Valuation: We arrive at our 12-month target price of US$17.00/ADS for SUPV shares after applying a 2017E
target PE of 9.0x. This multiple is composed of: 1) a target PE of 10.0x for the Argentine banks under * 2015 EPADS/Net Income are restated using blue chip
coverage, which is consistent with the average forward-looking PE in the last ten years; and 2) a 10% swap rate
discount, related to the historical average discount between large and small cap-banks in LatAm. EPADS may not add due to rounding. Earnings
estimates reported in accordance with Argentine
EPADS Q1 Q2 Q3 Q4 Full GAAP. Dividend/yield for 2016E. NA: Not Available.
Mar Jun Sep Dec Year
2015A US$0.28 US$0.12 US$0.58 US$0.66 US$1.64
2016E 0.26 0.25 0.40 0.35 1.26
2017E 0.41 0.40 0.54 0.57 1.91
Please read domestic and foreign disclosure/risk information beginning on page 25 and Analyst Certification on page 25.
Contents
Recommendation ..................................................................................... 3
Valuation .................................................................................................. 9
Recommendation
We are initiating coverage of shares in Grupo Supervielle (SUPV) with an Outperform rating and setting
our target price (TP) at US$17.00/ADS, which represents a potential upside of 30% from current prices.
SUPV is selling at a deep discount to local peers, as we do not believe the market is pricing in the above-
average growth potential that the group currently offers. Grupo Supervielle is currently trading at a 2017E
PE of 6.9x and P/BV of 2.5x, which implies a discount of 38% and 60% to the average of the Argentine
banks under coverage, respectively.
Grupo Supervielle runs a nationwide and diversified platform with specialized units dedicated to: 1)
universal banking (Banco Supervielle); 2) consumer finance (Cordial Compaia Financiera & Tarjeta
Automtica); 3) asset management (Supervielle Asset Management); 4) microfinance (Cordial
Microfinanzas); 5) insurance (Supervielle Seguros); and 6) retail (Espacio Cordial). The group targets from
high to low-to-medium income individuals and from large corporations to SMEs. In addition, Supervielle
commands a strong leadership position in certain niches, such as personal loans, factoring, leasing, active
Mastercard accounts, and social security payments. Following its recent IPO, the group is in a better
position to increase its financial assistance to SMEs and medium-to-large companies, eventually allowing
the group to become the principal bank for these companies. This should, in turn, foster growth in the
retail segment (payroll) and increase the cross-selling of products and services.
Supervielle successfully targeted unattended markets such as retirees, leasing, and factoring, allowing the
group to grow above the system average, and increase its private loans market share from 0.2% in 2001
to 3.9% in 2015, reaching 2.1 million clients. In order to achieve this strong growth, the group reinvested
most of its earnings and maintained high leverage ratios. With the aim of continuing to grow above the
financial system, SUPV raised capital through an Initial Public Offering on May 18, 2016. Net proceeds for
the group were US$240 million, taking Supervielle from a restrictive loans-to-equity ratio of 9.1x to a
highly capitalized position of 4.1x, vs. the 5.1x average for banks under coverage.
Our constructive view on Supervielle is mainly based on: 1) its distinctive business model; 2) the unlocked
value from the recent capital increase, which should allow SUPV to fully reflect its earnings generation
capacity from its current client base, new customers, and a nationwide network; 3) a leadership position
in its core segments; 4) its multi-brand platform for retail banking and consumer finance segments; 5) its
robust ROE, even after the capital increase; and 6) our positive industry outlook.
We believe that the two most important risks for Grupo Supervielle are related to a deeper-than-
expected compression in net interest margin (NIM), and the execution risk related to the use of the IPO
proceeds. However, the risk associated to the deployment of the proceeds should be mitigated by the
opportunities within the banks current client base, its lower securitization of loans, and the redemption
of up to US$40 million of Grupo Supervielle notes. Other risks for Grupo Supervielle are related to the
failure to renew or any early termination of its strategic alliances, and a slower-than-expected recovery in
economic activity in Argentina.
We arrive at our 12-month target price of US$17.00/ADS for SUPV shares after applying a 2017E target PE
of 9.0x. This multiple comprises: 1) a target PE of 10.0x for the Argentine banks under coverage, which is
consistent with the average forward looking P/E in the last ten years; and 2) a 10% discount, related to
the historical average discount between large-cap and small cap-banks in Latin America.
Investment Positives
1. Distinctive Business model
Grupo Supervielle runs a nationwide and diversified platform with specialized units dedicated to: 1)
universal banking (Banco Supervielle); 2) consumer finance (Cordial Compaia Financiera & Tarjeta
Automtica); 3) asset management (Supervielle Asset Management); 4) microfinance (Cordial
Microfinanzas); 5) insurance (Supervielle Seguros); and 6) retail (Espacio Cordial). The group targets from
high to low-to-medium income individuals and from large corporations to SMEs. In addition, Supervielle
commands a strong leadership position in certain niches, such as personal loans, factoring, leasing, active
Mastercard accounts, and social security payments. Following its recent IPO, the group is in a better
position to increase its financial assistance to SMEs and medium-to-large companies, eventually allowing
the group to become the principal bank for these companies. This should, in turn, foster growth in the
retail segment (payroll) and increase the cross-selling of products and services.
Supervielle has successfully targeted some unattended markets, such as retirees, leasing, and factoring,
allowing the group to grow above the system average, and increase its private loans market share from
0.2% in 2001 to 3.9% in 2015, reaching 2.1 million clients. In order to achieve this strong growth, the
group reinvested most of its earnings and maintained high leverage ratios. With the aim of continuing to
grow above the financial system, Grupo Supervielle raised capital through an Initial Public Offering on
May 18, 2016. Net proceeds for the group were US$240 million, taking Supervielle from a restrictive
loans-to-equity ratio of 9.1x to a highly capitalized position of 4.1x, vs. the 5.1x average for banks under
coverage.
