in comparative format
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
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.
25.b. Trust activitiesThe entity’s credit risk management policies are applied to corporate and individuals. To such ends, a customer segmentation has been defined for corporate banking, retail banking and finance.
See note 26
The Group is willing to carry out a strategy that enable it to address its contractual commitments, both under normal market conditions and adverse situations. Therefore, the Entity relies on scoring and rating models to estimate probability of default (PD) for the different client portfolios. As for risk appetite framework, the Group relies on25.cut-offsc. Derivative Financial Instruments
for each risk-based segment that express the maximum risk to be assumed in terms of probability of default.
In the normal course of business,addition to PD parameters, the Group enters intorelies on estimates of exposure at default (EAD) and loss given default (LGD) parameters with the purpose 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 Group is aimed at keeping a varietydiversified and atomized portfolio, in order tominimizerisk concentration. To such ends, loan originationand client portfolio profiles are adjusted to each different circumstance.
Credit Risk Measurement Models
The Entity 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 the recoveries of each defaulted loan (LGD – Loss Given Default).
Based on the aforementioned, the Group has developed 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 information 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 credit 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 principallysettlement risk, among other.
Regarding the economic capital for the counterparty’s risk, it is included in the foreign exchange stock markets. Most counterparties in the derivative transactions are banks and other financial institutions.Economic Capital Quantitative Model for Credit Risk.
GRUPO SUPERVIELLE S.A.
These instruments include:Notes to Consolidated Financial Statements
· 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, 2017 and 2016:
|
| 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 |
| |||
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
The Group acts as trustee or settler2018 presented in financial trusts.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015comparative format
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
I) As Trustee
The following are the financial trusts where the Group acts as trustee at year-end:
Impairment of Financial trust Banex Créditos IV
Trustee: Banco Supervielle
· Banex Asset-Backed Securities Program
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(1)VDFA means Senior Debt Securities, VDFB means Subordinated Debt Securities and CP means Certificates of Participation
Guarantee management trusts
Trustee: Banco Supervielle
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Instruments
The Group acts alsotests for impairment the financial assets measured at amortized cost, debt instruments measured at fair value with changes in other comprehensive income, finance lease and financial guarantee contracts and loan commitments granted that are not measured at fair value.
As a rule, the expected credit loss is estimated as trusteethe difference between the contractual cash flows to be recovered and the expected cash flows discounted using the original effective interest rate. In the case of purchased or originated credit-impaired assets, this difference is discounted using the effective interest rate adjusted by credit rating.
The movements in the following trusts:
· Mendoza Trust, 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, mainly originating from the exclusion of assets,allowance for loan losses as of December 31, 2017 increased2018 are detailed in the amounts of Ps. 17,343 and have been backed by assets in trust (loans, other miscellaneous receivables and other financial assets) in the amount of Ps. 576. This trust will be liquidated following the procedures established by Law 24,441.note 26.
·Write-Off Lujan Trust: the term of the contract has expired and all documentation relating to the liquidation has been delivered. To date, only the final deregistration in tax matters is still pending.
II) As Settler
The Group transfers portionsreduce the gross carrying amount of their loan portfolioa financial asset when it has no reasonable expectations of recovering a financial asset in its entirety of a portion thereof. Awrite-off constitues a derecognition event.
Maximum Credit Risk Exposure
Financial Instruments to special purpose trusts that fundwhich the purchase by issuing securities thatimpairment requirements in IFRS 9 are sold to third parties, thereby creating an additional source of funding for operations.applied
Loan Type Promissory Notes Unsecured Corporate Loans Overdrafts Mortgage Loans Automobile and other secured loans Personal Loans Retail Consumer Finance Credit Card Loans Retail Consumer Finance Foreign Trade Loans Other Financings Other Receivables from Financial Transactions Receivables from Financial Leases Total Loan Type Promissory Notes Unsecured Corporate Loans Overdrafts Mortgage Loans Automobile and other secured loans Personal Loans Retail Consumer FinanceIn 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. December 31, 2018 ECL Staging Total Stage 1
12-month
ECL Stage 2
Lifetime
ECL Stage 3
Lifetime
ECL 7,177,104 473,676 242,381 7,893,161 6,218,529 1,375,348 180,465 7,774,342 30,470,695 1,360,527 121,935 31,953,157 5,436,112 141,024 9,710 5,586,846 1,264,489 106,241 181,807 1,552,537 16,064,479 2,203,003 1,710,043 19,977,525 13,016,980 883,861 329,323 14,230,164 3,047,499 1,319,142 1,380,720 5,747,361 20,075,986 902,670 555,073 21,533,729 15,384,065 583,439 215,273 16,182,777 4,691,921 319,231 339,800 5,350,952 12,202,668 555,279 1,015,217 13,773,164 9,647,575 903,049 115,563 10,666,187 1,325,730 12,086 21,292 1,359,108 3,213,033 172,514 83,920 3,469,467 113,096,400 8,205.417 4,237,406 125,539,223 December 31, 2017 ECL Staging Total Stage 1
12-month
ECL Stage 2
Lifetime
ECL Stage 3
Lifetime
ECL 14,001,853 198,000 41,673 14,241,526 7,694,982 230,789 62,098 7,987,869 32,683,305 437,359 66,503 33,187,167 2,354,796 61,753 1,344 2,417,893 451,270 16,951 997 469,218 20,437,323 2,507,043 2,830,638 25,775,004 15,892,638 1,019,240 337,196 17,249,074 4,544,686 1,487,802 2,493,442 8,525,930
GRUPO SUPERVIELLE S.A.
