6-K 1 tm2032603-1_6k.htm FORM 6-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 6-K

 

 

 

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16

under the Securities Exchange Act of 1934

 

For the month of October, 2020

 

Commission File Number: 001-37777

 

 

 

GRUPO SUPERVIELLE S.A.

(Exact name of registrant as specified in its charter)

SUPERVIELLE GROUP S.A.

(Translation of registrant’s name into English)

 

 

 

Bartolomé Mitre 434, 5th Floor

C1036AAH Buenos Aires

Republic of Argentina

(Address of principal executive offices)

 

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F  x   Form 40-F  ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Yes  ¨   No  x

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Yes  ¨   No  x

 

 

 

 

 

GRUPO SUPERVIELLE S.A.

 

TABLE OF CONTENTS

 

Item  
   
1. Financial Statements for the six month period ended on June 30, 2020, presented on comparative basis

 

 

 

 

 

 

Consolidated Condensed Interim Financial Statements

 

For the six-month period ended on

June 30, 2020, presented on comparative basis in homogeneous currency

 

 

 

 

Contents

CONSOLIDATED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION 2
CONSOLIDATED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME 4
CONSOLIDATED CONDENSED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS´ EQUITY 7
CONSOLIDATED CONDENSED INTERIM STATEMENT OF CASH FLOWS 9
1. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES OF THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS 11
2. SEGMENT REPORTING 27
3. FAIR VALUES 30
4. RELATED PARTY TRANSACTIONS 31
5. COMPOSITION OF THE MAIN ITEMS OF THE CONSOLIDATED COMPREHENSIVE INCOME 32
6. DIVIDENDS 34
7. INSURANCE 34
8. MUTUAL FUNDS 34
9. ADDITIONAL INFORMATION REQUIRED BY THE BCRA 35
10. CONTRACT AS A FINANCIAL AGENT BY THE PROVINCE OF SAN LUIS 38
11. FINANCIAL RISK FACTORS 38
12. INTERNATIONAL FINANCING PROGRAMS 39
13. IMPACT OF COVID-19 ON SOCIETY OPERATIONS 39
SCHEDULE A - DEBT SECURITIES AT FAIR VALUE THROUGH PROFIT OR LOSS, OTHER DEBT SECURITIES, EQUITY INSTRUMENTS 41
SCHEDULE B - CLASSIFICATION OF LOANS AND OTHER FINANCING CREDIT ACCORDING TO STATUS AND COLLATERAL RECEIVED 42
SCHEDULE C - CONCENTRATION OF LOANS AND OTHER FINANCING 44
SCHEDULE  D - BREAKDOWN OF TOTAL LOANS AND OTHER FINANCING 45
SCHEDULE F - PROPERTY, PLANT AND EQUIPMENT 46
SCHEDULE G - INTANGIBLE ASSETS 47
SCHEDULE H - CONCENTRATION OF DEPOSITS 48
SCHEDULE I - BREAKDOWN OF FINANCIAL LIABILITIES FROM REMAINING TERMS 49
SCHEDULE L - ASSETS AND LIABILITIES IN FOREIGN CURRENCY 50
SCHEDULE R - LOAN LOSS RISK PROVISIONS 51
SEPARATE CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION 55
SEPARATE CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME 53
EARNING PER SHARE 55
SEPARTE CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME 56
SEPARATE CONDENSED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS´ EQUITY 57
SEPARATE CONDENSED INTERIM STATEMENT OF CASH FLOW 58
1. BASIS OF PREPARATION OF THE UNAUDITED SEPARATE CONDENSED INTERIM FINANCIAL STATEMENTS 59
2. FAIR VALUES 62
3. INVESTMENT IN SUBSIDIARIES AND ASSOCIATES 63
4. COMPOSITION OF THE MAIN ITEMS OF THE SEPARATE STATEMENT OF COMPREHENSIVE INCOME 64
5. RESTRICTED ASSETS 65
6. COMPANIES UNDER SECT. 33 OF CORPORATE LAW AND OTHER RELATED COMPANIES 65
7. CAPITAL STOCK 69
8. CASH FLOW STATEMENT AND EQUIVALENTS 69
9. SUBSEQUENT EVENTS 69
SCHEDULE A - OTHER DEBT SECURITIES 70
SCHEDULE F - PROPERTY, PLANT AND EQUIPMENT 71
SCHEDULE G - INTANGIBLE ASSETS 72
SCHEDULE L - ASSETS AND LIABILITIES IN FOREIGN CURRENCY 73
Additional Information pursuant to Art, 12, Chapter III, Title IV of standards issued by the National Securities Commission 74
INFORMATIVE REVIEW AS OF JUNE 30, 2020 76