2. Increasing loans & cross-selling opportunities to its current clients as well as for new customers
Supervielle has twofold growth sources stemming from its current base and new client acquisitions, which
should support the solid results that we foresee.
The group aims to expand the products and services offered to its current customer base, which is now
achievable with the IPO proceeds. The improvement in services provided to SMEs and large companies
should allow SUPV to become the principal bank for these firms. In turn, the group expects to increase
corporate banking services, such as payroll, which as a consequence should strengthen its position in the
retail banking segment, generating additional cross-selling synergies.
Specifically, the group will target current clients in the agricultural, energy and infrastructure sectors; and
should continue to expand its penetration in the Cuyo region (6.1% of Argentinas GDP), supporting
regional economies, such as the wine and fruits industries. On top of that, this capital injection combined
with a decline in inflation rate, could generate opportunities in the car loans and mortgages markets.
Also, its multi-brand platform and nationwide network should allow SUPV to expand its customer base
(now at 2.1 million customers), increasing its market share.
Apart from increasing products and services, the capital increase should allow the group to decrease its
securitization speed (representing US$180 million or 10% of the loan portfolio in 2015), and redeem up to
US$40 million notes outstanding.
All in all, in our opinion, all these opportunities will allow the company to deploy the IPO proceeds
relatively quickly, mitigating the related execution risk.
3. Material profitability upside coming from efficiency gains on its nationwide network
Due to Grupo Supervielles capital constraints, the group was originating lower-than-average revenues
and loans per branch. Supervielle revenues per branch stood at AR$19 million compared with the average
generation for local peers of AR$42 million; and Supervielles loans per branch stood at AR$72 million,
compared with the average for local peers of AR$187 million. Therefore, this resulted in higher cost-to-
income ratios of 76% versus peers average of 53%.
In our opinion, the IPO proceeds coupled with its nationwide network together and our expected loan
growth, should allow Supervielle to double its loans per branch, improving its current suboptimal
revenues origination, and thus, its cost-to-income ratio (to 54% in 2018, on our estimates).
Exhibit 1. 1Q16 Gross Loans Per Branch in AR$ Million Exhibit 2. Efficiency Ratios
$212 76%
$204
Average (Ex-SUPV) = $187
64%
Average (Ex-SUPV) = 53%
$145 50%
46%
$72
Banco Frances Grupo Financiero Banco Macro Grupo Supervielle Banco Macro Banco Frances Grupo Financiero Grupo Supervielle
Galicia Galicia
Source: BMA, BFR, GGAL and SUPV. Compiled by Raymond James Argentina.
Grupo Supervielle provides higher exposure to Argentinas retail segment when compared with other
leading banks. This is due to its multi-brand platform for retail customers offered through the units
dedicated to retail banking and consumer lending, which are composed of Cordial Compaia Financiera,
Tarjeta Automatica and Espacio Cordial. Apart from these vehicles, Banco Supervielle ranks fifth in the
personal loans segment, with a market share of 5.9% in 2015, first in terms of active Mastercard
accounts (among the private banks), and also processes 12.9% of social security payments in the country.
These consumer-dedicated units have agreements with Walmart and Hiper Tehuelche (a home-
improvement retailer), that allows the group to provide on-site products and services to untapped
customers with significant prospects for growth. Across its distribution network of 128 consumer finance
access points, the group offers personal loans and credit cards to the high-margin spread segments
(middle and low-middle-income individuals), reaching more than 350,000 clients.
5. Robust ROE, even after the capital increase
The group has generated superior ROEs compared with the system average over the last five years,
despite its capital constraints, which reduced dedicated units and Supervielles ability to grow in-line with
its origination potential and distribution network. We expect the IPO proceeds to reduce ROEs until the
capital is fully deployed. However, we believe that this will be a short-term effect, as the allocation of the
proceeds should take about 12-months. Therefore, we estimate that ROEs should recover to the historical
average seen in the last five years of approximately 30% by the end of 2017.
39%
35%
32%
29% 30%
Grupo Supervielle has 129 years of history in Argentinas financial sector, since the inception of the
banking house Supervielle y Ca. Banqueros, founded in 1887. Its long standing history, strong business
ethics and industry expertise, has ensured the group with solid long-term relationships. Supervielle is led
by Julio Patricio Supervielle, the groups Chairman & CEO; who has more than 30-years of experience in
the banking industry. In addition, top management and the other Board members have at least 15-years
of experience in the retail and commercial banking sectors.
7. Positive impact of the industry deregulation
Since the new administration took office in December 2015, the Central Bank has started to eliminate
negative regulations introduced by the previous government. In this scenario, we are confident that the
expansion in SUPVs spread between lending and deposits rates achieved in 1Q16 is sustainable in the
short term, due to the removal of the cap on personal loans rate, floor on deposits rate and higher rate
for mandatory loans. In addition, the CBs administration has loosened the following restrictions:
Lowered the Deposit Guarantee Fund fee from 0.6% to 0.15% of deposits (savings of AR$40mn);
Increased the capped rate for the mandatory loans for SMEs;
Hiked the banks global FX position coverage from 10% to 15% of their equity;
Increased the flexibility in terms of branch openings;
Removed the constraints to paying dividends.
Our positive view on the Argentine banking sector is supported by two main factors. First, the sector is the
least developed in the region, with a domestic-credit-to-GDP ratio of 18%, which should gradually
increase towards the regional average of 46%. Secondly, Argentine banks have proven they can grow
vigorously if economic conditions are supportive. This was the case in the recovery processes after the
2002 crisis, and the 2009 recession, when systems credit expanded by more than 20% and 15% in real
terms, respectively. All in all, we expect credit in Argentina to expand 13% y/y in real terms between
2017E and 2020E.