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 endedAs of December 31, 2017, 2016 and 20152018 presented in comparative format
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
| December 31, 2017 | ||||||||||||||||
| ECL Staging | Total | |||||||||||||||
Loan Type | Stage 1 12-month ECL | Stage 2 Lifetime ECL | Stage 3 Lifetime ECL | |||||||||||||
Credit Card Loans | 23,211,655 | 1,360,455 | 567,367 | 25,139,477 | ||||||||||||
Retail | 16,529,858 | 1,014,835 | 230,587 | 17,775,280 | ||||||||||||
Consumer Finance | 6,681,796 | 345,621 | 336,780 | 7,364,197 | ||||||||||||
Foreign Trade Loans | 12,264,552 | 83,783 | 4,429 | 12,352,764 | ||||||||||||
Other Financings | 9,993,744 | 44,534 | 41,184 | 10,079,462 | ||||||||||||
Other Receivables from Financial Transactions | 1,177,817 | 19,048 | 16,805 | 1,213,670 | ||||||||||||
Receivables from Financial Leases | 3,635,704 | 66,142 | 55,497 | 3,757,343 | ||||||||||||
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Total | 127,907,001 | 5,025,857 | 3,688,535 | 136,621,393 | ||||||||||||
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Financial Instruments to which the impairment requirements in IFRS 9 are not applied
The carrying amount of all financial instruments not subject to impairment is the corresponding fair value at the reporting date, as it best represents the maximum exposure to credit risk.
Publicly offered and listed financial trustsMarket risk
Group defines Market Risk as the risk resulting from deviations in the trading portfolio value as a result of market fluctuations during the period required for the settlement of portfolio positions.
The Risk Department’s measurement, control andSupervielle Créditos Financial Trustfollow-up perimeter covers those operations where certain loss risk in the Group’s shareholders equity value is assumed, as a result of changes in market factors. Such risk results from the variation in risk factors under evaluation (interest rate, exchange rate, market price of equity instruments and options), as well as liquidity risk in the different products and markets where the Group operates.
Assets assigned in trust: Personal loans
Trustee: 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, byAccording to its business strategy, Banco Supervielle and grantedis the component of the Group with the greatest exposure to ANSES retirees and pensions.
this risk. On the other hand, Cordial Compañía Financiera Créditohas 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 financial asset portfolio in normal market conditions, within a certain period of time and at apre-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 trading portfolio managed by the Trading desk, although there is also a broader control including managed positions with liquidity management objectives. For this reason, in terms of the broader trading portfolio, the controls are limited to the exposure to the assumed risk, measured using the VaR methodology, in relation to the regulatory capital (RPC). On the other hand, the controls over the trading desk are more exhaustive.
Approved strategies and policies are included in the Risk Map document, which establishes authorized transactions to be carried out by the trading desk and the authorized 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 Group’s exchange rate risk at the end of the year by currency type is detailed below:
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial TrustStatements
Assets assigned in trust: Personal Loans
Trustee: TMF Trust Company (Argentina) S.A.
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 |
| ||
b) Mutual Funds
AtAs 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)pesos)
|
| 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 |
|
Currency | Balances as of 12/31/2018 | Balances as of 12/31/2017 | ||||||||||||||||||||||||||||||
| Monetary Financial Assets | Monetary Financial Liabilities | Derivatives | Net Position | Monetary Financial Assets | Monetary Financial Liabilities | Derivatives | Net Position | |||||||||||||||||||||||||
US Dollar | 41,462,284 | 40,327,318 | 13,405 | 1,148,371 | 30,597,536 | 26,114,417 | 2,746 | 4,485,865 | ||||||||||||||||||||||||
Euro | 463,781 | 474,602 | — | (10,821 | ) | 434,590 | 434,580 | — | 10 | |||||||||||||||||||||||
Others | 114,521 | 3,338 | — | 111,183 | 2,125 | 2,125 | — | — | ||||||||||||||||||||||||
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| |||||||||||||||||
Total | 42,040,586 | 40,805,258 | 13,405 | 1,248,733 | 31,034,251 | 26,551,122 | 2,746 | 4,485,875 | ||||||||||||||||||||||||
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Financial assets and liabilities are presented net of derivatives, which are disclosed separately. Derivative balances are shown at their Fair Value at the closing price of the respective currency.
27.LoansThe table above includes only Monetary Assets and issuanceLiabilities, since investments in equity instruments andnon-monetary instruments does not generate market risk exposure.
A sensitivity analysis was performed considering reasonably possible changes in foreign exchange rates in relation to the Group’s functional currency. The percentage of negotiable obligationsvariation used in this analysis is the same the Group used in its Business Plan and Projections.
Currency | Variation | 12/31/2018 | ||||||||||
| P/L | Equity | |||||||||||
US Dollar | 29 | % | 336,894 | 336,894 | ||||||||
| (29 | %) | (336,894 | ) | (336,894 | ) | |||||||
Euro | 29 | % | (3,175 | ) | (3,175 | ) | ||||||
| (29 | %) | 3,175 | 3,175 | |||||||||
Others | 29 | % | 32,617 | 32,617 | ||||||||
| (29 | %) | (32,617 | ) | (32,617 | ) | |||||||
Total | 29 | % | 366,337 | 366,337 | ||||||||
| (29 | %) | (366,337 | ) | (366,337 | ) | |||||||
a. International financing programsSensitivity 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.