 

 

 

 

 

 

Consolidated Condensed Interim Financial Statements

 

For the six-month period ended on

June 30 2020, presented on comparative basis in homogeneous currency

 

1

 

 

GRUPO SUPERVIELLE S.A.

 

Name: Grupo Supervielle S.A.
Financial year: N° 42 started on January 1, 2020
Legal Address: Bartolomé Mitre 434, piso 5 Ciudad Autónoma de Buenos Aires
Core Business: Carry out, on its own account or third parties’ or related to third parties, in the country or abroad, financing activities through cash or instrument contributions to already-existing or to-be-set-up corporations, whether controlling such corporations or not, as well as the purchase and sale of securities, shares, debentures and any kind of property values, granting of fines and/or guarantees, set up or transfer of loans as guarantee, including real, or without it not including operations set forth by the Financial Entities Law and any other requiring public bidding.
Registration Number at the IGP: 212,617
Date of Registration at IGP: October 15, 1980
Amendment of by-laws (last): April 24, 2018 (Registration in progress)
Expiration date of the Company’s By-Laws: October 15, 2079
Corporations Article 33 Companies general Law   Note 6 to Separate Condensed Interim Financial Statements

 

Composition of Capital Stock as of June 30, 2020

 

Shares     Capital Stock  
Quantity     Class   N.V. $     Votes per share     Subscribed in
thousands of $
    Integrated in
thousands of $
 
61,738,188     A: Non endorsable, common shares of a nominal value     1       5     61,738       61,738  
394,984,134     B: Non endorsable, common shares of a nominal value     1       1     394,984       394,984  
456,722,322                         456,722       456,722  

 

2

 

GRUPO SUPERVIELLE S.A.

 

CONSOLIDATED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION

As of June 30, 2020 and December 31, 2019

(Expressed in thousands of pesos in homogeneous currency)

 

   Notes and
Schedules
  06/30/2020   12/31/2019 
ASSETS           
Cash and due from banks  1.8 and 3   31,705,003    29,992,168 
Cash      9,055,417    9,940,681 
Financial institutions and correspondents      22,621,896    20,017,511 
    Argentine Central Bank      18,542,448    18,092,397 
    Other local and foreign financial institutions      4,079,448    1,925,114 
    Others      27,690    33,976 
Debt Securities at fair value through profit or loss  1.8, 3 and A   3,607,931    645,779 
Derivatives  3   66,000    292,602 
Repo transactions  3   4,633,359    - 
Other financial assets  1.8 and 3   3,052,587    2,381,901 
Loans and other financing  3 and B   95,711,142    100,984,231 
To the non-financial public sector      200,543    32,797 
To the financial sector      298,196    73,293 
To the Non-Financial Private Sector and Foreign residents      95,212,403    100,878,141 
Other debt securities  3 and A   64,450,082    12,122,179 
Financial assets in guarantee  3   4,751,970    6,058,734 
Current income tax assets      -    116,385 
Investments in equity instruments  3 and A   44,003    16,561 
Property, plant and equipment  F   5,261,799    4,546,090 
Investment properties  F   3,984,891    4,605,912 
Intangible assets  G   4,946,198    4,966,885 
Deferred income tax assets      2,161,897    1,524,928 
Other non-financial assets      2,134,223    1,470,299 
Inventories      39,562    50,498 
TOTAL ASSETS      226,550,647    169,775,152 

 

The accompanying notes and schedules are an integral part of the Consolidated Condensed Interim Financial Statements.

