Good morning, everyone, and welcome to Grupo Supervielle Second Quarter 2023 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. [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 is Alejandro Stengel, First Vice Chairman of the Board and CEO, at Banco Supervielle. All will be available for the Q&A session. As a reminder, today's call will contain forward-looking statements based on management's current expectations and beliefs and subject to several risks and uncertainties. I refer you to 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 change events or circumstances. Patricio Supervielle, our Chairman and CEO, will start the call discussing the key highlights for the quarter and priorities for 2023 as well as an update on macro views for this year and 2024. Afterwards, Mariano Biglia, our CFO, will take a deeper look at our performance and near-term perspective. This will be followed by a Q&A session. Patricio, please go ahead.

Thank you, Ana. Good morning, everyone. Thank you for joining us today. I will begin my presentation with Slide 3. We continue executing our strategic plan while navigating complex macro and political environments with weak loan demand. The momentum that we saw at the beginning of the year continued through the Second Quarter with profitability across all business units. Our program is on track with ROE improving to 18% in real terms in the quarter. For the first half of the year, ROE increased to 10% from a negative 6% in the same period last year. Our results for the first half reflect strong asset and liability management, our prudent approach to lending and significant progress in streamlining operations. This resulted in revenue growth, healthy asset quality, significant improvement in operating efficiency and profitability. We continued deepening our transformation, driving digitalization and innovation while capturing customers beyond our physical footprint. Starting June 3, we were the first bank in Argentina to expand the time frame for money market investment to 24/7. This initiative has been well received with 90,000 clients already investing through this platform. As we look to the remainder of the year, our key priorities include, first, continued focus on profitability and cross-selling products to existing customers. In particular, we are cross-selling insurance, investment products and cash management services while also driving loans above market growth. InvertirOnline, our online brokerage business continued to deliver a very strong performance, active customers doubled year-to-date with assets under management up 49% in real terms since December last year. Second, we're closely monitoring market conditions and managing assets and liabilities to protect financial margins and the group's capital and continue with a prudent credit risk approach. Our shareholder equity remained fully hedged against inflation while we are also loaning in U.S. dollars.…

Thank you, Patricio, and good day, everyone. Please turn to Slide 6 for an overview of our performance for the past 6 months of the year. As Patricio just noted, the consistent execution of our strategy has driven a positive swing in profitability in line with our expectations. Net income improved to ARS 7 billion with ROE at nearly 10%, up from a net loss of ARS 4.4 billion, a negative ROE of 6% in the first 6 months of last year. This improved year-on-year performance was mainly driven by a combination of strong revenue growth and lower costs and provisions. Starting with revenues. Net financial income was up 9% or over ARS 7 billion, reflecting higher spreads and volumes on our investment portfolio. Our brokerage business also performed very well, driving fee income growth of slightly over 2% or close to ARS 500 million. On the cost front, rightsizing and operating efficiencies initiatives implemented in 2022 contributed to a 9% decline in personnel expenses or ARS 3.6 billion. In addition, our tight focus on cost controls resulted in a mid-single-digit year-on-year reduction in administrative expenses and D&A equivalent to savings of ARS 1.1 billion. Cost savings reflect the reduction of operating expenses as we do the transfer of smaller San Luis Province branches to Banco Nación, the decrease in corporate office lease space and selected branch closing. We also reported a good performance in loan loss provisions, down nearly 35% or close to ARS 3.3 billion reflecting both a shift away from consumer finance loans together with growth in middle market financing. Lastly, other income and losses declined nearly 6% or ARS 736 million, reflecting a drop in credit card benefits together with lower turnover taxes paid. Now for a quick update on turnover taxes. There is more detail…

Thank you, Mariano. At this time, we will be conducting the Q&A session. [Operator Instructions] Our first question comes from Ernesto Gabilondo from Bank of America. Ernesto María Gabilondo Márquez: Congrats on your results, and thanks for the opportunity. My question will be on your impressions on the economic and political outlook after the primaries we have seen Milei got like the preference on the borders. So I would like to hear your thoughts. If Milei is elected President, he will likely need to make agreements to pass some of his campaign proposals, which I think could prevent a fast dollarization of the economy or to protect the Central Bank. However, at the same time, it could be a challenge to get into agreements to approve structural reforms, which I think are highly needed especially when Argentina has inflation and interest rates above 100%. So I would like to hear your views on what are your first impressions on the economic and the political outlook going forward?