GlobalEconomic capital calculation
Banco Supervielle adopts the diversified Parametric VaR methodology for the calculation of market risk economic capital, both at a consolidated and individual level. It should be noted that in the case of Cordial Compañía Financiera, according to the provisions established by the Argentine Central Bank, its Board of Directors has chosen to quantify its needs for economic capital by applying a simplified methodology. According to this methodology, the aggregate economic capital arises from the following expression:
EC = (1,05 x MC) + max [0; ☐EVE – 15 % x bS)]
GRUPO SUPERVIELLE S.A.
Notes to Consolidated 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).
Statements
As of December 31, 2017, in-force operations2018 presented in comparative format
(Expressed in thousands of pesos)
Where, EC: economic capital according to profile’s risk (ICAAP).
MC: Minimum capital requirement in accordance with coverageArgentine Central Bank regulations.
☐EVE (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 the likelihood that changes in the Group’s financial 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:
Different terms maturity and interest ratere-adjustment dates for assets, liabilities and off balance sheet items.
Forecast, evolution and volatility of local interest rates and foreign interest rates.
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;
Embeded options in certain assets, liabilities and off balance sheet items of the aforementioned agency pursuantGroup.
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 the detection of interest rate risk concentration along the different terms.
The interest rate risk management is aimed at keeping the Group’s exposure within those levels of risk appetite profile validated by the Board upon changes in the market interest rates.
To such ends, the interest rate risk management relies on the monitoring of two metrics:
| • | 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. |
| • | 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 regulation makes a distinction between the impact of fluctuations in interest rate levels on the underlying value of the entity’s assets, liabilities andoff-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 agreement specifiedsuggested measurement methodology, maintaining some criteria and incorporating others.
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 (DEVE) of six proposed disturbance scenarios. These scenarios include parallel movements in the previous paragraph amountedcurves 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 USD 19,287,000 (nineteen million two hundred eighty seven thousand)the applicable regulation, Banco Supervielle has to use an internal measurement system (SIM) for measurement based on results (DNIM). On December 31, 2016, this operations amountedThis requirement is not applicable to USD 12,956,956 (USD twelve million nine hundred fifty six thousand and nine hundred fifty six)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 (DEVE).
The agreement signed with the IFC is subject
GRUPO SUPERVIELLE S.A.
Notes 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.
Consolidated Financial Statements
As of December 31, 20172018 presented in comparative format
(Expressed in thousands of pesos)
Beyond the regulatory provisions, it is important to note that both Banco Supervielle and 2016,Cordial Comapñia Financiera have been working with internal measurement systems (SIM) to measure the Bankimpact of rate fluctuations, both on economic value (DEVE) and on results (DNIM). 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 compliancethe 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 and dollars.
Economic Capital Calculation
As a first step to calculate economic capital, Banco Supervielle calculates its exposure to interest rate risk from theMVE-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 exacerbation of capital by securitization risk. The result obtained is compared with the aforementioned commitments, requirementsworst result of the alterations proposed in the six scenarios proposed by the Standardized Framework, with the resulting economic capital being the worst of both measurements (SIM and obligations.Standardized Framework).
In the case of Cordial Compañía Financiera, as mentioned above, the 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 Group measures the impact of fluctuations in market interest rates on the economic value based on the application of the Standardized Framework. In the event that the worst ☐EVE of the six scenarios proposed by the regulation exceeds 15% of the basic net worth (capital level one) of the Entity, the sum of the economic capital calculated according to the simplified methodology would be increased by said excess.
The exposure to interest rate risk is detailed in the table below. It presents the residual values of the assets and liabilities, categorized by date of renegotiation of interest or expiration date, the lowest.
| 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 | 54,435,109 | 13,281,894 | 11,692,926 | 9,323,634 | 46,537,858 | 135,271,421 | ||||||||||||||||||
Total Financial Liabilities | 74,913,615 | 21,093,049 | 1,498,595 | 1,500,302 | 25,041,966 | 124,047,526 | ||||||||||||||||||
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|
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| |||||||||||||
Net Amount | (20,478,506 | ) | (7,811,155 | ) | 10,194,331 | 7,823,332 | 21,495,892 | 11,223,895 | ||||||||||||||||
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Foreign Trade Credit Facility ProgramThe table below shows the sensitivity to a reasonably possible additional variation in interest rates for the next year, taking into account the composition as of December 31, 2018. 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.
| Additional variation in the interest rate | Increase / (decrease) in the income statement | Increase / (decrease) in shareholders’ equity | ||||||||||
Decrease in the interest rate | 4% ARS; 2% USD | 55,643 | 679,909 | |||||||||
Increase in the interest rate | 4% ARS; 2% USD | (55,643) | (645,962) | |||||||||
In May 2009, Banco Supervielle S.A. entered into agreement withinIf the frameworkmarket interest rates for instruments denominated in pesos decreased by 4 percentage points and for those nominated in dollars, they would fall by 2 percentage points, the annual net loss of IDB’s Trade Finance Facilitation Program. Banco Supervielleincome tax would be 55,643. On the contrary, if the interest rates increased in equal measure, 55,643 would be earned.
