Good morning, everyone, and welcome to the Grupo Supervielle Fourth Quarter 2021 Earnings Call. This is Ana Bartesaghi, Treasurer and IRO. A slide presentation will accompany today's webinar, which is available in the Investors section of Grupo Supervielle's Investor Relations website. Today's conference call is being recorded. 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. [Operator Instructions] Speaking during today's call will be Patricio Supervielle, our Chairman and CEO; and Mariano Biglia, our Chief Financial Officer. Also joining us are Alejandro Stengel, Second Vice Chairman of the Board and Vice CEO; and Oscar Ramírez, First Vice Chairman of the Board; Alejandra Naughton, Board Member of several Grupo Supervielle subsidiaries will also be joining us for today's call. All will be available for the Q&A session. As a reminder, today's call will contain forward-looking statements, which are based on management 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-looking statements 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. Mariano Biglia, our CFO, will start the call discussing our performance for the quarter and our near-term outlook. Mr. Patricio Supervielle, our Chairman and CEO, will follow with an update on our mid-term strategy initiatives.

Thank you, Ana. Good morning, everyone. Thank you for joining us today. Please turn to slide four of our earnings presentation. Economic activity continuing to grow at our pre-pandemic levels, market conditions made significant macro and regulatory changes, including high inflation, negative real interest rates, change in currency and industry loans at historical lows. Productivity in the quarter was negatively impacted by one-time personal expenses related to healthcare to patients, together with losses in Q2, reflecting inflation and higher loan loss provisions. Profound regulations and higher taxes also impacted performance, resulted in an attributable net loss of nearly AR$607 million where we posted regular profitability, when excluding non-recurring personal charges. In relation of our strategy to capture operating efficiencies has allowed us to reduce personnel expenses. Through the non-recurring, early recurring charges, our efficiency ratio improved 170 basis points sequentially, although it remains highly impacted, a lower revenue base. Also, we retained strong liquidity and an adequate capital base, closing the year with a Tier 1 ratio of 12.7%, aboard our strategic transformation initiatives and long term sustainability. We remain high inflation, real estate investments or it is on sovereign forms. The ESG form in line with our goal to more broadly integrate ESG criteria in our strategic planning, we'll begin reporting under the adequate framework in our 2021 sustainability report expanding on our current re-reporting. Sustaining for our commitment to long-term value creation, Atilio will discuss shortly how we are advancing on our valuation strategy to drive ROE improvement and related goals for 2022. Now please turn to Slide 5. In terms of lending, we recover market share year-over-year, even while our loan book posted the low-single-digit contraction remaining at historical low, currently loan were up just over 2% year-on-year, compensating the decline in US dollar denominated loans. Now…

Thank you. Thank you, Mariano. And good day, everyone. While work is being done to stabilize the economy, the financial sector in Argentina will continue to face macroeconomic and regulatory challenges that we expect we'll go beyond this year. Concurrently the pandemic has changed -- Business lives, through accelerated digital adoption and remote work. And along with these changes, we too have accelerated our initiatives to anticipate our client's needs and the changing environment in which we operate. This context we reaffirm our focus long term value creation and are advancing on our six strategic pillars to improve return on equity -- rate during acquisition expand digital adoption, continue to capture operating efficiencies, lower cost of funding and maintain healthy asset quality. We are executing our strategy on three key fronts. First, accelerating the digital and operational transformation of Banco Supervielle, scaling customer acquisition and executing on our omnichannel and branch transformation strategy. Second as you know, we are transforming the business model from a consumer finance business into a full digital banking platform to drive profitability. The third at Cordial and invertir beyond invertironline we aim to diversify revenue origination beyond of Argentina. So next slide. So we'll discuss how leading indicators of our transformation confirm by the right track of these initiatives and elaborate on our key goals for this year. Now please turn to Slide 12. Starting with Banco Supervielle retail customer base we added 53,000 new retail customers in 2021 of which were 80% are digital. Digitized clients in turn increase over 30% year-on-year. We also expanded the share of digital and automatic personal loan consumers over a retail customers by five percentage point -- to 40% at year end Asset management was -- up 80% year-on-year with assets under management more than doubling as we…

Thank you, Patricio. At this time, we will be conducting question-and-answer session. [Operator Instructions] The first question comes from Ernesto Gabilondo with Bank of America. Please go ahead, Ernesto.

