Grupo Supervielle S A : 2Q20 Conference Call Transcript

August 21, 2020

Tanscript 2Q20 Earnings Conference Call

Supervielle Second Quarter 2020 Earnings Call Opening Remarks

Operator

Good afternoon and welcome to the Grupo Supervielle Second Quarter 2020 earnings call. A slide presentation will accompany today's webcast, which is available in the Investor section of Grupo Supervielle's investor relations website, www.gruposupervielle.com. As a reminder, all participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. As a reminder, today's conference call is being recorded.

At this time, I would like to turn the call over to Ana Bartesaghi, Treasurer and IRO. Please go ahead.

Slide 1

Ana Bartesaghi

Thank you. Good Afternoon everyone and thank you for joining us today.

Speaking during today's call will be Patricio Supervielle, our Chairman & CEO who will discuss the overall macro environment and Mariano Biglia, our Chief Financial Officer who will review our results for the quarter. Also joining us are Alejandro Stengel, Second Vice-Chairman of the Board and Bank CEO and Jorge Ramírez First- Vice Chairman of the Board. Alejandra Naughton, board member of several of Grupo Supervielle's subsidiaries will also be joining us for today's call. All will be available for the Q&A session.

Please note that starting 1Q20, as per Central Bank regulations, we have began reporting results applying Hyperinflation Accounting, in accordance with IFRS rule IAS 29. For ease of comparability, we have restated 2019 results, quarterly and for the year applying IAS 29 to reflect the effects of inflation adjustment for each period. Therefore, all results in this presentation are presented adjusted for inflation as of June 30, 2020, unless otherwise noted.

For your convenience, we have also included in our earnings report managerial results in nominal terms. This means, we are including 2Q20 financial results ex-IAS29, isolating the IAS29 impact for the quarter and also showing quarterly figures for 2019 in nominal terms as they were previously reported until December 31, 2019. You can find more details on Hyperinflation Accounting in our earnings report filed yesterday after the close of the market, as well as in the investor education presentation we have uploaded to our IR site last quarter along with the earnings materials for 1Q20.

Before we proceed, I would like to make the following Safe Harbor statement. Today's call will contain forward- looking statements which are based on Management's current expectations and beliefs and are subject to a number of risks and uncertainties, including as a result of the COVID-19 pandemic, and I refer you to the forward-

1 | P a g e

looking statement section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances.

I would now like to turn the call over to our Chairman, Patricio Supervielle.

Slide 2

Patricio Supervielle. Thank you, Ana. Good morning everyone. Thank you for joining us today. We hope you and your loved ones remain healthy and safe as we navigate this global pandemic.

If you're following the presentation, please turn to Slide 2.

We took early and decisive action to mitigate the impacts of the COVID 19 crisis. I am very proud of my team for the hard work and commitment as we navigate this challenging time.

First, we acted rapidly to protect the well-being of our employees and our customers, establishing protocols to promote safe banking and ensure the continuity of our operations.

Second, we are supporting our customers through government sponsored lending programs and undertaking a number of initiatives to support the health and welfare needs of the communities where we operate.

Third, in this low touch economy, we are rapidly executing our strategy to transform our company into a cutting edge, cost efficient and agile player with the ability to continuously serve the evolving needs and aspirations of our customers. And I will discuss in more detail shortly how we are leveraging accelerated digital adoption in this new normal.

Turning to our financial performance, we delivered higher profitability this quarter despite the unprecendented overall environment. We continued to improve operating efficiency supported by the streamlining undertaken last year and strict cost controls, all while continuing to invest in our digital transformation.

During the quarter we further revised our expected loss models to adjust for the current economic outlook, and made additional Covid-19 specific anticipatory provisions that have resulted in increased coverage. We have taken an even deeper look at our loan book by segment and industry sectors and will continue to make adjustments as the situation evolves.

Finally, our strong level of liquidity and efficient operating structure are strengthening our capital base allowing us to navigate this complex environment.

Slide 3

Moving to slide 3, we maintain a strong commitment to our customers and the communities in which we operate.

Starting with our customers, we are providing support to mitigate the impacts of this crisis through the different lending programs within the scope of the Central Bank initiatives:

• Assisting with the payroll and working capital needs of our SME and middle-market clients, we have granted a total of 7.1 billion pesos in new loans at a preferential 24% interest rate. At quarter-end, the balance of these loans accounted for 7% of our loan book. Loans to the smallest SMEs are guaranteed by FOGAR.

