Grupo Supervielle S.A. (SUPV) Earnings Call Transcript & Summary

Good morning, and welcome to Grupo Supervielle's Second Quarter 2026 Earnings Call. I'm Ana Bartesaghi, Treasurer and IRO. Today's conference call is being recorded. [Operator Instructions] Speaking today are Patricio Supervielle, our Chairman and CEO; Gustavo Paco Manriquez, CEO of Banco Supervielle; and Mariano Biglia, our CFO. Diego Pizzulli, CEO of InvertirOnline, will also be available during the Q&A session. Before we begin, please note this call may include forward-looking statements. Please refer to our earnings release and SEC filings for further details. Patricio, please go ahead.

Thank you, Ana. Good morning, everyone, and thank you for joining us today. The second quarter marked our return to profitability and further progress in transforming Supervielle. Most importantly, the changes to our operating model are beginning to translate into a structurally lower cost to serve. The rightsizing program is now largely implemented and aligned to our current operating model, reflecting the full quarterly salary savings already secured, structural return on average equity would have reached 14.4%, illustrating the earnings support provided by our leaner operating model. Our core earnings also improved. Margin benefited from funding costs declining faster than asset yields. Asset quality indicators continue to move in the right direction with NPL formation declining for a second consecutive quarter and cost of risk improving sequentially. While credit costs remain elevated, these trends reinforce our view that the peak is behind us and our collection, refinancing and underwriting initiatives are beginning to produce results. With peso credit demand still subdued, we continue to prioritize risk-adjusted returns over volume while actively managing our funding mix and maintaining our strong liquidity position. We also made further progress across our ecosystem. The partnership with Aerolineas Argentinas is one example of how we are strengthening the value proposition for Identite customers. At InvertirOnline, assets under custody reached $3 billion, reflecting continued traction with higher-value clients and deeper investment relationships. Overall, we entered the second half with a structurally leaner platform, improving credit trends and a stronger foundation for disciplined profitable growth. Paco and Mariano will expand on this shortly. Let me turn briefly to the macro backdrop to put our second quarter performance in context. Conditions became more stable during the quarter with sustained FX purchases since the start of the year moving net reserves into positive territory. Interest rates remain broadly stable, contributing to lower funding costs and margin recovery, while monthly inflation declined for 3 consecutive months. However, greater stability has not yet translated into a broad-based recovery and peso credit demand remains subdued. Policy momentum is improving visibility with structural reform supporting a more predictable macro environment and reserve accumulation reinforcing FX stability. Argentina is undergoing a transition towards an export and investment debt growth model. 21 rig projects have been approved, representing approximately $47 billion of planned investments, primarily in energy, mining and infrastructure. This should create attractive financing opportunities across the broader value chain. Greater visibility of the government's financial plan for sovereign debt maturities in 2026 and 2027 has also reduced near-term refinancing uncertainty. Nevertheless, the recovery remains uneven. Looking ahead, continued progress will depend on consistent policy execution and further strengthening the institutional framework. Maintaining fiscal discipline, advancing monetary normalization and gradually removing remaining FX restrictions will be essential to reinforce confidence and contain volatility. Overall, the direction is constructive and should gradually support credit demand and asset quality. Supervielle enters this phase with gradually improving credit trends, a structurally leaner platform and a solid capital formation. Paco will now discuss how the bank is positioning itself to capture this opportunity through disciplined profitable growth. Paco, please go ahead.