Thank you, Ana. Hi. Good morning, Patricio and Mariano, and all your team. Thanks for your presentation and for the opportunity. I have three questions, but I will make one question and then I will raise my hand again. So my question is on IUDÚ. We continue to see a high level of NPLs and cost of risk, of around 19% and 16% respectively. And also, we're looking to the reserve coverage ratio at IUDÚ it seems to be low at 60% for this type of segment. So it would be interesting to know, what would be IUDÚ's targets for asset quality? And when do you expect to start like with some key performance indicators for IUDÚ? And when do you expect IUDÚ to become profitable? Also, related to the same question, it will be interesting to understand, the IUDÚ’s strategy in the short term? Would it be more focused on client growth over profitability? Or do you expect both to be aligned in the short term? Thank you.

Hey, Mariano, would you like to answer the question on asset quality?

Sure, Patricio.

Yes.

Hi, Ernesto, thank you for your question. Regarding NPL at IUDÚ, we are seeing the NPL ratio between 19% and 20% and what we expect – we were still seeing the effects of the automatic referral securing the pandemic, which ended at the end of March, regarding personal loans end up – at the end of March 2021. And so we still have the NPLs from that loan portfolio which was much more opportunity for these business segments as compared to first half. So we're still working in the recovery of this portfolio. And finally, if NPLs will be eventually not recovered will be written off in the last part to April 2022. So we have next two quarter which will might be some write-off which will lower the cost of return, will lower the NPL radio without the distortion that his portfolio bank. And then, during 2022, we'll start to see what we expect to become more similar to a medium-term trend which we expect to be -- to start five percentage points lower of the write-offs and then keep lowering until the end of the year. Remember, this business segment has a new customer profile. It's not only the new customer profile for the Walmart stores, now Changomas it's becoming a digital bank. So we expect to see a different profile of customers with better credit behavior, but we are still as it is a new development after Walmart. So upsetting NPL than what we can expect at the bank level. So we expect the NPL to be decreasing, but because of the prototype that I explained a second because of the new portfolio.

Thank you, Mariano. As we thinking and take the part of the strategy, but the straight answer when you ask whether the strategy is focused more on client growth or profitability or is both are aligned, the answer is yes, they are aligned as far as the aligned profitability and the current growth. Let me take a brief description of what the context we see in Argentina for Neobanks. And if you look at the performance of Neobanks in Argentina, they are not profitable. None of them are. And by the same token, another aspect which is a critical aspect I believe, which is the funding -- on the funding side. Although, let's say some of the -- let's say the best Neobanks in Argentina in terms of UX, a number of customers if they've achieved a certain level of funding is frankly, very low and it's almost irrelevant. I would like to show as a comparison, what happened with the funds that are being managed by the biggest company in Argentina with a fantastic UX Mercado Pago, MercadoLibre, they have maybe 2.5 million customers, but the funds they manage it's -- the volume is around 10% of the fund industry. So it's frankly irrelevant. And even though it's a fantastic company with US, which is absolutely fantastic. They have not been able to attract funding. I believe that the new banks to be successful, they need to attract customers that become -- that they transform or they choose, IUDÚ, as their principal bank. This is the key factor. In order to do these, you need to be able to offer certain types of services. We believe that we are doing and we are providing, which are the services that are traded. Let's say a traditional bank does, which are loans, credit cards and insurances. If you look at the transactional savings in Argentina, they are mainly in the banks or in the fund industry, but not in new banks as I said, so -- or in big tax. They are in the traditional bank. So our target for us to do is to as -- with a disruptive move to attract customers from traditional banks and get their principality with our company. This is the way we want to go further and we have in our products, the product suites that we have, we believe will enable us to acquire this principality with clients. By the same token, as I said, for us, the strategy will be not only we can grow, but also efficiency and profitability. For us this year will be a transformational year in terms of the operating business model and you will see a drastic reduction in cost all along your 2022, and I think then we will become -- we expect a company, IUDÚ, to become profitable as of 2023.

This is very, very helpful. Thank you very much.

Thank you, Ernesto. Our next question -- and thank you, you said you will be writing your headline later on. So our next question comes from Rodrigo Nistor with AR Partners. Please go ahead, Rodrigo Nistor.

Yes. Hi, good morning. Thank you for the opportunity. This is [Indiscernible] filling in for Rodrigo Nistor. Once again, congratulations on the clarity of the disclosures. They are really helpful. In your presentation you talk about the transformation of the bank embarking, but the banks can control many things, like the macro or central bank regulations. Who do you combined briefly on what you're doing to address your current weak spots and minimize the negative impacts of the operating environment?

Alejandro, do you like to follow on that question?

