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Grupo Supervielle S.A. Reports 4Q20 & FY20 Consolidated Results

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FY 2020 Net Income of AR$3.4 billion and AR$657.9 million in 4Q20

FY 2020 Comprehensive Net Income of AR$3.9 billion and AR$981.1 million in 4Q20

Grupo Supervielle S.A. (NYSE: SUPV) (BYMA: SUPV), ("Supervielle" or the "Company") a universal financial services group headquartered in Argentina with a nationwide presence, today reported results for the three- and twelve-month periods ended December 31, 2020.

Starting 1Q20, the Company began reporting results applying Hyperinflation Accounting, in accordance with IFRS rule IAS 29 ("IAS 29") as established by the Central Bank. For ease of comparison, figures for all quarters of 2019 have been restated applying IAS 29 to reflect the accumulated effect of the inflation adjustment for each period through December 31, 2020. This report also includes Managerial figures which exclude the IAS29 adjustment for 4Q20, 3Q20, 2Q20 and 1Q20 and present 4Q19 figures as they were previously reported according to Central Bank Rules until December 31, 2019 and before the adoption of Rule IAS29 in 1Q20.

Updated details with regard to the Argentine government’s social aid, monetary and fiscal measures to mitigate the economic impact of the Covid-19 pandemic can be found on page 46.

Management Commentary

Commenting on fourth quarter and fiscal year 2020 results, Patricio Supervielle, Grupo Supervielle's Chairman & CEO, noted: "Our flexible business model allowed us to adapt to the many challenges posed by the pandemic, the deep recession that ensued and a shifting regulatory framework. During 2020, we achieved low double digit ROAE adjusted for inflation and including comprehensive income. We also further increased our coverage ratio throughout the year while maintaining strong liquidity levels, despite operating in a very difficult environment. In this complex scenario, we continued to manage the credit cycle, leveraging our flexibility with the goal of balancing risk and profitability. In parallel, we diligently worked on executing our transformation strategy which is not only aimed at driving sustainable growth as demand resumes but at enhancing our current competitiveness."

"Throughout the quarter we continued to see pressure on NIM, impacted by higher cost of funds resulting from the floor on interest rates on time deposits and subsidized rates on loans. We expect these conditions to continue in the near term."

"On our digital transformation, we are accelerating the initiatives that were already in motion, both in our digital and automatic channels, given the significant growth of active digital customers at the bank, increasing by 73% since the end of 2019. Moreover, we have extended the thorough and profound digital transformation of our business across all subsidiaries under the rubric of three axes: i) the generation of a modern technological architecture, ii) a review of our entire branch network infrastructure, and iii) the addition of capabilities to connect to third parties and prepare for open banking. The successful implementation to date has benefitted from a deep cultural transformation across the Company, consolidating the adoption of agile working methodologies and a new operating model that places the customer at the center of all we do."

"Over the next two years, we plan to step-up investments to scale innovations and advance on the progress started in 2020. In terms of our branch infrastructure, our goal is to evolve our network by improving the client experience driven by a mix of higher digital adoption, as well as effectively serving our customers in expanded 24-hour service lobbies. Pilot programs we have been implementing are demonstrating significant improvements in the Net Promoter Score and efficiency and we plan to roll out these enhancements across our branch network. We are also investing in technology to facilitate API architecture to enable integration with internal and external developers. As an example, during the first quarter of this year we plan to integrate several new financial services through fintechs within our homebanking and mobile channels."

"Looking ahead, on the macro front we see the economy beginning to rebound following the 10% GDP contraction last year and in the context of better external conditions, particularly higher commodity prices. These are positively impacting export activity and providing a solid foundation for real GDP to post an expected recovery above 7% in 2021. Recovery, however, is still subject to advances in the vaccination program to contain the health crisis, the resumption of IMF negotiations and the regulatory framework."

"We are confident that the advancements on our digital transformation, including evolving our branch model, will place Grupo Supervielle in a position of strength to drive profitable growth when loan demand resumes," concluded Mr. Supervielle.