GRUPO SUPERVIELLE S.A. the line of credit granted
Notes 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.
Consolidated Financial Statements
As of December 31, 2017, there were no current operations with coverage2018 presented in comparative format
(Expressed in thousands of said entity underpesos)
Liquidity Risk
The Group defines Liquidity Risk as the agreement mentionedrisk 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:
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.
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:
| • | LCR (Liquidity Coverage Ratio): measures the relation between high quality liquid assets and total net cash outflows over a30-day period. The Group estimates this indicator on a daily basis, having met the minimum forecasted value in 2017. |
| • | 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. |
| • | Coverage of Remunerated Accounts andPre-Payable Term Depositsthis indicator is aimed to reduce funding dependence of unstable sources innon-liquid scenarios. |
In addition, the Assets and Liabilities Committee performs a daily monitoring of somefollow-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 and also 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 paragraphs. month, setting an alert when it is below 10% of that value.
Liquidity risk management consist in a strict dailyfollow-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, thefollow-up on the net stable funding ration (NSFR) is included in accordance with provisions set by the Argentine Central Bank and Basle III criteria guidelines.
Economic capital calculation
The Group relies on the following elements that ensure the suitable management of this type of risk:
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.
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2016,2018 presented in comparative format
(Expressed in thousands of pesos)
Indicators that measure the concentration of funding sources, establishing the Group’s risk appetite.
Development and monitoring of new liquidity coverage operations underand leverage indicators set by the agreement referredArgentine Central Bank in compliance with Basle III route map.
Different liquidity riskfollow-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).
The liquidity coverage ratio is used to assess the Group’s capacity to meet liquidity needs over a30-day period within a stress scenario described by the Argentine Central Bank. Thefollow-up of this indicator is carried out on a daily basis, keeping the Group’s liquidity director and officials updated on its evolution.
Permanent monitoring of limit and threshold compliance in virtue of the previous paragraph amountedstable funding ratio (NSFR).
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.
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 Risk 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 13,500,000 (U$S thirteen20,000,000 (USD 20 million) and 2) A Global Financial Exchange Program with the International Finance Corporation (IFC), whose line amounts to USD 30,000,000 (thirty million US dollars).
On the other hand, the Bank implemented atwo-tranche loan with BID totaling USD 133,500,000 (US dollars one hundred thirty-three million five hundred thousand). The disbursed were as follows: tranche A for USD 40,000,000 (USD 40 million) in December 2017 (USD 35 million for a3-year term and USD 5 million for a5-year term) and tranche B, for USD 93,500,000 (US dollars ninety-three million five hundred thousand) in June 2018 for a period of two and a half years.
TheIt should be noted that this agreement entered into with the IDB is subject to compliance with certain financial covenants, certain positive and restrictive covenants, certainobligations to do and not to do, obligations and reportingas well as certain information requirements.
As of December 31, 2017 and 2016, the Bank is in compliance with the aforementioned commitments, requirements and obligations.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
b. Program for the issuance of Negotiable Obligations denominated in USD
On April 30, 2007, the Ordinary and Extraordinary Shareholders’ Meeting No. 95 of Banco Supervielle resolved to approve the application for admission to the public offering regime through the creation of a Global Program for the issuance of Corporate Bonds for up to a maximum amount of US$ 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.
The following are the main terms and conditions of the issuance:
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
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.
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.
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 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, 1,000,000 (one billion 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 billion pesos), under which different classes and/or series of Negotiable Obligations denominated in pesos, dollar or other foreign currencies can be issued.
At December 31, 2017 and 2016 the following series of corporate bonds of Grupo Supervielle issued under the above mentioned program were outstanding:
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.
Funds resulting from 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, to the settlement of the Group’s financial liabilities.
28.Non-controlling interest
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 ended December 31, 2017, 2016 and 2015
(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.
The Company’s Board of Directors considers that its criteria and guidelines regarding risk management are a key part of its Corporate Governance. The risks to which the Company is exposed, are inherent to 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.
Within this framework, Banco Supervielle and Cordial Compañía Financiera follow the guidelines set forth by the BCRA for comprehensive risk management and corporate governance
30.Parent only Financial Statements
The following are the parent company only financial statements of Grupo Supervielle 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 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
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 |
|
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 |
|
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)
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 Investment
Pursuant to Communications “A” 5319 of the BCRA, financial institutions are required to offer a credit line directed to finance investment projects to purchase capital goods and/or to finance the construction of facilities 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% 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 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
33.Adoption of the International Financial Reporting Standards
The National 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 because 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 takenentity is in compliance with the necessary measures to fulfill the implementation plan.aforementioned obligations.
| 29. | BUSINESS COMBINATIONS |
In accordance
| 29.1 | MICRO LENDING S.A.U. |
On May 2, 2018, the Group acquired 100% of the capital stock of Micro Lending S.A. (MILA) for a total price of US $ 24.4 million composed of US $ 20.0 million paid at the date of acquisition, plus liabilities assumed for an estimated value of US $ 2.4 million. MILA specializes in used car loan financing.
MILA complements the Group’s product offering and plays a relevant role in the attractive new and used car loan market, a key strategic segment. Through its 32 branches across the country and over 5,000 related agencies, MILA is a well-positioned company and the integration with the requirements of the Technical Pronouncement No. 26Group will create cross-selling opportunities across our Company 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 GAAPis expected to generate tax 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 statements asoperating synergies.