80%
70%
60%
Brazil, 54.5%
50%
Colombia, 41.7%
40%
Peru, 37.0%
30%
Argentina, 17.9%
10%
0%
2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A 2013A 2014A 2015A
Source: Fundacion Capital, the IMF, Bloomberg and Raymond James Argentina.
Grupo Supervielle received a material capital injection of US$240 million compared with the previous
book value of US$175 million. Taking into consideration the significant size of the IPO proceeds, we
believe that the asset quality of the loan portfolio and financing spreads should be monitored. However,
we are confident about Supervielles opportunities in the wholesale & retail segments, and managements
expertise, to deploy the capital quickly and efficiently, thus avoiding a significant dilution of returns.
2. Lower than expected net interest margin
We are projecting the net interest margin (NIM) will contract in the medium term under a normalized
scenario, in which volumes will substantially increase, while inflation and interest rates will drop. We are
expecting a contraction in NIM of 340bp and 200bp for 2018E and 2019E, respectively, but an earlier or
deeper-than-expected reduction would represent a risk to our constructive view.
3. No renewal or early termination of the Banks agreement with the ANSES
In December 2014, Grupo Supervielle renewed its agreement to be one of the National Social Security
System (ANSES) financial agents for the next six years. In our view, the early termination of the agreement
or ANSES decision not to renew it (in December 2020), could negatively affect the banks top line. In
2015, the Bank derived 27.4% of its revenues from the sale of financial services through its senior citizen
service centers, which are mainly related to the aforementioned ANSES agreement. However, as
Supervielle has been an ANSES financial agent for the past 20 years, and has a network of 78 senior citizen
dedicated access points, we attribute a low probability to the non-renewal or early termination of this
agreement.
4. Management owns multiple voting rights shares
Grupo Supervielle has a disparity between economic and voting interests. This difference is attributable to
SUPVs Class A and Class B shares, which have five and one votes each, respectively. In the IPO, Class B
shares became public, but most of the five-vote shares remained in Julio Patricio Supervielles hands,
representing 81% of total votes and an economic interest of 54%. Therefore, Mr. Supervielle will
dominate the investment decisions, but due to his long-standing experience, this situation might not be
an issue for certain investors as they believe that strategic decisions should remain within the current
management.
5. Macro risk
We believe the new administration will continue to move forward to put the economy back on track for
growth, but this could take more time than we expect, thus negatively affecting our positive view on the
stock. Additionally, despite current favorable banks policies, we cannot rule out that the Central Bank
could introduce restrictive regulations in the future. It is worth noting that Supervielle has significant
exposure to middle and lower-middle-income individuals and SMEs, which makes it more sensitive to
economic downturns and recessions.
Exhibit 5. Key Macro Assumptions
2011A 2012A 2013A 2014A 2015A 2016E 2017E
GDP Growth (y/y) 6.87% 1.09% 2.72% -2.52% 1.11% -2.00% 4.00%
FX EoP (AR$/US$) 4.28 4.88 6.33 8.56 13.00 15.80 17.00
Deval. Rate 5.6% 13.9% 29.7% 35.2% 51.9% 21.5% 7.6%
FX average (AR$/US$) 4.62 5.55 7.94 9.29 14.40 16.40
Inflation 22.4% 25.1% 27.9% 38.5% 28.4% 39.6% 25.0%
Source: Fundacion Capital, Macroviews and Raymond James Argentina.
Valuation
Valuation approach
We value Grupo Supervielle, and the Argentine banks, with a PE target multiple. We disregarded the use
of a P/BV target valuation method due to the prohibition to adjust the banks balance sheets by inflation.
This material distortion negatively affected earnings and book values since 2003, while yearly average CPI
stood at 22% in the last ten years.
PE target multiple
We arrive at our 12-month target price for SUPV shares of US$17.00/ADS, which represents a potential
upside of 30% from current price levels, after applying a 2017E target PE of 9.0x. This multiple is
comprised of:
1) A target PE of 10.0x for Argentine banks under coverage, which is consistent with the average
forward-looking PE for Banco Frances, Banco Macro and Grupo Financiero Galicia in the last ten years
(for more details on the Banks under coverage, please refer to our last sector report published in
February, 2016).
2) A 10% discount related to the historical average discount between large-cap and small cap-banks
in Latin America.
Price-To-Earnings:
Large Banks 11.3x 13.3x 13.3x 14.0x 16.0x 13.6x
Small Banks 8.0x 11.7x 13.2x 12.4x 14.8x 12.0x
Relative Valuation
Supervielle is currently trading at a 2017E PE of 6.9x and P/BV of 2.5x, which implies a discount of 38%
and 60% to the average of the Argentine banks under coverage, respectively.
Currently, Latin America banks are trading, on average (excluding Argentina), at a 2017E PE of 10.5x. This
ranges from Mexican banks selling at 12.7x, Chilean, Peruvian, and Colombian financial institutions at an
average of 10.3x, while large cap Brazilian banks are selling at 8.9x.
Company Description
Grupo Supervielle runs a nationwide and diversified platform with specialized units dedicated to: 1)
universal banking (Banco Supervielle); 2) consumer finance (Cordial Compaia Financiera & Tarjeta
Automtica); 3) asset management (Supervielle Asset Management); 4) microfinance (Cordial
Microfinanzas); 5) insurance (Supervielle Seguros); and 6) retail (Espacio Cordial). The group targets from
high to low-to-medium income individuals and from large corporations to SMEs. In addition, SUPV
commands a strong leadership position in certain niches, such as personal loans, factoring, leasing, active
Mastercard accounts, and social security payments.
SUPV has successfully targeted unattended- markets, such as retirees, leasing, and factoring, allowing the
group to grow above the system average, and increase its private loans market share from 0.2% in 2001
to 3.9% in 2015, reaching 2.1 million clients.