Thank you, Patricio, and good morning, everyone. Turning to Slide 5. I will focus on how we are managing the bank today and where we see attractive growth opportunities for the second half. On the balance sheet, prudence remains our priority. Peso loan demand was soft and with system delinquency still elevated, we choose not to chase volume. We maintain selective origination, grew transactional deposits across retail and corporate clients and actively manage the funding mix. As margin normalize, every new loan must continue to meet our risk-adjusted return thresholds. On asset quality, delinquency and cost of risk improved sequentially, although both remain elevated. The collection refinancing and customer outreach initiative launched in December are producing early results, while recent origination cohorts are performing mainfully better. We will maintain this discipline as we gradually rebuild lending. On structural efficiency, the rightsizing plan is largely completed. It reflects the work we have been doing for some time to redesign the service model without compromising service quality. Annualized personnel savings are approximately ARS 42 billion with the full quarterly run rate benefits starting in this third quarter. Turning to growth. Our focus is on expanding the loan portfolio profitability through a targeted retail than load-based approach. In retail, we are focused on expanding and deepening relationship across 3 priority segments: payroll identity is our premium offer and senior citizens. Our enhanced scoring capabilities allow us to identify the stronger customers and serve more of their transactional saving and credit needs through tailored products. In corporate banking, the strongest opportunities are in Vaca Muerta, mining and selected regional economies, where activity in more dynamic and U.S. dollar loan demand remains strong. On partnerships, we recently reached an agreement with Flash Argentina Asia, a company that originated within the Mercado Libre ecosystem through which we will finance person-to-person vehicle transactions listed on Mercado Libre starting in the fourth quarter of this year. In short, we are combining a leaner operating model, disciplined balance sheet management and sharper customer selection to resume growth where we see good credit behavior and compelling economics. With that, I will hand the call over to Mariano, who will discuss our financial results and updated guidance. Thanks.

Thank you, Paco, and good day to everyone. Turning to Slide 6. Attributable net income turned positive, reaching ARS 13 billion in the second quarter, a swing of more than ARS 31 billion when compared with a loss of ARS 18 billion in the first quarter. Excluding ARS 23 billion in after-tax extraordinary severance charges, adjusted net income reached ARS 36 billion with adjusted ROE of 12.4%. The sequential recovery was driven mainly by stronger net financial income, lower inflation adjustment and improving credit costs. Together, these factors more than offset softer fee income and modestly higher adjusted operating expenses. Slide 7 takes this analysis one step further by illustrating the earnings capacity of our streamlined cost base. After incorporating a full quarter of salary savings from the rightsizing actions of the second quarter, structural net income would have reached ARS 42 billion, equivalent to a structural ROE of 14.4%. Applying the same framework, structural net income for the first half would have totaled ARS 53 billion. The program reduced our workforce by 553 employees during the first half, including 262 in the second quarter. With these actions now completed, the structurally lower cost base should support continued improvement in efficiency and profitability. Turning to Slide 8. Total loans declined just over 1% sequentially and increased nearly 9% year-on-year. Commercial lending edged higher, supported by U.S. dollar loans, which grew 6% in original currency. Retail loans in turn declined 2%, reflecting still soft demand and our selective approach to origination. As Paco discussed earlier, we expect retail growth to rebuild gradually as inflation decline while maintaining disciplined credit criteria and a balanced profitable portfolio mix. Turning to asset quality on Slide 9. Our NPL ratio improved 10 basis points sequentially to 5.5% Meanwhile, the financial system ratio deteriorated 50 basis points to 7.6%, placing our ratio 210 basis points below the industry. Quarterly NPL formation declined for the second consecutive quarter and was approximately 20% below the fourth quarter peak with retail formation down 21%. Net cost of risk eased to 5.6% from 6% in the first quarter, reflecting the early benefits of our collections and refinancing initiatives, together with disciplined risk-adjusted origination. Importantly, recent origination cohorts continue to perform meaningfully better. Together, these trends reinforce our view that asset quality has entered a gradual improvement phase. Turning to Slide 11. Net financial income reached ARS 295 billion, increasing 8% sequentially. Net interest margin expanded sequentially by 250 basis points to 20.3%, above our full year guidance as funding costs declined faster than yields on interest-earning assets. Now moving on to the outlook for 2026. We are updating our expectations to reflect first half performance and normalizing operating conditions. On loans, we are lowering real growth expectations to between 10% and 15% This, however, is a pickup from the 7% decline experienced in the first half, driven by the initiatives Paco outlined. The mix remains skewed to our corporate lending with retail growth expected to resume as activity, employment and disposable income improve. We are also raising our NIM guidance to a range of 17% to 19%. First half NIM of 19.7% benefited from the declining in funding costs, while lag asset repricing could weigh on margin in the second half. As shown on the next slide, we now anticipate net fee income to decline between 5% and 8% in real terms as softer activity weighs on banking fees. Adjusted operating expenses are now expected to decline between 6% and 4%, a greater reduction than anticipated, reflecting our successful headcount rightsizing plan. We are now tightening our reported ROE expectation to between 2% and 4%, consistent with the larger than originally anticipated headcount rightsizing. Excluding extraordinary severance charges related to the efficiency program, adjusted ROE is now anticipated to range between 8% and 10%. Importantly, this range does not yet reflect the full benefit of the ARS 42 billion in annualized salary savings, which will support the underlying cost structure into 2027. Finally, we are raising the CET1 guidance to a range of 12% to 14% following softer loan growth. All other outlook metrics remain unchanged. This concludes our prepared remarks. We are now opening the floor for Q&A.