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018 as it were adopted by the BCRA. The items and figures containedpresented 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.
The items and amounts included in the reconciliation could be modified to the extent that, when preparing the financial statements as of December 31, 2018, the standards used are different.
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 2015comparative format
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
ReconciliationThe amounts recognized as of Net Incomethe date of acquisition for each main class of assets acquired and liabilities assumed are:
| ||||||
| Fair Value | ||||||
| 2,783 | |||||
Government securities | 1,353,978 | |||||
Loans and other financing | 136,621 | |||||
Property, plant and equipment | 1,284 | |||||
Other assests | 322 | |||||
Other financial liabilities and Financing received | (1,437,208 | ) | ||||
Miscellaneous obligations | (50,117 | ) | ||||
Forecasts | (157 | ) | ||||
|
|
| ||||
|
| 7,506 |
|
| ||
|
|
|
| |||
|
|
| ||||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
| ||||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
| ||||
|
|
|
| |||
| ||||||
- Amount paid net of expenses | 620,522 | |||||
- Escrow account | 81,025 | |||||
|
|
|
| |||
Net | 701,547 | |||||
|
|
| ||||
Reconciliation of Comprehensive Income
| |||||
| 694,041 | ||||
|
|
The goodwill is attributable to the workforce and the high profitability of the acquired business. It will not be deductible for tax purposes.
| 29.2 |
|
On May 24, 2018, the Group acquired 100% of the capital stock of InvertirOnline S.A.U and InvertirOnline.com Argentina S.A. for a total price of US $ 43.3 million, composed of US $ 36.5 million paid at the date of acquisition plus liabilities assumed for an estimated value of US $ 7.5 million. InvertirOnline is a specialized online trading platform, with a leading position in the online Broker segment in Argentina, and a reference in the Fintech sector in the country.
InvertirOnline is an online trading platform, and a benchmark for the Fintech sector in the country. Consistent with the Group’s digital transformation strategy, this acquisition represents a qualitative leap in the value proposition for the Group’s customers.
The amounts recognized as of the date of acquisition for each main class of assets acquired and liabilities assumed are:
| Fair Value | ||||||
| 541,320 | |||||
Government securities | 137,138 | |||||
Property, plant and equipment | 853 | |||||
Other assets | 12,377 | |||||
Intangible assets identified | ||||||
- Customer relationship | 335,889 | |||||
- Brand Name | 95,498 | |||||
- Software and Technology | 32,931 | |||||
Other financial liabilities and Financing received | (514,067 | ) | ||||
Other Liabilities | (55,695 | ) | ||||
|
|
|
| |||
|
| 586,244 |
| |||
|
|
| ||||
|
|
| ||||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
| ||||||
- Amount paid net of expenses | 1,286,217 | |||||
- Escrow account | 76,194 | |||||
- Contingent Consideration | 105,300 | |||||
|
|
|
| |||
| 1,467,711 | |||||
|
| |||||
Goodwill by business combination | 881,467 | |||||
|
| |||||
a) Loan origination fees and costs
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
Under Argentine GAAP, the Company does not defer loan origination fees and costs. In accordance with IFRS 9 “Financial Instruments”, loan origination fees netAs 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 recognized2018 presented 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 2015comparative format
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
Based on the adjustment was recognized against unallocated results, whileacquisition method established by IFRS 3 “Business Combinations”, and through the use of expert criteria, the following assets have been identified:
Customer Relationships: Relations with customers is a source of value as long as current clients maintain their relationship with the company and have a recurrence in the generation of future benefits. When the projection of future benefits from customers is not contractually scheduled, the analysis of customers’ historical behavior is carried out. To obtain the amount identified, the relationships with the client portfolio has been analyzed by projecting the cash flow based on the aforementioned historical behavior and the probability of occurrence of operations.
Brand Name: A brand contributes to the generation of economic benefits for the fiscalbusiness in two ways: it can increase sales volumes and it can also create an extra perception of value by consumers of its products and services, enabling its commercialization at higher prices. compared to products that do not have a brand recognized by the market. Usually, the control over those future benefits is obtained through the trademark registration, while the trademark registration satisfies the legal-contractual criterion that is required to recognize an intangible asset separately from goodwill.
Software and Technology: The digital platform and the proprietary software support the existence and operation of the company, which is also reflected in the high weight that the Information Technology area has on the total payroll. In addition to being recognized as a separate intangible asset, the value of the proprietary technology was also used to calculate the corresponding contributory charge in the valuation of customer relationships.
The goodwill is attributable to the workforce and the high profitability of the acquired business. It will not be deductible for tax purposes.
In the event that certain net income is achieved by the subsidiary for the year ended December 31, 2017, a result2018, additional consideration of (22,874) was recognizedup to U$S 3.7 millions may be payable in the income statement.
c) Goodwill
cash on March 14, 2019. 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 investment portfolio into those held for trading, which were valued 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.
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)
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.