In order to achieve this strong growth, the group reinvested most of its earnings and maintained high
leverage ratios. With the aim of continuing to grow above the financial system, Supervielle raised capital
through an Initial Public Offering on May 18, 2016. Net proceeds for the group were US$240 million,
taking Supervielle from a restrictive loans-to-equity ratio of 9.1x to a highly capitalized position of 4.1x, vs.
the 5.1x average for banks under coverage.
Following its recent IPO, the group is in a better position to increase its financial assistance to SMEs and
medium-to-large companies, eventually allowing the group to become the principal bank for these
companies. This should, in turn, foster growth in the retail segment (payroll) and increase the cross-selling
of products and services.
Grupo Supervielle currently owns strategic companies in key segments of the financial system, which are
represented by:
40% 2% 58%
97%
Banco Supervielle
100% 100%
Supervielle Asset Management Cordial Microfinanzas 0.1%
100% 100%
Supervielle Seguros Tarjeta Automatica
100%
Espacio Cordial de Servicios Cordial Compaia Financiera
98%
Banco Supervielle (97% ownership): The Bank is a universal commercial bank and the groups largest
subsidiary. When consolidated with Cordial Compaia Financiera (see next bullet), they accounted for
97.7% of groups total assets as of December 31, 2015. During the last fifteen years, the Bank
experienced significant growth while efficiently managing risks, including those posed by the 2001-
2002 crisis, and the 2008 international economic downturn. It operates in Argentina, with
substantially all of its customers, operations and assets located in the country. It offers a wide variety
of financial products and services to retail and corporate customers. In 2015, the Bank continued to
be a leader among private banks with respect to the social security payments to senior citizens. It is
also one of the leading providers of (i) factoring services in Argentina, with a 7.5% market among
private banks as of November 30, 2015; and (ii) leasing services, with a market share estimated at
11.0% as of December 31, 2015.
Cordial Compaia Financiera (98% ownership): Acquired in 2011, and formerly known as GE
Compaia Financiera, this entity specializes in credit cards, personal loans and the distribution of
certain third-party insurance products. Additionally, the company has a strategic alliance with
Walmart Argentina, in which Cordial Compaia Financiera has exclusive rights to promote and sell
financial and credit products in Walmart Argentina stores, around Argentina, through August 2020.
Tarjeta Automatica (100% ownership): This business was founded in 1995 in order to provide
financial services to non-bancarized citizens. This unit was acquired by the group in 2007, and it is a
wholly-owned private credit card company with 20 branches, 41 points of sale, and more than 60,000
active credit cards.
Supervielle Asset Management (100% ownership): As of December 31, 2015, it managed 8 mutual
funds and approximately 5,000 customers. This company had US$452 million of funds under
management, of which 58% were allocated in fixed income, 30% in the money market, 10% in SMEs
equity or debt, and 2% in listed equities.
Cordial Microfinanzas (100% ownership): It offers loans and other financial services to urban micro-
entrepreneurs that have limited access to traditional banking and financial services; and families with
housing infrastructure deficiencies that need financing for improvements or home maintenance
purposes.
Supervielle Seguros (100% ownership): Acquired in 2013, the company focuses in non-credit related
insurance products such as its protected bag insurance and personal accident insurance.
Espacio Cordial de Servicios (100% ownership): Created in 2012 to sell various types of goods and
services, including those related to insurance, tourism and health plans.
On May 18, 2016, Grupo Supervielle filed the F1 to perform both a capital injection and a partial sale from
the controlling shareholder. This was done through a dual listing, taking place on the Buenos Aires and
New York Stock exchanges.
The total transaction was equivalent to ~US$320 million or 40% of the economic interest. This includes
the exercise of the green shoe option (15% additional shares or 19.1 million class B shares) by the
underwriters. All in all, the net proceeds for the group were ~US$240 million, taking outstanding shares to
363.8 million. The directors of Supervielle, the existing shareholders, and senior management agreed to
enter into a lock-up period of 180-days.
The group plans to use the proceeds to: 1) increase the volume of assets and loans of their subsidiaries
(Banks and Consumer Financial Co.) to sustain their expansion process and strengthen their position
within the Argentine financial system; and 2) redeem or cancel up to US$40 million of each series of their
outstanding notes issued by Grupo Supervielle in the Argentine capital markets.
History
Grupo Supervielle was founded in 1887 as Supervielle y Cia. Banqueros by the Supervielle family, when it
started offering demand deposits, time deposits, savings accounts, securities trading orders, purchases &
sales of foreign currency, and drafts & letters of credit payable in European financial centers.
In 1940, Banco Supervielle de Buenos Aires S.A. was founded by the Baron and Supervielle families. It
acquired the assets and liabilities of Supervielle y Ca. Banqueros. The Barons and Supervielle families
continued to manage the operations until 1964.
During this year, Societe Generale (France) acquired the majority of the capital of Banco Supervielle de
Buenos Aires S.A. from the two controlling families, transforming it into a universal bank with 60 branches
and a significant presence in the corporate market.
In 1996, they acquired 100% of the capital of Banco San Luis S.A. pursuant to a public bidding process
organized by its owner, the Province of San Luis (Argentina). On July 25, 1996, the Province of San Luis
entered into an agreement with Banco San Luis S.A, pursuant to which the province designated Banco San
Luis as its financial agent. On December 15, 2006, the province extended the term of this financial agency
agreement until 2021. This bank was lately merged into Banco Banex (controlled by Supervielle family).
In 2005, Banco Banex acquired the Societe Generale bank, turning back the control to Supervielles family.
On July 1, 2007, with the prior approval of the Central Bank, Banco Banex S.A., merged into Banco
Supervielle. On September 19, 2008, the Bank finalized the acquisition of 99.94% of the capital of Banco
Regional de Cuyo S.A.