[Operator Instructions] The first questions come from Camila Azevedo with UBS.

I have a question on the profitability and efficiency. So the efficiency ratio improved to 63%, but would have been close to 52%, excluding extraordinary severance charges. When does the company expect the full run rate benefit of the COP 42 billion in annualized personnel savings to be fully reflected in the reported efficiency metrics? And in profitability, given that the structural ROE reached 14%, how does management expect this trend to continue throughout the year? And what specific milestones should have -- should be met to sustain this recovery?

Mariano, do you want to answer this? Maybe a compliment afterwards.

Sure, Patricio. Camila, thank you for your question. First, regarding efficiency and the saving cost from the retirement plan, we will start capturing the full benefit of this plan on the third quarter as we finished the plan as of the end of the second quarter. So those savings that we quantified as if they were captured on the first half of the year, they will be already captured in the reported SG&A and the reported net income in the third and fourth quarter of this year. So the efficiency -- the reported adjusted efficiency for following quarters will be the same or almost the same. And of course, it will be much lower than the first and second of the year. Then regarding ROE, as you said and we showed on the presentation, the adjusted ROE when we account for -- when we exclude severance costs, but we also account for the savings as if we had maybe the efficiencies from the beginning of the year of the quarter, the adjusted ROE would be 14.4%. Then for following quarters, as I mentioned, we will continue capturing the benefits of this headcount reduction. But also on the other side, we think margins will be more pressured on following quarters because -- on the second quarter, we saw a reduction -- a decline in the funding cost, which we captured very well to increase the NIM on our loan portfolio and also on the investment portfolio. But going forward, we will also see pressure on the asset side of interest assets. So the NIM we saw in the second quarter will be lower going ahead. So that will partially offset the benefit of cost savings and ROE for the second part of the year will be maybe higher than on the first half, but lower if you take the annualized second quarter. So that's why we gave a guidance of an ROE closer to 10% for the full year.

So just to complement and to give some context on the operational side and looking into the future, we conducted a very successful efficiency program on this voluntary retirement program. And this did produce any type of disruption. NPS continues to improve, productivity is becoming higher. And basically, the efficiency agenda is permanent for us. We will continue to look in the future for opportunities to improve our cost to serve and -- but you should not expect another step change of the magnitude to be delivered in the first half of this year.

Our next question comes from Ernesto Gabilondo with Bank of America.

Congrats on your results. My question is related to your loan growth expectations for next year. This year is expected to be between 10% to 15%. You were expecting above 20% before. And I believe this is not specific for Supervielle. This is more for the industry. So how should we think about loan growth next year? I don't know if you have started to participate in the financing of the VG projects. Are you already perceiving the announcements of the VG projects taking place? You mentioned these 21 projects. So are they already taking place? And if you think this will be more tangible after the presidential elections next year? Again, all to understand loan growth trends for next year.