Fourth Quarter 2020 & FY20 Highlights

Attributable Net income of AR$657.4 million in 4Q20, compared to a loss of AR$703.7 million in 4Q19 and a profit of AR$957.0 million in 3Q20. Attributable Net Income of AR$3.4 billion in FY20 compared to a Net loss of AR$4.0 billion in FY19.

4Q20 QoQ performance was explained by: i) a lower financial margin resulting from the increase in cost of funds due to the full impact in the quarter of higher market interest rates and minimum rates on time deposits while yields on loans remained stable impacted by credit lines at subsidized rates, ii) lower volumes in Central Bank Securities holdings and Repo transactions, and iii) higher administrative expenses in connection with initiatives related to the acceleration of the digital transformation process. These were partially offset by: i) lower LLPs following the creation of Covid-19 anticipatory provisions in previous quarters, and ii) lower personnel expenses despite some non-recurring charges on severances and early retirement program in the quarter.

Attributable Comprehensive Income of AR$ 981.1 million in 4Q20 compared to a loss of AR$582.9 million in 4Q19 and a gain of AR$846.8 million in 3Q20. Attributable Comprehensive Income of AR$ 3.9 billion in FY20 compared to a loss of AR$3.9 billion in FY19.

ROAE of 7.4% in 4Q20 compared with -9.6% in 4Q19 and 11.0% in 3Q20. ROAE calculated including Other Comprehensive Income was 11% in 4Q20. ROAE calculated including Other Comprehensive Income was 11.4% in FY20.

Profit before income tax of AR$753.6 million in 4Q20 compared to a loss of AR$778.3 million in 4Q19 and a profit of AR$970.3 million in 3Q20. Profit before income tax of AR$ 4.1 billion in FY20 compared to a loss of AR$3.7 billion in FY19.

Revenues were down 8.0% YoY and 13.4% QoQ.

Net Financial Income of AR$9.3 billion down 15.0% YoY and 15.2% QoQ. Net Interest Margin (NIM) of 19.5% was down 950 bps YoY, and 170 bps QoQ

The total NPL ratio was 3.7% in 4Q20 decreasing by 374 bps YoY and 80 bps QoQ. The QoQ NPL decline was mainly due to the write-off of atomized consumer loans in the personal & business banking segment reflecting the Company´s credit policy of writing-off delinquent loans at 270 days.

Loan loss provisions (LLP) totaled AR$1.0 billion in 4Q20, down 34.4% YoY and 66.6% QoQ. The level of provisioning reflects the Company’s IFRS9 expected losses models. The Coverage ratio increased to 191.5% from 83.0% in 4Q19 and 181.3% in 3Q20. As of December 31, 2020, collateralized non-performing commercial loans increased to 80% of total, from 78% as of September 30, 2020 and 58% as of December 31, 2019.

Efficiency ratio was 72.8% in 4Q20, compared to 79.9% in 4Q19 and 61.2% in 3Q20. Excluding non-recurring severance costs and early retirement charges, Efficiency would have been 66.3% in 4Q20. The Efficiency ratio was 64.9% in FY20, compared to 69.0% in FY19. Excluding non-recurring severance payments and early retirement charges, the FY20 efficiency ratio would have been 61.9% compared to 64.2% in FY19, while Personnel expenses decreased 2% YoY.

Loans to deposits ratio of 61.8% declining from 103.6% as of December 31, 2019 and compared to 60.6% as of September 30, 2020.

Total Deposits measured in comparable AR$ units at the end of 4Q20 increased 47.4% YoY but declined 5.8% QoQ to AR$178.6 billion. The QoQ decline in AR$ deposits was mainly driven by the strategy to reduce institutional funding given the decline in market spreads, while core peso deposits remained flat.

Loans measured in comparable AR$ units at the end of 4Q20 declined 12.0% YoY and 3.6% QoQ to AR$110.4 billion.

Total Assets were up 22.9% YoY, but declined 5.0% QoQ, to AR$249.9 billion as of December 31, 2020. The QoQ performance reflects a 3.6% decrease in loans along with lower holdings of Central Bank instruments following the decline in market spreads.

Common Equity Tier 1 Ratio as of December 31, 2020, of 13.8%, compared to 14.0% reported as of September 30, 2020 and 11.8% reported as of December 31, 2019.

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