In December 2007, the group acquired 51% of Tarjeta Automaticas capital stock. The remaining 49% was
held by the Coqueugniot family. Following several stock transfers, that took place in 2009 and 2010,
Tarjetas capital is indirectly wholly owned by Grupo Supervielle. In 2007, Julio Patricio Supervielle and
Grupo Supervielle created Cordial Microfinanzas.
One of the latest and most important acquisitions of the group took place on July 6, 2010, when Grupo
Supervielle and the bank acquired 100% of GE Compaa Financiera S.A., which is currently named as
Cordial Compaia Financiera.
The senior management of the group and the bank is represented by:
Julio Patricio Supervielle: Mr. Supervielle is the Chairman & Chief Executive Officer of Grupo
Supervielle. He received a degree in Business Administration from Universidad Catolica Argentina and
holds a masters degree from The Wharton School of the University of Pennsylvania (US). He joined
the financial group Exprinter-Banex in the year 1986, where he held several positions, including:
General Manager, Director and Chairman. Also, he currently serves as Chairman of the Boards of
Banco Supervielle and Cordial Compaia Financiera (CCF); Manager at Missiones Participaes Ltda;
and Alternate Director of Cordial Microfinanzas.
Jose Luis Panero: Mr. Panero is the Chief Operating Officer of Grupo Supervielle. He received a
degree in Economics from Universidad Nacional de Cordoba (Argentina) and a Masters degree in
Finance awarded by CEMA (Argentina). In 2009, he completed the General Manager Program (GMP
7) at Harvard Business School (US). From 1988 through 2002, he held several positions at Banco
Suqua, including Planning and Capital Markets Manager. From 2002 through 2007, he worked at
Banco Banex as Financial Manager and since the merger with Banco Supervielle, Mr. Panero served as
Head of the Banks Finance and Capital Markets department until April 2009, and Deputy CEO from
2006 to 2009.
Alejandra Naughton: Ms. Naughton has been Chief Financial Officer of Grupo Supervielle since
September 2011. She holds a degree in Economics from the Universidad de Buenos Aires (Argentina)
and a post graduate degree in Project Management from Universidad de Belgrano (Argentina). From
1994 to 2007, she served on the Central Banks staff in several senior positions, including that of
Deputy General Manager (2003 to 2007) and Argentine Representative to the Governance Network
at the Basle-based Bank for International Settlements (Switzerland). During 2007 and 2008 she
worked as a Consultant to the 279 International Monetary Fund.
The Board of Directors is led by Julio Patricio Supervielle (Chairman and CEO) and Jorge Oscar Ramirez
(First Vice-Chairman).
Jorge Oscar Ramrez: Mr. Ramirez has been a Director of Grupo Supervielle since February 2011, and
is currently First Vice-Chairman of the Board of Directors. He is a certified public accountant, with a
degree from the University of Buenos Aires (Argentina). He also holds an Executive Management
Program degree (PADE) from the Business School of the Universidad de Los Andes (Chile). From 1981
to 1985, he worked in the International Capital Markets division of Banco Nacional de Desarrollo in
Argentina (National Development Bank). He subsequently joined the First National Bank of Boston
(later BankBoston) where he served as a lending officer and team leader in the Corporate Banking
Division (1985 1989), Investment Banking Officer, Senior Investment Banker, and Managing Director
of Boston Investment Group (1989 1995). From 1995 to 1997, he served as the Country Manager for
First National Bank of Boston in Uruguay and Chile. In 2000, he was appointed as Regional President
for the Andean Region which included Chile, Peru, Colombia and Panama. In 2003, he returned to
Argentina as CEO of BankBoston. In 2004, he served as Regional President for Argentina and Uruguay.
Mr. Ramirez left BankBoston in December 2005 after the announcement of its sale to Standard Bank.
From May 2006 to January 2011, he was a partner of Prisma Investment S.A., a financial advisory firm
in Argentina. Until December 2010, he also served on the board of ALICO, the life insurance company
of AIG in Argentina.
Financial Analysis
The group results are mainly driven by its main subsidiary, Banco Supervielle. In turn, the banks profits
are due to the difference between the financial income coming from its interest-earning assets and the
financial expenses arising from its interest-bearing liabilities. The most important SUPV figures as of
December 31, 2015, were:
AR$33.0 billion assets, AR$30.7 billion liabilities and AR$2.4 billion shareholders equity;
Gross financial margin of AR$3.36 billion, Income from financial transactions of AR$784 million and
net income of AR$674 million in 2015;
Average interest-bearing liabilities were AR$23.9 billion mostly explained by deposits representing
95% of the total in 2015.
Overdrafts
5% 8%
Promissory 15%
Notes Checking
Mortgage Loans 28% accounts
29% 49% Savings deposits
Collateral Loans
Time deposits
Personal Loans 36%
Interest-earning assets
In 2015, average interest-earning assets stood at AR$22.1 billion with its average nominal rate reaching
30.6%. Gross loans, investment portfolio and other receivables represented 86%, 12% and 2% of assets,
respectively, while their average nominal rates were 31.1%, 26.3% and 17.7% in 2015. Average loan
portfolio was AR$18.3 billion, mostly explained by personal loans (AR$5.5 billion), credit card loans
(AR$4.4 billion), promissory notes (AR$3.3 billion) and corporate unsecured loans (AR$1.8 billion); yielding
41.5%, 30.8%, 26.4% and 31.7%, respectively.
We estimate that average interest earning assets will reach AR$33.6 billion, yielding 33.4% in 2016. For
2017, we project these assets to represent AR$47.3 billion with a yield of 30.5%. The growth we see, in
nominal terms, is mainly driven by the retail loans, enhanced by a faster growing wholesale segment. All
in all, we forecast gross loan growth rate at 39.9% and 53.8% y/y in 2016 and 2017, respectively.