Yes. Thank you for your question, Rodrigo, sorry [Indiscernible]. Your comment is actually right on and we are focusing on the things that regardless of the context we can control. One of them is very tight expense controls. This includes every efficiency that we can make, and it extends to right sizing our network. We believe that the transformation we've embark on for some time now is allowing us to be able to capture many efficiencies, while at the same time enhancing customer experience and extending our reach through digital -- through our digital network. The other thing we're focusing on is enhancing our cost of funding is very important in the context that we face. And we are as we presented showing some progress in that regard. And finally, to continue the digital transformation will allow us to increase our acquisition of digital clients to adopt or get a higher proportion of our customer base to continue to adopt a digital and automatic channels. And also, leverage cross-sell opportunities in our portfolio. These are the key things that we're focusing on in what you well described is a challenging environment.

Thank you very much.

Mr. Pedero [ph]. So our next question comes from Juan Recalde with Scotiabank. Juan, go ahead.

Hi. Thank you guys. Thank you for taking my question. Can you hear me well?

That's very clear, Juan.

Okay. Perfect. So I have two questions. One is related to IUDÚ. And the relationship with what was -- what used to be Walmart. So how are you leveraging that partnership the partnership with now? It's call retail, how are you been leveraging that partnership to benefit IUDÚ? Can you elaborate as for example, to create -- to cover and to create cards to bring more customers to IUDÚ for example? So that would be the first question. And the second one would be related to the dividends. We know that there is this new regulation from the Central Bank that limits the percentage of profits that can be distributed it as dividends. So what should we expect in terms of dividend payments for 2022?

Regarding the question of the – to arrangement and transport and with a group of MRIs basically we signed a new contract. This contract is gives us a complete control of our customers before work in the area, in the period or the era of Walmart, you would go to the branches and you would see a Walmart financial services and there below in little letters, the name of our branch. Now this is called, I mean, all customers that we have, let's say, we have on an originated in this franchise, they belong to IUDÚ and they know that, so there's no confusion on that and we are able for us and we don't have any more the concern what's happened every time we renegotiate with a supermarket. These times are in our franchise and what we've been doing is transforming them to full digital clients working with the IUDÚ app. Looking forward the opportunities with the Changomas franchise, we believe they are important in the sense that of course there is when you have traffic in a supermarket, there's opportunities to get new customers and the people from Changomas. they have planned probably in 2023 or not this year, but next year to put in place a loyalty program which they know is extremely effective to data analytics to basically to do data mining and get new customers and we know that for that it's going to be for us it's a powerful tool also for attracting customers for let say in IUDÚ. But that's I would say in a nutshell, we have a very good relation. We talk with them every week -- we talk with them all the time how to basically perform better in stores and so on. But they know that we -- the way -- the operational model will be fully digital, particularly for instance when in the post sales of customers, they have to work through the app, no longer with people in the stores. Having said that, the main let's say origination we believe in the next few years will come from let's say internet from basically from the older plan we have from digital marketing, trying to attract customers from traditional banks and come to us. That's basically my answer.

Okay. That's very clear. And in terms of dividends, yeah?

Yes, let me answer in terms of dividends, central bank regulations and dividends for the bank and do we just enjoy the financial company, which are subject to Central Bank relations. The Holding Company, Grupo Supervielle is only affected indirectly because it only emits the dividends by the holding company averaging from the bank and IUDÚ. But in past years where we approved dividends of approximately 10% of our net profit, we funded all 100% of the dividend at the holding company was funded by dividends received from other subsidiaries not subjected to central bank regulation as various rules and as various asset management mainly. So we are we not -- we don't expect to approve events from the bank or IUDÚ as we haven't done that last few years. Even for this year that we recommended the shareholders to approve, it solely to offset the personal assets tax. So that can be funded with dividends from against real asset management and will not be limited by this regulation. Let me know if that's helpful.

That’s helpful. Thank you very much.

Our next question comes from Marlon [indiscernible] with JPMorgan. Hi Marlon, you can you can proceed -- you confirm your question now.

Hello Ana. Hi Patricio, actually Yuri Fernandes here. No, no worries. I wasn't using my link. I have a first one on margins, you mentioned you're expecting a better funding, we saw a decrease on deposits, which is still good loan to cost ratio, good liquidity ratios. So, my question is, what should we see for margins 2022 because we saw some expansion this quarter, but I don't know how much sustainable it is given I guess we have a new deposit regulation taking place in January, right, so maybe your first few 2022 may be more challenging given now minimal remuneration for a larger chunk offered opposed to base. The first question is margins, what you see, what do you expect for 2022? I have a second one regarding capital. We saw some decrease, you explained very well in the release, but my question is regarding the RWAs, we saw RWAs growing faster to most, so you can provide more color? And also your general view for capital during the year, like how do you expect to review this capital during the year? What do you see as the outlook for capital? Thanks very much.