I will give you first the more short-term answer. Yes, the guidance is 10% to 15% for the full year. But at this stage, we are coming off from minus 7%. So this implies a meaningful growth in the second half. But this is not a forecast that depends on broad macro pickup. We are counting on fourth quarter surge in demand across a series of initiatives that we control. First one is we completed a disciplined asset quality work in the first half. So we know who are the good clients and which are healthy and that allow us to conduct targeted campaigns on our better performing retail segments. Second, we continue and this is also maybe an answer to your question. We continue to focus on the dynamic sectors of the economy, including export industries, mining energy and all the value chains around them where dollar loan is real and growing. And third, we also have specific initiatives that we are launching in this quarter, particularly Paco mentioned Flash. Flash is a new company that has grown or -- was born in the Mercado Libre ecosystem, which is a P2P financing auto loans. But on the retail side, more broadly, demand will need inflation to continue declining and disposable income to continue improving. That's happening. And gradually, we expect retail growth to build progressively rather than surge. So our guidance for this year is what we can reasonably see and where we can act upon. Regarding next year, I think the business climate will definitely, on the agenda of the RIGI agenda. It's going to be a major change. We already -- the countries have record exports this year. But I think next year, the trend will continue in this sense. So there will be lots of opportunities to finance the value chain of these dynamic industries. I am hopeful and I'm optimistic that this will also reflect in -- on the retail side with more, let's say, a better appetite for credit demand on the retail side. Of course, we will be entering an electoral year, and this will also probably affect everything, but we are optimistic. And I think 2027 will be a very good year.

Can I say something, Patricio?

Yes.

All we know about the situation that we had in the first semester in terms of delinquency, in terms of loan growth. So looking forward, the growth we are targeting in the second half and for the next year comes from our better performing retail segment. Also, we made significant adjustment in our credit scoring models. So we are believing that we have in place a very good score. Also, the organic growth will come from strategic sectors, energy, oil and gas, mining, you mentioned about the RIGI, basically, we support all the value chain for the RIGI -- the main RIGI projects. It's basically our targeting is our size for the bank. So we are entering a new semester with the confidence that we have in place a new credit score and also the customer knows better their own payments and behavior. So we are looking forward very well.

This is super helpful. And just -- so all of the projects that are taking place, Supervielle will look to finance all the value chains. So do you think this will be more visible in 2027, maybe after the presidential election removing the uncertainty. And that is when we will see more tangible all these projects, right?

Yes, yes. 2027 will be -- we will see something. And then, of course, due to the election of during October. But yes, Ernesto. Our target is the value chain of those RIGI projects. Basically, it's our target and our business proposition goes there.

Our next question comes from Pedro Leduc with Itau.

Congrats on the numbers. I would like to discuss a little bit about your NIMs, 24% this quarter, very nice improvement. We know there were some unusual aspects about this quarter. But anyway, I would like to pick your brains a little bit and how do you see this level going forward? And in trying to puzzle it together as well, looking at it from a funding cost perspective, it was a nice improvement, but your mix in funding seems to have shifted a lot with institutional time deposits gaining a lot of share. I would imagine that they are not cheaper than the retail deposits, but maybe more duration. So help us reconcile a little bit the funding mix shift with the better NIMs and how we should model it in the second half?

At a high level, what you saw in the second Q was active funding optimization where we adjusted both mix and the tenure of our funding to take advantage of relative pricing while our strategic focus on growing -- is always on growing franchise deposits that remain unchanged. So Mariano, maybe you can take us through the details of this funding strategy and then how this also translates and how do you reconcile also into ROE and sustaining the needs.

The deposit mix, we see a shift mainly from corporate institutional deposits, retail. And this is mainly tactical as we want to be more efficient on the cost of funding. If we go to institution because we see lower cost of funding, maybe compared to the largest corporates, this is not a reduction in SME balances, deposits or retail as I said before. So the same way we transition, which is tactical, we may transition back corporates and we don't change our strategy of gaining deposits from our core customers, both retail and how this translates into NIM what we see going forward. We saw a very good NIM in the second quarter, which translated into good figures of ROE when adjusted for severance costs. This level of NIM was achieved by capturing the lowering the cost of funds. This also relates to the deposit mix and tactical movements. And so that allowed us to increase spreads both in loans and our investment bond portfolio. So into the third quarter and the second half of the year, we see that interest rates will remain stable. And now we have a repricing on the asset side. So NIM will be more pressure, as I explain before in the second half of the year. So maybe the NIM for the second half will be a bit lower a bit higher than the first half of the year, but lower if you see the second quarter annualized terms.