 

3

 

GRUPO SUPERVIELLE S.A.

 

CONSOLIDATED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION

As of June 30, 2020 and December 31, 2019

(Expressed in thousands of pesos in homogeneous currency)

 

   Notes and
Schedules
   06/30/2020   12/31/2019 
LIABILITIES               
Deposits   3 and H    158,604,239    101,107,381 
 Non-financial public sector        5,131,751    6,213,758 
 Financial sector        18,656    31,917 
 Non-financial private sector and foreign residents        153,453,832    94,861,706 
Liabilities at fair value through profit or loss   3    113,041    215,321 
Repo transactions   3    644,149    363,291 
Other financial liabilities   3    10,538,160    10,355,847 
Financing received from the Argentine Central Bank and other financial institutions   3    7,996,501    10,243,392 
Negotiable Obligations Issued   3 and 9.4    5,882,718    6,913,832 
Current income tax liabilities        682,130    - 
Subordinated negotiable obligations   3 and 9.4    2,489,706    2,408,052 
Provisions        728,977    769,048 
Deferred income tax liabilities        308,970    575,113 
Other non-financial liabilities        9,735,089    9,324,778 
TOTAL LIABILITIES        197,723,680    142,276,055 
                
SHAREHOLDERS' EQUITY               
   Capital stock        456,722    456,722 
   Paid in capital        27,764,641    27,764,641 
   Capital Adjustments        2,401,296    2,401,296 
   Reserves        15,869,923    11,882,824 
   Retained earnings        (19,547,052)   (11,794,339)
   Other comprehensive income        358,280    98,162 
   Net income for the period/year        1,499,975    (3,332,089)
Shareholders' Equity attributable to owners of the parent company        28,803,785    27,477,217 
Shareholders' Equity attributable to non-controlling interests        23,182    21,880 
TOTAL SHAREHOLDERS' EQUITY        28,826,967    27,499,097 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY        226,550,647    169,775,152 

 

The accompanying notes and schedules are an integral part of the Consolidated Condensed Interim Financial Statements.

 

4

 

GRUPO SUPERVIELLE S.A.

 

CONSOLIDATED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME

For the six and three-month period ended on June 30, 2020 and 2019

(Expressed in thousands of pesos in homogeneous currency)

 

 

      Six-month period ended on   Three-month period ended on 
   Notes  06/30/2020   06/30/2019   06/30/2020   06/30/2019 
Interest income  5.1   26,528,693    25,466,792    12,765,196    12,537,079 
Interest expenses  5.2   (11,018,334)   (21,451,228)   (4,662,757)   (10,517,428)
Net interest income      15,510,359    4,015,564    8,102,439    2,019,651 
Service fee income  5.5   4,823,524    5,004,095    2,287,176    2,469,272 
Service fee expenses  5.6   (1,366,850)   (1,156,067)   (661,447)   (622,695)
Income from insurance activities  7   729,752    670,826    389,020    332,105 
Net Service Fee Income      4,186,426    4,518,854    2,014,749    2,178,682 
Subtotal      19,696,785    8,534,418    10,117,188    4,198,333 
Net income from financial instruments (NIFFI) at fair value through profit or loss  5.3   975,142    14,598,027    653,918    7,212,969 
Result from assets withdrawals rated at amortized cost  5.4   (2,178,233)   -    (2,190,492)   - 
Exchange rate difference on gold and foreign currency      398,093    (115,412)   299,177    383,359 
Subtotal      (804,998)   14,482,615    (1,237,397)   7,596,328 
Other operating income  5.7   1,733,689    1,598,243    870,546    729,832 
Result from exposure to changes in the purchasing power of the currency      776,725    (3,358,916)   1,692,795    (1,573,021)
Loan loss provisions      (3,931,578)   (4,826,839)   (2,266,046)   (1,774,569)
Net operating income      17,470,623    16,429,521    9,177,086    9,176,903 
Personnel expenses  5.8   7,479,850    7,992,753    3,726,473    4,211,856 
Administration expenses  5.9   4,199,058    4,241,168    2,282,772    2,172,471 
Depreciations and impairment of non-financial assets  5.10   969,032    889,019    492,835    455,683 
Other operating expenses  5.11   2,798,986    3,346,522    1,491,140    1,711,124 
Operating income      2,023,697    (39,941)   1,183,866    625,769 
Income before taxes from continuing operations      2,023,697    (39,941)   1,183,866    625,769 
Income tax      522,687    532,683    161,003    (229,295)
Net income for the period      1,501,010    (572,624)   1,022,863    855,064 
Net income for the period attributable to owners of the parent company      1,499,975    (571,952)   1,022,232    854,279 
Net income for the period attributable to non-controlling interests      1,035    (672)   631    785 