Interest-bearing liabilities
In 2015, average interest-bearing liabilities were AR$23.9 billion and its average nominal rate stood at
14.2%. Time deposits, checking and saving accounts and other borrowings represented 56%, 29% and 15%
of liabilities, respectively, while their average nominal rates were 24.0%, 0.1% and 20.6% in 2015.
We estimate average interest bearing liabilities at AR$33.2 billion, costing 16.6% in 2016. For 2017, we
project these liabilities to represent AR$46.7 billion with a cost of 13.1%. This expansion is mainly due to
the growth at term deposits, which we estimate at 33.9% and 54.8% y/y, with its related cost standing at
22.1% and 16.9% in 2016 and 2017, respectively.
NIM & gross financial margin
In 2015, financial income from interest-earnings assets was AR$6.7 billion while financial expenses totaled
AR$3.4 billion. Thus, gross financial margin and net interest margin reached AR$3.3 billion and 15.2%,
respectively. This NIM compares favorably with the 13.8% for banks under coverage in 2015.
For this year, we project financial income from interest earnings assets at AR$11.2 billion and financial
expenses at AR$5.5 billion. In 2017, we estimate financial income at AR$14.4 billion and expenses
reaching AR$6.1 billion. Consequently, in our view, NIM will expand in 2016 and 2017 to 17.0% and 17.6%,
respectively.
Exhibit 18. 2015 Net Interest Margin for Banks Under Coverage
15.6% 15.2%
14.2%
11.7%
76%
64%
Average (Ex-SUPV) = 53%
50%
46%
Administrative expenses
In 2015, Supervielle administrative expenses totaled AR$4.3 billion, with personnel expenses accounting
for AR$2.8 billion or 65% of the total expenses. In terms of efficiency, Grupo Supervielle cost-to-income
ratio was 76.2% in 2015. It should be noted, this ratio compares unfavorably with the 53.3% for the banks
under coverage in 2015.
Return on equity
In 2015, Supervielle reported a return over average equity (ROE) of 35.2%, which was explained by a net
income of AR$674 million and average equity for AR$1,916 million. This ROE is in-line with the figures of
Argentine peers average of 35.1% (BFR at 32.0%, GGAL at 35.5% and BMA at 37.8%)
According to our estimates, the bottom line will grow 83.7% and 84.8% to AR$1.2 million and AR$2.3
million in 2016 and 2017, respectively. These net earnings combined with the capital injection will show a
shrinkage in ROE to 24.9% in 2016E, recovering to 28.7% in 2017E, similar to Supervielles average over
the last five years.
38%
32%
Income by segment
The company generates most of its revenues and net income from the retail banking and corporate
banking segments at Banco Supervielle:
Retail banking: The bank offers to its retail customers a wide range of banking products including
personal loans, short term advances, secured loans, payroll services, credit cards, debit cards, savings
accounts, time deposits, and checking accounts. Other services offered by the bank are related to
investments such as mutual funds, insurance coverage, guarantees and benefits payments to senior
citizens and pensioners, among others. This segment generated revenues for AR$3.4 billion (or 61%
of total sales) and net income for AR$221 million (or 30% of net results) in 2015.
Corporate banking: Through this segment the bank offers factoring, leasing, employee payroll,
foreign trade, cash management, and transaction services. In addition, the corporate banking
segment offers checking account short-term advances, secured and unsecured loans, pledge loans,
supplier payment services, check custody services, armored transportation services, collections
services, corporate credit cards, pension services, deposit accounts (including time deposits and
short-term deposits), and mutual guarantee society services. This segment generated revenues for
AR$787 million (or 14% of total sales) and net income for AR$288 million (or 39% of net results) in
2015.
Exhibit 21. Supervielle: Net Revenue By Segment In 2015 Exhibit 22. Supervielle: Net Income By Segment In 2015
3% 3%
Retail Banking Retail Banking
8%
Corporate Corporate 8%
15%
Banking Banking 30%
Bank Treasury Bank Treasury 8%
4%
Consumer Consumer 7%
Finance 14% 61% Finance
Insurance Insurance
Dividends:
Grupo Supervielle reinvested most of its earnings to support its past growth, thus, it has not paid
significant dividends, which represented a payout ratio of close to 2%. Given Supervielles business
strategy, we are forecasting that the company will maintain a 2% payout ratio in the future.