Thank you, Ernesto. I will refer the answer to Alejandro. Simply, I would like to first start by saying that, of course, these results were a sort of a surprise for all of us. We did not expect a 1/3 scenario, which for each candidate more or less, and this reflects uncertainty but at the same time, a majority of Argentinians are demanding a change towards lower size of government, lower taxes and more of a private economy, creating jobs. So this is good. But as you well said, we need -- I mean, the next government will need teams, will need to make agreements because there are many structural changes that need to be done in the country, and this is quite a challenging scenario for next government. Alejandro, do you want to add? Emérico Alejandro Stengel: Yes, thank you for your question. I think that basically, the surprise in the actual outcome has introduced a greater degree of volatility that we've seen in the markets. However, having said that, the levels of deposits in pesos and dollars have remained pretty stable. And the devaluation of 22% in the official exchange units, followed by an increase from 97% to 118% in the reference peso interest rate, are trying to anchor future expectations of inflation and judging by the [indiscernible] contracts we show as of yesterday, this could hold up to some point in September or the middle of October. That is that after an initial turbulence, the guidelines of the government by which with these two movements, they would try to anchor the future devaluations and future increases in interest rates up to October, it seemed to be as of now, reasonably in line with what the government would like to have. Having said that, what we saw is…

I would like to add a few other positive effects but I, of course, am building on what Alejandro said, I think another positive effect would be a -- dollarization would imply also more liquidity for the banking system in the sense and a substantial growth in deposits because Argentines have the custom of saving part of their wealth approach, and then they would have the opportunity to invest in a -- put the deposits in Argentine banks. There's another thing also important. I think that with dollarization you remove the currency risk for foreign investments. So potentially, it could be a booster for foreign investments in the country that would be good for the banks and also for the economy as a whole. And finally, I think also that dollarization could trigger at a certain point in time, a consolidation because I think if you look at what happens in the past 25 years, there was no -- the only moment of consolidation when -- the real moment of consolidation was when there was a crisis in 2002, a big financial crisis. Then afterwards, they weren't just -- some transactions in terms of M&A, but they were only few of them, it was not a driver of consolidation. And I think it has to do a lot with a risk sensation for from management of banks towards making potential moves. When you remove the currency effect, and you have, let's say, dollar deposits. I think it's a major change and that major change could lead to a consolidation at a certain point in time, which I think is very good. Ernesto María Gabilondo Márquez: No, excellent. I think you made very interesting points. Just thinking if we have this dollarized economy, as you mentioned, that could help to have lower rates and to improve the lending activity in Argentina. How should we think about next year if that happens, considering that this year, most of the Argentine banks have benefited a lot from the asset liability management and investing in the Leliqs and repos and government paper. So how do you think that will be sustainable for next year?

I think that with consolidation at a certain point in time, there will be -- I'm sorry, with fiscal consolidation and fiscal normalization at certain points in time, there will be a pickup in loan demand, and then the assets that banks have today, in -- particularly on Central Bank securities, they will be transformed into loans and -- which is very healthy, by the way. Do you want to build on this answer?

Yes, I think for next year, we will see at the beginning, more or less what is happening now until the macro stabilizes, we will most probably see high levels of inflation, high levels of interest rates and then decreasing -- the inflation finally goes down, which is what we expect after the fiscal deficit is reduced and certain tariffs and other prices -- relative prices are fixed. So in that context, what we believe is that we will see a pickup in loan demand, first from the -- most probably from the corporate sector and then from individuals, which will, in turn, replace the Leliqs, which is our main asset class today. So that will allow us to replace the financial margin generated or obtained from Central Bank loans to financial margin obtained from loans, which would be our main business. Remember that in the past, we used to have a higher NIM than the industry. Now our NIM, although it's at very high levels, it's similar to the industry because all banks are doing the same, we are capturing deposits and investing in the Leliqs and treasury bonds. So what we expect for the midterm is that Leliqs, most -- all Central Bank instruments, the Leliqs and repos will be finally replaced growth in the loan portfolio and having a more sustainable long-term NIM.

We have a second question now -- new question from Carlo Gomez-Lopez.

So you talked about the surprise in the past elections. I've been surprised by the good results of the banks in this Second Quarter. And I was wondering, it applies to all the banks, right? All of you have had a particularly good second quarter. Should we understand that there is some element of either the interest rates or inflation evolving in a particular way, this quarter, which is different from the first, perhaps different from the third. Can we really extrapolate the second quarter or this first half of the year into the second half? I understand there's a lot of uncertainty. We don't know what is going to happen, but that will be my general question. Is this -- doesn't this feel a bit extraordinary, and would the normal profitability will be lower than this?

Thank you, Carlos. Mariano will answer your question.

Yes, sure, Patricio. So as you said, this quarter was somehow extraordinary. But nonetheless, we are seeing similar NIMs and spread during July and last time of August. So we will probably see a third quarter still probably in line with the second Q, but more broadly, stabilizing in the fourth quarter. So maybe this is not the level of spreads that we expect for middle or longer term, but it still has some time to run, particularly into the third quarter.