 

The accompanying notes and schedules are an integral part of the Consolidated Condensed Interim Financial Statements.

 

5

 

GRUPO SUPERVIELLE S.A.

 

CONSOLIDATED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME

EARNING PER SHARE

For the six and three-month period ended on June, 30 2020 and 2019

(Expressed in thousands of pesos in homogeneous currency)

 

 

   Six-month period ended on   Three-month period ended on 
Item  06/30/2020   06/30/2019   06/30/2020   06/30/2019 
NUMERATOR                    
Net income for the period attributable to owners of the parent company   1,499,975    (571,952)   1,022,232    854,279 
PLUS: Diluting events inherent to potential ordinary shares   -    -    -    - 
Net income attributable to owners of the parent company adjusted by dilution   1,499,975    (571,952)   1,022,232    854,279 
                     
DENOMINATOR                    
                     
Weighted average of ordinary shares   456,722    456,722    456,722    456,722 
PLUS: Weighted average of number of ordinary shares issued with dilution effect.   -    -    -    - 
Weighted average of number of ordinary shares issued of the period adjusted by dilution effect   456,722    456,722    456,722    456,722 
                     
Basic Income per share   3.28    (1.25)   2.24    1.87 
Diluted Income per share   3.28    (1.25)   2.24    1.87 

 

The accompanying notes and schedules are an integral part of the Consolidated Condensed Interim Financial Statements

 

6

 

GRUPO SUPERVIELLE S.A.

 

CONSOLIDATED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME

For the six and three-month period ended on June, 30 2020 and 2019

(Expressed in thousands of pesos in homogeneous currency)

 

   Six-month period ended on   Three-month period ended on 
    06/30/2020    06/30/2019    06/30/2020    06/30/2019 
Net income for the period   1,501,010    (572,624)   1,022,863    855,064 
Components of Other Comprehensive Income not to be reclassified to profit or loss                    
Income for the period from equity instrument at fair value through other comprehensive income   (1,038)   -    (316)   - 
Income tax   311    -    94    - 
Net income from equity instrument at fair value through changes in other comprehensive income   (727)   -    (222)   - 
Total Other Comprehensive Income not to be reclassified to profit or loss   (727)   -    (222)   - 
Components of Other Comprehensive Loss to be reclassified to profit or loss                    
Loss for the period from financial instrument at fair value through other comprehensive income   373,047    (3,451)   441,339    (1,109)
Income tax   (111,935)   1,035    (129,900)   333 
Net income from financial instrument at fair value through changes in other comprehensive income   261,112    (2,416)   311,439    (776)
Total Other Comprehensive Loss to be reclassified to profit or loss   261,112    (2,416)   311,439    (776)
Total Other Comprehensive Income   260,385    (2,416)   311,217    (776)
Other comprehensive income attributable to owners of the parent company   260,118    (2,413)   310,898    (775)
Other comprehensive income attributable to non-controlling interests   267    (3)   319    (1)
Total Comprehensive Income   1,761,395    (575,040)   1,334,080    854,288 
Total comprehensive income attributable to owners of the parent company   1,760,093    (574,365)   1,333,130    853,504 
Total comprehensive income attributable to non-controlling interests   1,302    (675)   950    784 

 

The accompanying notes and schedules are an integral part of the Consolidated Condensed Interim Financial Statements.