Earnings Estimates
Exhibit 23: Grupo Supervielle: Balance Sheet, Income Statement, Ratio Analysis (2010A 2019E)
Balance Sheet (AR$ million) 2010A 2011A 2012A 2013A 2014A 2015A 1Q16A 2Q16E 3Q16E 4Q16E 2016E 2017E 2018E 2019E
Ca s h & Res erves 1,017 1,230 2,177 2,663 3,649 6,809 3,767 4,778 5,815 7,143 7,143 9,538 12,391 15,696
Securi ti es 426 337 230 484 1,008 932 3,285 6,148 6,130 5,900 5,900 7,129 11,032 13,075
Gros s Loa ns 4,835 6,874 8,254 12,146 15,597 21,841 23,269 25,673 27,678 30,549 30,549 46,987 63,544 81,324
Other As s ets 982 1,445 2,030 2,125 2,987 3,465 4,351 4,410 4,682 4,744 4,744 5,047 5,900 6,264
Total Assets 7,260 9,887 12,692 17,418 23,241 33,046 34,672 41,010 44,305 48,337 48,337 68,701 92,868 116,359
Depos i ts 5,631 7,238 9,302 12,819 16,893 23,717 24,347 26,722 28,659 31,466 31,466 46,987 63,544 81,324
Other Li a bi l i ti es 1,133 1,950 2,370 3,205 4,587 6,885 7,703 8,098 9,023 9,847 9,847 12,420 16,920 18,620
Tota l Li a bi l i ti es 6,764 9,188 11,672 16,024 21,479 30,601 32,049 34,820 37,682 41,313 41,313 59,407 80,464 99,945
Mi nori ty Interes t 18 22 31 42 55 71 75 76 78 80 80 86 100 115
Net Worth 478 677 988 1,352 1,707 2,374 2,548 6,113 6,546 6,943 6,943 9,208 12,304 16,299
Total Liabilities & Net Worth 7,260 9,887 12,692 17,418 23,241 33,046 34,672 41,010 44,305 48,337 48,337 68,701 92,868 116,359
Income Statement (AR$ million) 2010A 2011A 2012A 2013A 2014A 2015A 1Q16A 2Q16E 3Q16E 4Q16E 2016E 2017E 2018E 2019E
Interes t Income 924 1,454 2,210 3,045 4,751 6,742 2,339 2,776 3,030 3,058 11,203 14,430 15,760 17,012
Interes t Expens e -338 -582 -818 -1,304 -2,465 -3,386 -1,233 -1,400 -1,427 -1,434 -5,494 -6,117 -6,279 -6,348
Net Interes t Income 586 872 1,392 1,741 2,287 3,356 1,106 1,376 1,604 1,624 5,709 8,312 9,481 10,665
Credi t Los s Cha rges -68 -99 -210 -351 -357 -544 -184 -257 -233 -255 -929 -1,452 -1,976 -2,594
Net Fee Income 504 699 1,035 1,344 1,561 2,233 656 688 761 828 2,934 4,079 5,567 7,128
Admi ni s tra ti ve Expens es -873 -1,273 -1,808 -2,287 -3,014 -4,261 -1,300 -1,486 -1,441 -1,581 -5,808 -7,354 -8,151 -8,850
Income before Income Ta x 133 187 401 471 562 921 239 351 705 632 1,928 3,661 5,014 6,455
Income Ta x -41 -44 -75 -98 -199 -247 -65 -130 -261 -234 -689 -1,373 -1,865 -2,388
Net Income Reported 93 144 326 373 363 674 175 221 444 398 1,238 2,288 3,149 4,067
EPS (AR$) 0.75 1.17 2.65 3.04 2.95 4.42 0.70 0.72 1.22 1.09 4.04 6.29 8.66 11.18
EPADS (US$) 0.96 1.40 2.91 2.74 1.82 2.28 0.26 0.25 0.40 0.35 1.26 1.91 2.40 2.87
EPADS (US$ at Blue Chip Swap) n.a. 1.35 2.22 1.79 1.32 1.64 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Ratios Analysis (AR$) 2010A 2011A 2012A 2013A 2014A 2015A 1Q16A 2Q16E 3Q16E 4Q16E 2016E 2017E 2018E 2019E
Growth (y/y)
Gros s Loa ns 43.8% 42.2% 20.1% 47.1% 28.4% 40.0% 41.6% 40.4% 38.8% 39.9% 39.9% 53.8% 35.2% 28.0%
Depos i ts 33.7% 28.5% 28.5% 37.8% 31.8% 40.4% 36.4% 32.8% 38.8% 32.7% 32.7% 49.3% 35.2% 28.0%
Net Interes t Income 22.1% 48.8% 59.6% 25.1% 31.3% 46.7% 57.9% 90.0% 87.7% 50.8% 70.1% 45.6% 14.1% 12.5%
Credi t Los s Cha rges -20.5% 46.1% 111.7% 67.1% 1.7% 52.5% 40.3% 103.0% 136.9% 35.6% 70.8% 56.4% 36.0% 31.3%
Net Fee Income 20.7% 38.8% 48.0% 29.9% 16.1% 43.1% 40.6% 33.7% 32.2% 22.5% 31.4% 39.0% 36.5% 28.0%
Admi ni s tra ti ve Expens es 23.4% 45.8% 42.0% 26.5% 31.8% 41.4% 40.5% 37.5% 36.1% 32.1% 36.3% 26.6% 10.8% 8.6%
Net Income Reported 80.9% 54.9% 127.2% 14.3% -2.7% 85.7% 106.6% 508.1% 130.2% 10.5% 83.7% 84.8% 37.6% 29.2%
EPS Reported 80.9% 54.9% 127.2% 14.3% -2.7% 49.7% 2.0% 143.9% -22.2% -41.4% -8.6% 55.7% 37.6% 29.2%
EPADS Reported 2.7% 46.4% 107.1% -6.0% -33.5% 25.1% -35.6% 53.5% -52.8% -59.6% -44.7% 51.8% 25.4% 19.6%
Asset Quality
NPLs to Gros s Loa ns 0.0% 0.0% 4.2% 3.1% 3.1% 3.3% 2.8% 3.1% 3.4% 3.7% 3.7% 3.4% 3.4% 3.4%
LLR / Gros s Loa ns 2.1% 2.4% 3.5% 2.8% 2.7% 2.8% 2.3% 2.6% 3.1% 3.6% 3.6% 3.4% 3.4% 3.4%
LLR / NPLs NA NA 82% 91% 86% 87% 81% 84% 90% 96% 96% 101% 100% 100%
Credi t Los s Chrg / Gros s Loa ns 1.7% 1.7% 2.8% 3.5% 2.7% 3.0% 3.3% 4.2% 3.5% 3.5% 3.6% 3.8% 3.6% 3.6%
Source: Grupo Supervielle and Raymond James Argentina. NA not available.