To complement, if you look at our balance sheet on the loan balance sheet, almost 65% to and 35% is retail. So clearly, this has to do with the macro context and the subdued demand on the retail side. As I mentioned before, we know now we are -- with all the procedures we have in place, strong underwriting standards and the history of our own clients, we know where to target. So we are conscious that we want to grow on the retail side very responsibly in order to help the NIM looking forward.

We have a question now from Yuri Fernandes with JPMorgan.

Also congrats on the quarter. I have a follow-up on the NIMs because I got the impression from the Leduc answer that maybe second half could be better, but your guidance points to 17% to 19%, the consolidated margins. And if we were to assume like the run rate you had in the first half, closer to 20%, that would indicate a major drop on margins. So what are we missing here like on the NIMs? Should it go down in the second half? Or should it remain -- should be more resilient? Just trying to understand because I think the guidance indicates 17% to 19% on the margins. So this implies in this drop? And then I can follow up.

Yes, that's right. Our guidance for NIM from 17% to 19%. So this implies lowering NIM in the following quarters when compared to the second quarter. If we look the first 6 months of the year, maybe we will have -- we will see different dynamics for the second half because on the first half, we started with very high interest rates and a lot of volatility, which negatively impacted the NIM. So we are not expecting that scenario to repeat on the second half of the year. So maybe it will be higher than that first quarter and lower than the second quarter. So not necessarily, I will correct that and not necessarily higher than the first half of the year, but it will have different dynamics. We don't expect that high volatility and a significant reduce in the funding costs, it will be more stable, but on the average of the semester in a similar level.

Okay. No, clear. And then if I may, just similar exercise, but with cost of risk and asset quality, and congrats, I think NPLs are improving, the new NPL formation is improving. Then I have just a follow-up on coverage, if you can provide any kind of color. And similar to the size as margins on cost of risk because if we take the guidance of cost of risk of 5.3% and 5.8% and we plot the run rate of the first half, it implies a very broad range on the second half. It should run between 4.8% cost of risk and 5.8% cost of risk, right? This quarter has been tracking around 5.6%. So where should cost of risk be? Like should it be closer to the low end of this kind of soft guidance? Or should we see maybe still a challenging outlook for asset quality and cost of risk being a little bit higher?

Well, the cost of risk, we expect -- we also saw there an improvement in the second quarter we expect to further improve for the third and fourth quarter. We still are in an environment where we saw a peak in the NPLs and that translates into lower loan loss provisions and lower cost of risk. But we are still in a period where the SMEs who are the ones who suffered on the first half of the year, individuals was the last part of last year, and that's when our credit policies and review then SMEs were more impacted. Now for the second half of the year, we expect that to improve gradually and also to resume growth as Patricio explained before. That will also help to lower the cost of risk. But we expect to see those dynamics not much lower than 5%, although it might be helped by growing on the corporate side. But when we resume growth also on the retail side, it will be impact. So on the average, we expect it to be within the range of 5.3%,5.8%. Maybe of course, we expect it to be on the lower range on the lower part of that range. But still with the visibility that we have, it's the range that we can give guidance.

Yes. I'm sorry, maybe if I may add, we decided not to change the guidance for these 2 metrics this quarter during maybe mainly because NPS cost of risk is still high. But yes, maybe we could be expecting something to be more close to the lower end, but still a high level. So that's why this is maybe one of the only metrics we have not changed this quarter to be a bit more conservative.

So basically, just summarizing the 2 things for risk-adjusted margins, maybe not as strong as this quarter, but we're very confident on the level of margin. It will not be as low as the first quarter. So something in between or maybe closer here. And cost of risk, didn't revise the guidance, still challenging outlook, but things are slightly improving, so maybe the low end of the guidance of the 5.3%. Does this summary make sense? Did I get the message correct, Mariano?

Yes.

It makes sense. And maybe we are -- we should have changed for be more optimistic. But this is what the management change, but I am more optimistic. We will see in the next quarter. We expect that it will improve the cost of risk.