Sorry, Carlos, I would also like to add that the swing factor that you see -- that you have seen in our case. It also reflects all the structural changes and consolidations that we have been conducting over the past year by basically benefiting from the fact that the Consumer Finance business, which was a lagging factor for us is no longer there. And also we've been doing, I think, a pretty good job in terms of consolidating branches that are one close to the other and we have all -- we have built digital capabilities today that expand the footprint and we can open individual accounts or enterprise accounts out of our branch network. And so we are very happy on that. And so we are sort of -- we are preparing the company to -- for the next -- for a stabilized economy and preparing for growth again.

Okay. And now it is true, your -- the gap in profitability with the other banks is narrower. So again, my question will refer to all the industry because all the industry has been quite profitable. But you are right, Supervielle has gotten closer to the other banks. There's no question about that. If I can follow up a little bit. Going into 2024 and 2025, and I know that you wish you knew like all of us did. But realistically, I mean, it seems reasonable to expect that there has to be some type of adjustment -- of real adjustment of the variables becoming more real, the foreign exchange, the tariffs, everything has to adjust, has to go back to a more normal level. From the outside that would seem contractionary. And therefore, that the next, I would say, 1 year, 1.5 years might be tough. Now that's 1 perspective. How do you see it? And how are you positioning the bank for the next 2 years?

Alejandro, if you can? Emérico Alejandro Stengel: Sure. There is no question, Carlos, that we will see volatility in the next year or 1.5 years. Having said that, in terms of the bank strategy, we're not changing our strategy. We're still targeting our key market segments. We are focusing on middle to high-income individuals on one hand and trying to give them the best digital experience. We are also focusing on SMEs, and we're making good progress there as they -- we do significant cross-sell and innovation in those parts. Now in terms of the impacts of the stabilization plan, we think that initially, it will be recessionary. We are imagining 2024 with a decline in GDP of roughly 2.5% -- 2.3% and that would probably affect certain customer segments that are linked to consumption. But at the same time, two or three very positive things will be happening in the Argentine economy, sectors to which we are exposed. One is a significant change in the commercial balance for the energy sector. As you're probably aware, we are going from a deficit in our energy trade to a very significant surplus which will probably be heightened towards the second half of next year. And we also have significant growth and investment in mining. And at the same time, the impact of the drought will have gone, so you're likely to have a big swing also that will help you in terms of Central Bank reserves, creating a difference estimated by some economists at around $20,000 million. All this will have an extremely positive effect towards the second half of the year on these sectors to which we are exposed. So the answer would be 2024 is going to be a very [binary] year, you're going to see a very complicated first half with high inflation and deep recession as interest rates go up probably to control as best as possible this inflation. But then the second half with a significant change in expectations and being exposed to some of the sectors I mentioned, should help us drive growth in the direction we wanted because these are export-oriented segments that will have a significant advantage after the stabilization and the foreign currency adjustments.

I would like to add on what Alejandro said, in all those sectors that Alejandro mentioned, we are starting -- we have started to grow more aggressively. And we see also today already results that we are going above the market. So the decline that you were seeing in the first 2 quarters, we want to change this to grow in terms of market share. But also, the other thing is that we have -- if you look into our past history, a large part of the high NIMS was due to a big percentage of mid market share in personal loans, due to our large segments of individuals that get their salaries or their pensions, particularly senior citizens. When inflation goes down, we will start to see, again, the effect of high NIMS in personal loans, probably in the second half of 2024 and that will help us to resume growth, to get profitability from that side also. I want to add, I think is -- I don't know, you want to add something?

I can maybe add just a brief summary on the very short-term view. So how we are positioned to go through these upcoming months, where we for sure are going to see a lot of volatility. Right now we are very liquid. It's important to highlight that we're very liquid both in pesos and U.S. dollars. After the elections, for instance, we didn't see any reduction in deposits, in particular, dollar deposits were very stable. But we are keeping levels of liquidity of about 70% and also in pesos because our -- 40% of our assets is in Leliqs -- Leliqs or repos with the central bank. Repos are 1 day. Leliqs are 28 days, but they are issued every week. So they have a tenure of about 14 days on average. So that and having [cash] on very short-term loans makes us have a very short-term balance with high liquidity again, both in pesos and dollars, and we are 100% hedged against inflation. There we have real estate, we have mortgages that are judged by [UVA], and we have treasury bonds that are judged by [CER] by the inflation index. And then on top of that, we have also a position in treasury bonds that is more tactical, where we can be long in U.S. dollars. Remember that our position in U.S. dollar must be net, that's a net position of 0, but we can go long through dollar link bonds or dual bonds, which pay the higher inflation or dollars. So that's how we're positioned for the short term to have liquidity and also make some profitability that will allow us to build capital for growth.