The Company recognized an increase of assets for 7,216 as of December 31, 2017, which, by application of the exception of IFRS 1, was recognized in the other comprehensive income.
g) Vacation Provision
Under IFRS, short-term employee benefits such as vacation, salary and social security contributions are recognized as a liability equivalent to thepotential 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 recognizedpayable under the liability method, due to temporary differences arisingagreement is between the tax bases of assetsU$S 0 for net income below U$S 21 millions and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recorded if they arise from the initial recognition of Goodwill; or the initial recognition of an asset or liability in a transaction, other than a business combination, which at the time of the transaction, affects neither the accounting result nor the taxable profit or loss. Deferred tax is determined using tax rates (and laws) approved or about to be approved at the balance sheet date and expected to apply when the corresponding deferred tax asset is realized or the deferred tax liability is settled.
Under Argentine Banking GAAP, Banco Supervielle and Cordial Compañía Financiera (subsidiaries of the Group) recognize the current taxU$S 3.7 millions for the year.
The Group recognized a deferred tax net asset of 313,919 and 477,426 as of January 1, 2017 and 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 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
results, while for the fiscal year ended December 31, 2017 the adjustment was recognized in the statement 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 receive 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, while for the fiscal year ended December 31, 2017, the adjustment was recognized in the statement of income by (308,256).
k) Customer loyalty programs
above U$S 21 millions. 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.
In accordance with IFRS 15, the Company establishes a liability based on the fair value of the points issued that are expected to be exchangedcontingent consideration of 105,300 was estimated by customers. Points to be redeemed are estimated based oncalculating the historical redemption behavior of each program. The liability is reduced as the points are exchanged by customers or their due.
As a result, 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).
l) Accounting for Guarantees
Under IFRS, the financial guarantees granted must initially be recognized at their fair value, which is equivalent to the commission charged in most cases. This amount is subsequently amortized in a straight line over the life of the contract. At each closing, the financial guarantees are measured by the greater of: (i) thepresent value of the outstanding commission atfuture expected cash flows.
On March 14, 2019 the end of the fiscal year and (ii) the best estimate of the amount to beGroup paid 121,141 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.
The Company recognized a liability corresponding to the reversal of the non-accrued charge of 9,111 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.
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)
m) Initial Recognition at Fair Value
Under IFRS, the Company must recognize the financial instruments in their initial measurement at their fair value. In the event that the Company originates loans that accumulate an interest rate that is unfavorable, the entity will recognize the loan at its fair value andcontingent consideration, the difference between that value andwith the transaction priceamount recognized at acquisition was recorded as a loss in the income statement.
| 30. | ASSETS AND LIABILITIES IN FOREIGN CURRENCY |
The Company originates some financing that meets the conditions established by the IFRS, as a result the Company recognized a decrease of assets corresponding
Items | At 12/31/2018 | At 12/31/2018 (per currency) | At 12/31/2017 | At 01/01/2017 | ||||||||||||||||||||||||
| Dollar | Euro | Real | Others | |||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||
Cash and Due from Banks | 16,358,427 | 15,783,228 | 460,908 | 10,983 | 103,308 | 8,992,672 | 6,826,959 | |||||||||||||||||||||
Government and corporate securities at fair value with changes in results | 2,792,749 | 2,792,749 | — | — | — | 1,718,040 | 121,056 | |||||||||||||||||||||
Derivatives | 13,405 | 13,405 | — | — | — | 2,746 | 1,703 | |||||||||||||||||||||
Other financial assets | 595,143 | 595,097 | 46 | — | — | 500,874 | 166,253 | |||||||||||||||||||||
Loans and other financing | 21,130,355 | 21,127,528 | 2,827 | — | — | 18,739,575 | 10,317,318 | |||||||||||||||||||||
Other Debt Securities | 1,039,824 | 1,039,824 | — | — | — | 727,599 | 1,515,960 | |||||||||||||||||||||
Financial assets in guarantee | 462,536 | 462,536 | — | — | — | 404,759 | 46,465 | |||||||||||||||||||||
Investments in subsidiaries, associates and joint ventures | — | — | — | — | — | 1 | — | |||||||||||||||||||||
Othernon-financial assets | 149,192 | 149,192 | — | — | — | 102,980 | 3,700 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
TOTAL ASSETS | 42,541,631 | 41,963,559 | 463,781 | 10,983 | 103,308 | 31,189,246 | 18,999,414 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
GRUPO SUPERVIELLE S.A.
Notes to the non-accrued negative interestConsolidated Financial Statements
As 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 recognized2018 presented in the statement of income by (93,698).
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 prepared in accordance with Argentine Banking GAAP, which differs in certain significant respects from US GAAP. Such differences involve methods of measuring the amounts shown in the consolidated financial statements, as well as additional disclosures required by US GAAP and Regulation S-X of the SEC.
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 include the reversal of the adjustments to the consolidated financial statements for the effects of inflation, because, as permitted by the Securities and Exchange Commission (“SEC”), it represents a comprehensive measure of the effects of price-level 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.
The main differences, other than inflation accounting, between Argentine Banking GAAP and US GAAP as they relate 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.