 

7

 

GRUPO SUPERVIELLE S.A.

 

CONSOLIDATED CONDENSED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS´ EQUITY

For the six-month period ended on June, 30 2020 and 2019

(Expressed in thousands of pesos in homogeneous currency)

  

                           Other comprehensive income             
Items  Capital
stock
   Capital
adjustments
   Paid in
capital
   Legal reserve   Other
reserves
   Retained
earnings
   Revaluation
of PPE
   Earnings or
los accrued by
financial
institutions at
FV through
profit and loss
   Total
Shareholders´ equity
attributable to
parent company
   Total
Shareholders´ equity
attributable to
non-controlling
interest
   Total
Shareholders´
equity
 
Re-expressed Balance at December 31, 2019   456,722    2,401,296    27,764,641    159,620    11,723,204    (15,126,428)   92,426    5,736    27,477,217    21,880    27,499,097 
Distribution of retained earnings by the shareholders’ meeting on April 28, 2020:                                                       
Constitution of reserves   -    -    -    -    4,420,624    (4,420,624)   -    -    -    -    - 
Dividend distribution   -    -    -    -    (433,525)   -    -    -    (433,525)   -    (433,525)
Net Income for the period   -    -    -    -    -    1,499,975    -    -    1,499,975    1,035    1,501,010 
Other comprehensive income for the period   -    -    -    -    -    -    -    260,118    260,118    267    260,385 
Balance at June 30, 2020   456,722    2,401,296    27,764,641    159,620    15,710,303    (18,047,077)   92,426    265,854    28,803,785    23,182    28,826,967 

  

The accompanying notes and schedules are an integral part of the Consolidated Condensed Interim Financial Statements.

 

8

 

 

GRUPO SUPERVIELLE S.A. 

 

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS´ EQUITY

For the six-month period ended on June, 30 2020 and 2019

(Expressed in thousands of pesos in homogeneous currency)

 

                           Other comprehensive income             
Items  Capital
stock
   Capital
adjustments
   Paid in
capital
   Legal
reserve
   Other
reserves
   Retained
earnings
   Revaluation
of PPE
   Earnings or
los accrued by
financial
institutions at
FV through
profit and loss
  

Total

Shareholders´ equity
attributable to
parent company 

  

Total

Shareholders´ equity
attributable to
non-controlling
interest  

   Total
Shareholders´
equity
 
Re-expressed Balance at December 31, 2018  456,722   2,401,296   27,764,090   159,619   9,358,992   (8,290,061)  -   -   31,850,658   26,624   31,877,282 
IFRS 9 Impact Adjustments  -   -   -   -   -   (610,593)  -   -   (610,593)  (468)  (611,061)
Balance at December 31, 2018  456,722   2,401,296   27,764,090   159,619   9,358,992   (8,900,654)  -   -   31,240,065   26,156   31,266,221 
Other movements  -   -   551   -   -   -   -   -   551   96   647 
Distribution of retained earnings by the shareholders’ meeting on April 26, 2019:                                            
Constitution of reserves  -   -   -   -   2,044,660   (2,044,660)  -   -   -   -   - 
Dividend distribution  -   -   -   -       (444,317)  -   -   (444,317)  -   (444,317)
Net Income for the period  -   -   -   -   -   (571,952)  -   -   (571,952)  (672)  (572,624)
Other comprehensive income for the period  -   -   -   -   -   -   -   (2,413)  (2,413)  (3)  (2,416)
Balance at June 30, 2019  456,722   2,401,296   27,764,641   159,619   11,403,652   (11,961,583)  -   (2,413)  30,221,934   25,577   30,247,511 

 

The accompanying notes and schedules are an integral part of the Consolidated Condensed Interim Financial Statements.

 

9

 

GRUPO SUPERVIELLE S.A.