Exhibit 24: Grupo Supervielle: Balance Sheet, Income Statement, Ratio Analysis (2010A 2018E)
Balance Sheet (US$ million) 2010A 2011A 2012A 2013A 2014A 2015A 1Q16A 2Q16E 3Q16E 4Q16E 2016E 2017E 2018E 2019E
Ca s h & Res erves 254 286 443 408 427 527 258 318 377 452 452 561 652 787
Securi ties 107 78 47 74 118 72 225 409 397 373 373 419 581 655
Gros s Loa ns 1,209 1,599 1,680 1,863 1,824 1,689 1,596 1,706 1,795 1,934 1,934 2,764 3,344 4,076
Other As s ets 245 336 413 326 349 268 298 293 304 300 300 297 311 314
Total Assets 1,815 2,299 2,583 2,671 2,718 2,556 2,378 2,726 2,873 3,059 3,059 4,041 4,888 5,833
Depos i ts 1,408 1,683 1,893 1,966 1,975 1,834 1,670 1,776 1,858 1,992 1,992 2,764 3,344 4,076
Other Li a bi l i ties 283 453 482 492 536 532 528 538 585 623 623 731 891 933
Total Li a bi l i ties 1,691 2,137 2,375 2,458 2,512 2,367 2,198 2,314 2,443 2,615 2,615 3,495 4,235 5,010
Mi nori ty Interes t 5 5 6 6 6 5 5 5 5 5 5 5 5 6
Net Worth 119 157 201 207 200 184 175 406 424 439 439 542 648 817
Total Liabilities & Net Worth 1,815 2,299 2,583 2,671 2,718 2,556 2,378 2,726 2,873 3,059 3,059 4,041 4,888 5,833
Income Statement (US$ million) 2010A 2011A 2012A 2013A 2014A 2015A 1Q16A 2Q16E 3Q16E 4Q16E 2016E 2017E 2018E 2019E
Interes t Income 235 349 484 550 585 705 170 195 199 196 760 879 876 873
Interes t Expens e -86 -140 -179 -235 -302 -355 -90 -98 -94 -92 -374 -373 -349 -326
Net Interes t Income 149 210 305 315 283 350 80 97 105 104 386 506 526 547
Credi t Los s Cha rges -17 -24 -46 -63 -44 -57 -13 -18 -15 -16 -63 -88 -110 -133
Net Fee Income 128 168 227 244 192 234 48 48 50 53 199 248 309 366
Admi ni s tra tive Expens es -222 -306 -396 -416 -371 -449 -94 -104 -95 -101 -395 -448 -453 -454
Income before Income Ta x 34 45 88 84 69 92 17 25 46 40 129 223 278 331
Income Ta x -10 -11 -16 -17 -25 -25 -5 -9 -17 -15 -46 -83 -103 -123
Net Income Reported 24 35 71 67 45 67 13 16 29 25 83 139 174 209
Net Income (US$ at Blue Chip Swap) n.a. 33 55 44 32 50 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Ratios Analysis (US$) 2010A 2011A 2012A 2013A 2014A 2015A 1Q16A 2Q16E 3Q16E 4Q16E 2016E 2017E 2018E 2019E
Growth (y/y)
Gros s Loa ns 36.6% 32.3% 5.1% 10.9% -2.1% -7.4% -14.4% -15.2% -15.2% 14.5% 14.5% 42.9% 21.0% 21.9%
Depos i ts 27.0% 19.6% 12.5% 3.9% 0.5% -7.1% -17.5% -19.8% -15.2% 8.6% 8.6% 38.8% 21.0% 21.9%
Net Interes t Income 15.6% 40.7% 45.5% 3.3% -10.4% 24.0% -0.3% 19.6% 14.0% 7.9% 10.3% 31.0% 3.9% 4.0%
Credi t Los s Cha rges -24.8% 38.1% 93.1% 38.0% -30.6% 28.6% -11.4% 27.7% 43.9% -2.9% 11.3% 40.2% 24.0% 21.4%
Net Fee Income 14.2% 31.2% 34.9% 7.7% -21.4% 21.8% -11.2% -15.9% -19.7% -12.3% -14.9% 24.7% 24.4% 18.4%
Admi ni s tra tive Expens es 16.7% 37.9% 29.5% 5.0% -10.8% 20.8% -11.3% -13.5% -17.3% -5.4% -12.0% 13.5% 1.0% 0.3%
Net Income Reported 71.2% 46.4% 107.1% -6.0% -33.5% 49.5% 30.5% 282.6% 39.8% -20.9% 23.9% 67.8% 25.4% 19.6%
Source: Grupo Supervielle and Raymond James Argentina.
Company Citations
Company Name Ticker Exchange Currency Closing Price RJ Rating RJ Entity
Banco Macro S.A. BMA NYSE US$ 78.73 2 RJ
Argentina
BBVA Banco Frances BFR NYSE US$ 20.97 3 RJ
Argentina
Grupo Financiero Galicia GGAL NASDAQ US$ 31.67 2 RJ
Argentina
Notes: Prices are as of the most recent close on the indicated exchange and may not be in US$. See Disclosure section for
rating definitions. Stocks that do not trade on a U.S. national exchange may not be approved for sale in all U.S. states.
NC=not covered.
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RATING DISTRIBUTIONS
Coverage Universe Rating Distribution* Investment Banking Distribution
RJ Arg RJA RJL RJEE/RJFI RJ Arg RJA RJL RJEE/RJFI
Strong Buy and Outperform (Buy) 56% 54% 69% 51% 10% 19% 39% 0%
Market Perform (Hold) 44% 41% 29% 36% 0% 7% 16% 0%
Underperform (Sell) 0% 4% 2% 14% 0% 2% 0% 0%
* Columns may not add to 100% due to rounding.
Valuation Methodology: We arrive at our 12-month target price for SUPV shares after applying a 2017E target PE of 9.0x. This
multiple is composed of: 1) A target PE of 10.0x for the Argentine banks under coverage, which is consistent with the average
forward-looking PE in the last ten years; and 2) a 10% discount, related to the historical average discount between large-cap and
small cap-banks in Latin America.
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Specific Investment Risks Related to the Industry or Issuer
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