The following tables summarize the main reconciling items between Argentine Banking GAAP and US GAAP:
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015comparative format
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
Items | At 12/31/2018 | At 12/31/2018 (per currency) | At 12/31/2017 | At 01/01/2017 | ||||||||||||||||||||||||
| Dollar | Euro | Real | Others | |||||||||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||
Deposits | 31,319,494 | 30,916,259 | 403,235 | — | — | 20,796,980 | 13,639,827 | |||||||||||||||||||||
Non-financial public sector | 7,899,762 | 7,899,699 | 63 | — | — | 5,638,296 | 1,466,769 | |||||||||||||||||||||
Financial sector | 2,978 | 2,978 | — | — | — | — | — | |||||||||||||||||||||
Non-financial private sector and foreign residents | 23,416,754 | 23,013,582 | 403,172 | — | — | 15,158,684 | 12,173,057 | |||||||||||||||||||||
Liabilities at fair value with changes in results | 152,886 | 152,886 | — | — | — | — | — | |||||||||||||||||||||
Other financial liabilities | 503,747 | 432,784 | 67,625 | — | 3,338 | 567,745 | 884,594 | |||||||||||||||||||||
Financing received from the Argentine Central Bank and other financial entities | 6,789,700 | 6,785,958 | 3,742 | — | — | 4,173,736 | 1,235,542 | |||||||||||||||||||||
Subordinated negotiable obligations | 1,383,817 | 1,383,817 | — | — | — | 1,012,661 | 2,540,431 | |||||||||||||||||||||
Othernon-financial liabilities | 514,782 | 514,782 | — | — | — | 153,315 | 66,396 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
TOTAL LIABILITIES | 40,664,426 | 40,186,486 | 474,602 | — | 3,338 | 26,704,437 | 18,366,790 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
NET POSITION | 1,877,205 | 1,777,073 | (10,821 | ) | 10,983 | 99,970 | 4,484,809 | 632,624 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Reconciliation
| 31. | CURRENT/NON-CURRENT DISTINCTION |
The group has adopted the presentation of net income:all assets and liabilities in order of liquidity due to this presentation provides information that is reliable and more relevant.
As of December 31, 2018 and 2017, the amount expected to be recovered or settled after more than twelve months for each asset and liability line item is as follows:
|
|
|
| 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 |
| |||
ASSETS Cash and due from banks Cash Argentine Central Bank Other local financial institutions Others Debt Securities at fair value through profit or loss Derivatives Repo transactions Other financial assets Loans and other financing To thenon-financial public sector To the financial sector To theNon-Financial Private Sector and Foreign residents Other debt securities Financial assets in guarantee Current income tax assets Inventories Investments in equity instruments Property, plant and equipment Investment Property Intangible assets Deferred income tax assets Non-current assets held for sale Othernon-financial assets TOTAL ASSETS 12/31/2018 12/31/2017 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 33,687,553 — 33,687,553 16,384,924 — 16,384,924 4,789,701 — 4,789,701 4,486,951 — 4,486,951 27,388,784 — 27,388,784 10,408,716 — 10,408,716 1,498,669 — 1,498,669 1,415,251 — 1,415,251 10,399 — 10,399 74,006 — 74,006 15,112,115 — 15,112,115 16,837,925 — 16,837,925 15,924 — 15,924 39,740 — 39,740 — — — 4,945,864 — 4,945,864 1,698,054 — 1,698,054 2,388,795 — 2,388,795 56,882,652 20,325,812 77,208,464 55,648,429 31,460,241 87,108,670 7,526 25,276 32,802 3,848 44,295 48,143 358,177 40,374 398,551 484,816 101,542 586,358 56,516,949 20,260,162 76,777,111 55,159,765 31,314,404 86,474,169 1,218,922 3,092,173 4,311,095 377,588 152,303 529,891 2,004,112 3,105 2,007,217 1,921,219 — 1,921,219 612,718 -20,660 592,058 189,463 -9,005 180,458 69,918 — 69,918 156,306 — 156,306 — 10,404 10,404 1,084 67,797 68,881 — 2,183,734 2,183,734 — 2,060,551 2,060,551 — 413,357 413,357 — 287,072 287,072 — 2,710,837 2,710,837 — 459,420 459,420 6,303 815,515 821,818 90,485 1,066,495 1,156,980 2,800 — 2,800 — — — 173,711 714,937 888,648 74,719 628,735 703,454 111,484,782 30,249,214 141,733,996 99,056,541 36,173,609 135,230,150
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.).
GRUPO SUPERVIELLE S.A.
|
| 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 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)
Equity and Shareholders Equity include 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 life 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, 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 made by the Company 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”. 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 the consumer portfolio, the charge-off takes place when the loan is approximately 360 days past due. For the commercial portfolio, the situation depends on the individual evaluation of the credit risk. All charged-off loans are registered in off balance accounts while the Group continues its collection efforts.
In addition, under BCRA rules, the Group records recoveries on previously charged-off loans directly to income and records the amount of charged-off loans in excess of amounts specifically allocated as a direct charge to the consolidated statement of income.
The Group’s consumer portfolio consists principally of personal loans and credit card loans.
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.