 

CONSOLIDATED CONDENSED INTERIM STATEMENT OF CASH FLOWS

For the six-month period ended on June, 30 2020 and 2019

(Expressed in thousands of pesos in homogeneous currency)

 

   06/30/2020   06/30/2019 
CASH FLOW FROM OPERATING ACTIVITIES          
           
Net income for the period before Income Tax   2,023,697    (39,941)
           
Adjustments to obtain flows from operating activities:          
Depreciation and impairment of non-financial assets   (969,032)   889,019 
Loan loss provisions   3,931,578    4,826,839 
Other adjustments          
-    Exchange rate difference on gold and foreign currency   (398,093)   115,412 
-    Interests from loans and other financing   (26,528,693)   (25,466,792)
-    Interests from deposits and financing   11,018,334    21,451,228 
-    Net income from financial instruments at fair value through profit or loss   (975,142)   (14,598,027)
-    Result from assets withdrawals rated at amortized cost   2,178,233    - 
-    Result from exposure to changes in the purchasing power of the currency   (776,725)   3,358,916 
-    Interest on liabilities for financial leases   82,350    130,447 
-    Allowances reversed   (277,082)   (268,773)
           
(Increases) / decreases from operating assets:          
Debt securities at fair value through profit or loss   (2,276,053)   17,133,369 
Derivatives   226,602    (110,150)
Repo transactions   (4,633,359)   (50,912)
Loans and other financing          
To the non-financial public sector   (167,746)   12,391 
To the other financial entities   (224,903)   (238,108)
To the non-financial sector and foreign residents   27,625,817    43,926,425 
Other debt securities   (52,327,903)   3,009,571 
Financial assets in guarantee   1,306,764    (2,411,249)
Investments in equity instruments   (27,442)   5,158 
Other assets   1,575,277    (3,068,339)
           
Increases / (decreases) from operating liabilities:          
Deposits          
Non-financial public sector   (1,082,007)   (5,045,707)
Financial sector   (13,261)   (6,173)
Private non-financial sector and foreign residents   47,747,160    (21,440,271)
Liabilities at fair value through profit or loss   (102,280)   2,064,561 
Derivatives   -    (164,647)
Repo operations   280,858    616,435 
Other liabilities   666,771    2,589,502 
Income Tax paid   (739,219)   (488,568)
           
Total operating activities (A)   7,144,501    26,731,616 
           
CASH FLOW FROM INVESTING ACTIVITIES          
           
Payments:          
Purchase of PPE, intangible assets and other assets   (529,445)   (598,991)
Purchase of investments in subsidiaries   -    (229,479)

 

The accompanying notes and schedules are an integral part of the Consolidated Condensed Interim Financial Statements.

 

10

 

GRUPO SUPERVIELLE S.A.

 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the six-month period ended on June, 31 2020 and 2019

(Expressed in thousands of pesos in homogeneous currency)

 

   06/30/2020   06/30/2019 
CASH FLOW FROM INVESTING ACTIVITIES          
           
Collections:          
Purchase of PPE, intangible assets and other assets   22,576    93,848 
           
Total investing activities (B)   (506,869)   (734,622)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
           
Payments:          
Changes in the ownership of subsidiaries that do not result in loss of control   -    647 
Interest on finance lease liabilities   (705,692)   (355,890)
Financing received from Argentine Financial Institutions   (22,013,806)   (14,841,328)
Unsubordinated negotiable obligations   (3,526,730)   (3,047,005)
Subordinated negotiable obligations   (45,029)   (200,262)
Dividends paid   (433,525)   (444,317)
           
Collections:          
Financing received from Argentine Financial Institutions   19,766,915    7,464,280 
Unsubordinated negotiable obligations   2,365,871    3,380,183 
Subordinated negotiable obligations   83,060    - 
           
Total Financing activities (C)   (4,508,936)   (8,043,692)
           
EFFECT OF CHANGES IN THE EXCHANGE RATE (D)   6,229,029    27,453,628 
           
NET INCREASE IN CASH AND CASH EQUIVALENTS  (A+B+C+D)   8,357,725    45,406,930 
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR (NOTE 1.8)   31,797,894    82,088,435 
Result from exposure to changes in the purchasing power of the currency of cash and equivalents   (4,739,374)   (30,272,149)
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD (NOTE 1.8)   35,416,245    97,223,216 

 

(*) In the items “Loans and other financing - non-financial sector and foreign residents”and “Other Assets”, “Purchase of PPE,intangible asstes and other assets” and “Other liabilities” and “Purchase of PPE,intangible asstes and other assets” and “Other assets” 914,118, 509,124 and 621,021 corresponding to non-monetary transactions were eliminated.