Hey Mariano -- thank you Yuri for your question. Mariano, can you answer the question on margins?

Yes. Hello, Yuri. Thanks for your questions. First, regarding margins, I think you mentioned the recent regulations from January and February. Although it raised the interest rates on our time deposits and also raised the limit of -- to AR10 million of deposits that are at the highest interest rate now at 39%. These regulations also increased the earnings rate and the repo rate that we receive from central banks and also raise the cap on certain interest rates with credit cards going from 34% to 39% and also increasing the interest rates on subsidized loans. So, following on the increasing interest rates, although impacts of assets and liabilities, we think the net effect will be positive for 2022. Also -- and I think more important, we expect during 2022 to increase also our cost of funds. We've seen that during the fourth quarter of 2021. And cost of funds also will be very important. The role of [indiscernible] starting to -- but customers that are also saving accounts customers are not only the customers as you look at the past. And last inflation as we are long on inflation because we haven't hedged our net equity 100% inflation, mainly through inflation adjusted instruments as mortgages and sovereign bonds. Also high inflations will increase margin. So, those will be the main factors playing with the financial margin for 2022. Then, regarding capital, risk weighted assets, risk weighted assets have three components. The first and more important is the risk weighted assets of credit and that is very linked to the loan growth. Of course, it's not one to one relationship because there are certain particularities of the regulations, but it tends to go one on one with loan growth. And then we have market risk weighted asset and operational rates. Those are the two components, although less material that can also have an impact in terms of market risk sometimes on the hedge, we have against [indiscernible] can increase market requirements of capital and operational is related mainly to -- operational requirement of capital is mainly linked to revenues. So in the long-term, the increase in risk weighted assets will be linked to increase in loans, but in the short term there can be some mismatches. Lastly for capital in 2022. We expect to remain at a great level, in the range of 12% to 13%. Now we are at 12.7% having decreased in the last quarter from 14.1%. But the write offs in the quarter made an extraordinary decrease were if you look at the technicalities of the regulations that allow us to recover part of the expected loss provisions and other bad capital, we expect to recover 0.4% of Tier 1 ratio to our capital. So adjusting for that we would be in 13%, 13.1% So increase in risk weighted assets would lead to a small degree in the Tier 1 capital ratio, but always we see it above 12%.

That's pretty clear, Mariano. Thank you very much.

Thank you, Yuri. Our next question comes from Alejandra Aranda with Itau. Please Alejandra, go ahead.

Hi, good morning. Thank you for the opportunity. Most of my questions have been answered. But regarding the right sizing, I mean, how long should we expect this to continue? And what should we expect in terms of additional costs coming from this and the additional investments for this year?

Well, as I said in consumer finance, right sizing with the -- particularly, let's say large this year, it will be very large and this is already we can see this in the first quarter. But in the first quarter of consumer finance, as we said we stated we are reducing 25% of the workforce by first quarter 2022 through the change of operational model, but you might expect to continue to see this around the year. And regarding the bank, the capture efficiencies will continue because the transformation is ongoing and it has a lot to do with new digital processes, automation, digital adoption of clients, branch transformation. I don't know if you want to add something Alejandro on that, on the capital efficiencies.

Yes. As Patricio was saying, we will continue to capture these efficiencies, which, as you know, have been driven by a combination of digital adoption that was accelerated during the pandemic and also our investments of increasing automated channels and their availability to the public. In effect, what has happened is that, our clients are going to the bank at different hours, extended hours and even during weekends, deciding when and how to serve or self-serve from our services. And this is creating huge opportunities to rethink and optimize our branch network and also to extend our reach as our investments in digital transformation allow for digital acquisition of digital native clients. In terms of investments, I recall Mariano mentioned earlier on that the investments planned for 2022 in terms of our network are at approximately AR$ 5.1 billion, just to give you an idea, of second question and digital transformation initiatives are at around AR$1.2 billion.