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 ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
LIABILITIES | 12/31/2018 | 12/31/2017 | ||||||||||||||||||||||
| 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 | 94,819,436 | 86,578 | 94,906,014 | 83,284,540 | 443 | 83,284,983 | ||||||||||||||||||
Non-financial public sector | 11,105,477 | — | 11,105,477 | 9,112,185 | — | 9,112,185 | ||||||||||||||||||
Financial sector | 25,236 | — | 25,236 | 23,183 | — | 23,183 | ||||||||||||||||||
Non-financial private sector and foreign residents | 83,688,723 | 86,578 | 83,775,301 | 74,149,172 | 443 | 74,149,615 | ||||||||||||||||||
Liabilities at fair value through profit or loss | 268,086 | — | 268,086 | — | — | — | ||||||||||||||||||
Derivatives | 94,222 | — | 94,222 | — | — | — | ||||||||||||||||||
Other financial liabilities | 4,091,866 | 175,373 | 4,267,239 | 5,493,412 | 281,143 | 5,774,555 | ||||||||||||||||||
Financing received from the Argentine Central Bank and other financial institutions | 7,159,251 | 873,586 | 8,032,837 | 4,625,374 | 580,392 | 5,205,766 | ||||||||||||||||||
Unsubordinated negotiable Obligations | 2,152,945 | 7,154,226 | 9,307,171 | 1,552,959 | 11,128,278 | 12,681,237 | ||||||||||||||||||
Current income tax liability | 791,272 | — | 791,272 | 1,217,961 | — | 1,217,961 | ||||||||||||||||||
Subordinated negotiable obligations | 26,150 | 1,357,667 | 1,383,817 | 19,172 | 993,489 | 1,012,661 | ||||||||||||||||||
Provisions | 11,641 | 75,274 | 86,915 | 8,934 | 109,423 | 118,357 | ||||||||||||||||||
Deferred income tax liability | 5,871 | 217,480 | 223,351 | 8,667 | 21,141 | 29,808 | ||||||||||||||||||
Othernon-financial liabilities | 4,593,346 | 811,652 | 5,404,998 | 4,577,760 | 1,035,294 | 5,613,054 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
TOTAL LIABILITIES | 114,014,086 | 10,751,836 | 124,765,922 | 100,788,779 | 14,149,603 | 114,938,382 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
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.A financial asset 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 shoulda financial liability shall 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 defaultoffset and the lossnet amount presented 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 GAAPwhen, 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 GAAPonly when, the Group fulfill with paragraph 42 of IAS 32, and currently has recorded “Holding of trading securities”, “Unlisted Government securities”, “Investments in listed corporate securities”, “Securities issued bya legally enforceable right to set off the Argentine Central Bank listed”recognized amounts; and “Securities receivable under spotintends either to settle on a net basis, or to realize the asset and forward purchases pending settlement” at fair value, meanwhilesettle 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.
The table below shows the investments classified as trading securities:
|
| 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 |
| |
Other “Securities issued by Argentine Central Bank”, “Unlisted corporate bonds”, “Unlisted government securities” 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 with the unrealized gain and losses reported as net of income tax included in other comprehensive income in the Shareholders´ equity, in accordance with ASC 320 “Investment — Debt and Equity Securities”.
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 table below shows the investments classified as available for sale securities:
|
| 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 |
|
(*)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.
|
| 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 | ) |
(*)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
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 ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
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 | ) |
The maturities of available for sale securities as of December 31, 2017 are as follows:
|
| 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 |
|
liability simultaneously.
In addition, the Group has evaluated whether there wasmaster netting arrangement that not satisfies the offsetting criteria but creates a declineright ofset-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.business.
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 asAs of December 31, 2018, 2017 and 2016:January 1, 2017, the amount of assets and liabilities subject to a master netting arrangement not offset is as follows:
|
| 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.
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)
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:
12/31/2018 | Amounts subject to a master netting arrangement not offset | Net amount | ||||||||||
| Financial asset / (Financial liability) | Collateral | |||||||||||
Credit cards transactions | (1,937,072 | ) | 530,451 | (1,406,621 | ) | |||||||
|
|
|
|
|
| |||||||
Total | (1,937,072 | ) | 530,451 | (1,406,621 | ) | |||||||
|
|
|
|
|
| |||||||
· 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.
12/31/2017 | Amounts subject to a master netting arrangement not offset | Net amount | ||||||||||
| Financial asset / (Financial liability) | Collateral | |||||||||||
Credit cards transactions | (1,936,899 | ) | 457,800 | (1,479,099 | ) | |||||||
|
|
|
|
|
| |||||||
Total | (1,936,899 | ) | 457,800 | (1,479,099 | ) | |||||||
|
|
|
|
|
| |||||||
· Future principal payments will be sufficient to recover the current amortized cost of these investments.
01/01/2017 | Amounts subject to a master netting arrangement not offset | Net amount | ||||||||||
| Financial asset / (Financial liability) | Collateral | |||||||||||
Credit cards transactions | (1,420,263 | ) | 390,855 | (1,029,408 | ) | |||||||
|
|
|
|
|
| |||||||
Total | (1,420,263 | ) | 390,855 | (1,029,408 | ) | |||||||
|
|
|
|
|
| |||||||
· 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.
As of December 31, 2017 and 2016 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.
| 33. | SUBSEQUENT EVENTS |
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 benefitsnot other subsequent events 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.24.
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.F-83
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 sheet 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 |
|
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 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)
|
| ||
| |||
|
| ||
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
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)
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.
Items 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 by the Argentine Central Bank” includes a reverse repo transaction operation for an amount of Ps. 3,738,790 that it 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. | — |
|
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, 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 determined 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.
The following table sets forth 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 |
|
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)
j)Cash Flow
The statement 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, investing 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. 2014-09
In May 2014, the FASB issued the Accounting Standard Update No. 2014-09 “Revenue from Contracts with Customers (Topic 606)”. The guidance in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts).
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.
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.