Okay. A technical question on the dual bonds, as you said, you can receive your payment in dollars or in pesos. They are accounted as foreign currency or a local currency?

No. They are paid in pesos. If the valuation is higher than inflation, they pay the difference in the exchange rate, but they are paying in pesos, and they don't count for the foreign currency position. So that's why we don't have a limit on those bonds because they are accounted for as if they were 100% pesos.

So effectively, you can go loan dollars through the dual bonds?

Correct. We can go up to 30% with total link bonds and beyond that because they don't count in the foreign exchange position through dual bonds.

So is there a limit to the linked bonds?

No, there's there no limit. Of course, we have our internal policy of risk limit, but there's no limits on the foreign currency exposure side for the Supervielle Bank.

Thank you, Carlos. We have a question from Rodrigo Nistor from Latin Securities.

Good morning, everyone. In light of the prevailing inflationary environment, we have seen a raise in terms of deposits as a proportion of the banking sector funding base and some deposits moving to the money market funds. So I also was thinking at Patricio's comments before. So do you think this can limit your margins once exposure to the public sector reduces. And then if you can provide us with a brief comment on competition in platforms like [indiscernible] are impacting already in your funding availability? Thank you.

Yes. The first part, Rodrigo, regarding funding, as you said, more and more funds are being allocated by corporates and individuals to mutual funds or money market funds --mainly money market funds, so that's why savings accounts and current accounts in the industry in [indiscernible] are growing below inflation because we saw high rate of inflation. People and companies will allocate more funds to interest -- assets that accrue some interest. But on the other hand, we see a growth in deposits also from the institutional side. So that partially offset the extremely high NIM that we will have if all funds will stay in savings account or current accounts, but as deposits are growing more or less in line with inflation, we're expecting to grow a bit less maybe 5% to 10% less, but with an inflation of more than 100%. That's not a big difference. So that growth in deposit allows us to keep margins quite at high levels. I don't know if I answered the first part of the question, so maybe Alejandro or Patricio want to comment on the second part.

Yes. I mean I think you raised the point of savings and deposits moving to money market funds, and you mentioned a couple of fintechs. And basically, I think that when inflation is over 100%, people -- Argentines they want to have their certain protection for their money because of the losing of purchasing power with inflation. And we believe that there is a threat particularly, yes, on fintechs because they offer a very simple way of protecting their savings or salaries, whatever. So what we have done is the reason why we were the first bank in Argentina to have a simple way of investing in [indiscernible] in a way, in a very rapid way, 7 days a week, you can invest or remove the fund from your investment any day of the week at any time. And this is a way of protecting because it exactly what the fintechs were doing and it's kind of strange that still you don't see the bulk of banks that are reacting to that. But I think that there will be changes. What we have done probably will be copied right by others at a certain point in time.

Thank you. We have a question in the Q&A box from [indiscernible]. First, it says which will be the turnover tax change. I'm sorry, in third Q '23, considering you are not paying any more and what can we expect for the second half '23 in severance payments and early retirement challenges?

Mariano, do you want to answer those questions?

Thank you for the question, [indiscernible]. Let me first take the part of the turnover tax. First, I would like to point out that it's not that we are not paying turnover taxes, we're not only paying only in regards to Leliqs and Central Bank instruments. As we explained during the presentation, these are monetary policy instruments from the Central Bank. So the Central Bank claim that they cannot be taxed or interfered with by local government. So that's why we stopped paying since April but we keep paying turnover tax on other taxable income, which is basically interest from loans, for instance. Remember that treasury bonds are not taxed. So we based on the interest earned on the loan portfolio and of course, on commissions and other sources of revenues. So the tax revenue charge for the third quarter would be in line with the second quarter where we had already stopped paying on Leliqs. But as interest rates increase our revenues also increase. Remember for this tax, you don't net the inflation charge, you are only paying for the revenues, even if interest rates are more positive or negative in real terms. You are paying only on the revenue side. So with higher interest rates, we will probably increase the charge of the turnover tax, so for the second quarter, the turnover tax charge was [ARS 5.1 billion]. So we would expect a bit more -- slightly higher in the third quarter. And regarding severance payments on an early retirement charges, we decreased these charges in the first half of the year. But as we continue to find sources of efficiencies, we will probably increase a bit during the second half of the year because we give -- through the merger of branches and all the capabilities developed through digital processes that allow us to work more efficiently, even with more customers, we can reduce our headcount. Of course, not at the level as last year where we reduced 20% the group's headcount because we are merging with the bank, but we still continue at a rate that I would say, around 5% per year. That's our target. So you would see some increase in severance costs for the second half.

So this was the last question. We have reached to 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 remain available to answer any questions that you may have. Have a good day.