2 | P a g e

• We have also disbursed a total of 264 million pesos in zero interest loans to eligible customers. These loans, granted through credit cards in 3 subsequent disbursements, have a 12-month tenor and a six-month grace period. They are fully guaranteed by FOGAR, while FONDEP also provides a 15% annual nominal rate to financial institutions over the amount disbursed. This program was recently extended until the end of September.
• In addition, approximately 4.5 billion in unpaid credit card balances and loans were automatically rescheduled in line with the deferral programs established by the Central Bank.

We are also undertaking several intiatives to assist the communities in our main markets of operations - mainly Buenos Aires, and the provinces of Mendoza and San Luis in the fight against Covid-19.

• For example, we have taken extraordinary steps to ensure that an additional of 136 thousand people that are receiving the government's Covid-19 related emergency social assistance, can rely on the national ATM network.
• In addition, we have also made donations to social organizations dedicated to purchasing medical equipment and supplying food for the most vulnerable communities in our main markets.

Slide 4

Now turn to slide 4 for an update on our digital transformation.

The Covid-19 pandemic and measures established by the regulator and government to contain the spread of the virus have accelerated the adoption of digitalization in a traditionally cash-oriented culture.

As a reminder, branches re-opened for specific customers on April 3rd, with financial services deemed essential on April 13th. Since then, bank branches have been allowed to open gradually for specific transactions, with prior appointment, and complying with certain health and safety requirements. All other banking activities are being performed through digital means.

Simultaneously, in the current low-touch economy we are rapidly executing on our digital transformation strategy and introducing new functionalities across our business segments, while keeping best in class cybersecurity standards. This has driven strong growth in digital and automatic transactions across our company.

Starting with our Banking operations, as you can see on the top of this slide:

• The share of Home Banking and Mobile Banking transactions saw sequential increases of over 50% and 70%, respectively.
• Automatic transactions - including ATMs and cash dispensers - accounted for 61% of total transactions, keeping a sustained trend. We are currently conducting pilots at selected branches to expand self-service areas.
• In total, 94% of transactions this quarter were conducted through our digital and automated channel.
• By contrast, transactions at traditional tellers plummeted 68% sequentially, accounting for only 6% of total transactions in the quarter.

3 | P a g e

• At the same time, 70% of total time deposits in July were made through digital channels, up from just 47% in January.
• Among SMEs, an important customer segment for us, we are driving exponential growth in E-CHEQs, with the issuance of E-CHEQs increasing sharply to a total of 4 billion pesos in July. We are also pleased with the significant adoption observed in our e-factoring product.

We are also seeing rapid adoption in our Consumer Finance business since we added new App functionalities beginning last February, both in terms of mobile payments and digital onboarding.

Finally, our online broker InvertirOnline, experienced a spike in usage with new accounts increasing over 150% when comparing July with the levels observed in February, and transactions more than tripling during that period.

Slide 5

As you can see on slide 5, the use of digital channels has continued to accelerate significantly across customer segments between February and July.

Growth rates are doubling to tripling in some channels, and in other channels we are reporting even higher increases.

For example, use of our dedicated senior citizens app with face recognition more than doubled as we have been actively promoting the accelerated adoption of digital channels among this group of customers.

Also, Personal mobile banking usage tripled.

As these low touch transactions continue to grow, we will continue to achieve greater operating efficiency across the business.

Slide 6

Please turn to slide 6 for a brief overview of the macro environment.

The Argentine economy appears to be rebounding somewhat following the sharp drop in industrial production recorded in March and April. Montlly industrial production advanced sequentially in the low teens in May and June, driven by the gradual relaxation of social distancing measures and other healthcare protocols, along with the combined effects of stimulatory fiscal, monetary, and credit measures. Other sectors like construction, cement and vehicle production also saw improved performance.

However, the pace of the recovery remains uneven with economic sectors that are dependent on close contacts, particularly services, continuing to struggle. With labor market conditions significantly deteriorated, consensus expectations and ours, currently call for a contraction in GDP of 12.5% for 2020.

These dynamics have put pressure on expected inflation, while monthy inflation remains at low levels in the quarter, kept in check by the lengthy lockdown. In this context, monetary policy interest rates have remained relatively stable througout the quarter at 38% since dropping to 40% in March, down from 55% last December.

Finally, the recent Argentine government debt agreement with private creditors is a significant step. This clears the way to start negotiations with the IMF as a further step towards normalization of fiscal and monetary policies.

4 | P a g e