Let me comment on investment, as what we mentioned in the presentation is AR$5.1 billion. In terms of sales for IT and digital transformation related investments, I'm going to [Indiscernible] for the transformation of the network. And regarding severance, I don’t know, we're asking also the -- some investment on severance during 2022. We got AR$2.6 billion or severance at the tight [ph] level. On top of that AR$500 million, as you do, where we started reductions already in the fourth quarter. And for 2022 we’ll still have headcount efficiencies at the bank and increasing at Q2 level. On a consolidated basis, there’s a AR$3.1 billion of cost in severance, that is, once per year plan. Q2 will be a bit no work in 2022 maybe in real terms [Indiscernible]. And still have high levels due to due to these efficiencies at our company.

Okay. Thank you very much.

Thank you, Alejandra. And now we're going to go back to Ernesto Gabilondo with Bank of America. Ernesto, please go ahead.

Thank you, Ana. So my last question is on your ROE expectations. I think the ROE of last year was minus 2%. So considering now you're 2022 perspectives, where do you see the ROE?

Yes. Please go ahead, Mariano.

Yes. So let me comment on -- although, we are not giving the ROE or net income guidance. Let me expand on the main factors. We see improvement in 2022 or expect in 2022 results. Although, there are still many moving parts to see the exact level, the precise level of net profit or ROE for the full year. As we saw during the presentation, 2021 net profit or net loss was impacted -- negatively impacted by regulations, our taxes are although I explain, some improvements, but most of them will be still in place during 2022. We will also keep a high level of each growth due to efficiencies are going to be a bit lower than 2021. But on the other hand, we will start to reduce the net loss from the new business segment, which is very, very significant or very significant in 2021 reaching or expecting to reach a breakeven at the end of the year or 2023 earlier. So, reducing loss from – mainly from customers with deposit, which is very important in high inflation environment that affects this company in more than another businesses will be very important in 2022. Also, although we are keeping costs -- additional costs from efficiencies, we’re starting to see lowering costs from the reductions we made in 2020 and particularly, in 2021. So we get 6% less get down at the bank level, we will allow us to have less personnel costs. And also in 2021, we reduced the space that we lease for the corporate business, according to IFRS 16. The savings of that agreement will be in 2022, 2023 not – because of the accounting rule. But in the net – in the length of the contract, that would be a significant savings. And so – those what I explained before that we could expect to allow us to have a higher NIM and producing cost, and trying to maintain cost of risk would be the main factors that will play 2022 ROE.

Thank you, Mariano. And then can you just remind us your macro expectations regarding inflation, interest rates and FX? And also, you were mentioning high inflation will help NIMs on higher inflation in government bonds. But how do you see this could be impacting the net monetary position?

Well, high inflation as we are hedging inflation for real estate assets and digital assessment bonds and mortgages is positive for our margin. But at the end of the day, it's neutral for the P&L, because we have a higher margin by a higher loss from the monetary position. So, our monetary position is now, and we expect in this environment during the year. It's lowering inflation to cover 100% of net equity. On top of that, we might have also a loan position in US dollar and that is mainly tactically and we expect to see a higher devaluation on those. So that will be the effect on inflation. Higher inflation impacts only the Euro business segment, but we are covered on a consolidated basis. And also for long-term deposits, inflation we started to work in 2022 forecast -- the 50% inflation then started to work with a 55% inflation projected. If inflation grows beyond that or much higher, let's say, below 50% [indiscernible] to real terms will be lower because that we at some point affect great demand. .:

Yes. Thank you very much, Mariano.

You’re welcome.

Thank you, Ernesto. Yes, and we have some questions in the panel. It says, could you please provide an update on InvertirOnline its growth and growth prospects?

Thank you. Thank you for an opportunity to talk about InvertirOnline. Last year 2021, we were able to increase our number of clients around 25% in terms of active users. We are above 110,000 active users. This is the metric This is one of the metrics by meaning active users, users that have been using – have been operating, transacting invertironline over the last 60 days. Invertironline, we believe that for us is important to gain traction in terms of growth in Argentina. For this we are launching in this quarter the new app mobile, which we believe will help us to bring traction as well as we are in the process of connecting digital wallet to provide customers who – and to refer let's say our customers to a digital wallet that eventually if they want to transact with cryptocurrencies. We are doing this with – in absolutely – in according to the standards of Argentine Regulation. At the same time, such a number of people Invertironline engineers and software developers, they are working on the international platform. We are working in implementation of a plan in order to launch services in the region and this is process and that's basically my answer.

Ladies and gentlemen, we have reached the end of today's Q&A session. Thank you for joining us today. We appreciate your interest in our company. We look forward to meeting more of you over the coming months and providing financial and business updates next quarter. In the interim, we will remain available to answer any questions that you may have. Thank you and stay safe.