 

The accompanying notes and schedules are an integral part of the Consolidated Condensed Interim Financial Statements.

 

11

 

GRUPO SUPERVIELLE S.A.

(Expressed in thousands of pesos in homogeneous currency) 

 

1.BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES OF THE UNAUDITED CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS

 

Grupo Supervielle S.A. (hereinafter, "the Group"), is a company whose main activity is investment in other companies, Its main income comes from the distribution of dividends from these companies and the obtaining of income from other financial assets.

 

The consolidated financial statements of Grupo Supervielle S.A. they have been consolidated, line by line with the financial statements of Banco Supervielle S.A., Cordial Compañía Financiera S.A., Sofital S.A. F. e I.I., Tarjeta Automática S.A., Supervielle Asset Management S.A., Espacio Cordial Servicios S.A., Supervielle Seguros S.A., InvertirOnline S.A.U., InvertirOnline,Com Argentina S.A.U., Micro Lending S.A.U., Supervielle Productores Asesores de Seguros S.A., Bolsillo Digital S.A.U. and Futuros del Sur S.A.

 

The main investment of the Company is its shareholding in Banco Supervielle S.A., a financial entity included in Law No. 21.526 of Financial Institutions and subject to BCRA regulations, for which the valuation and exposure guidelines used have been adopted by said Entity (see Note 1.1) in accordance with that established in Title IV, Chapter I, Section I, Article 2 of the 2013 Orderly Text of the National Securities Commission (CNV).

 

These consolidated financial statements have been approved by the Board of Directors of the Company at its meeting held on August 20, 2020.

 

1.1.Preparation basis

 

These condensed interim financial statements have been prepared pursuant to: (i) provisions set by Intenational Accounting Standards N° 34, “Interim Financial Information” (IAS 34) and (ii) the accouting information framework set by the Argentine Central Bank which is based on International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board and interpretations issued by the International Financial Reporting Standards Interpretation Committee with the following exceptions:

 

(i)          Temporary exception of IFRS 9 “Financial Instruments” application over debt instruments of the non-financial public sector,

 

(ii)         Temporary exception of the application of Section 5.5 (Value Impairment) for Group B entities, a category that includes Cordial Compañia Financiera S.A.. Therefore, provisions of the aforementioned entity are held under minimum provisions standards set by the Argentine Central Bank.

 

Pursuant to IAS 34, interim financial information shall include an explanation of events and transactions that have taken place as from the end of the last annual period being reported and are relevant for the understanding of changes in the financial situation, financial performance and cash flows of the Group with the purpose of relying on updated information as per the last financial statements of the fiscal year ended on December 31, 2019 ( hereinafter, “annual financial statements”). Given the aforementioned, these condensed interim financial statements do not include all the information to be required by complete financial statements prepared pursuant to International Financial Reporting Standards; hence, in virtue of a suitable understanding of the information included therein, such statements must be read jointly with annual financial statements as of December 31, 2019.

 

The Gruop´s Board has concluded that these interim condensed financial statements reasonably express the financial position, financial performance and cash flows.

 

It is worth to be mentioned that interim condensed financial statements have been prepared by applying accounting policies and measurement criteria consistent with those applied by the Group for the preparation of annual financial statements, except for what has been set forth in Note 1.1.4.

 

The preparation of financial statements requires that the Group carries out calculations and evaluations that affect the amount of incomes and expenses recorded in the period. In this sense, calculations are aimed at the estimation of, for example, credit risk provisions, useful life of property, plant and equipment, impairments and amortizations, recoverable value of assets, income tax charges and the reasonable value of certain financial instruments. Future real results may defer from calculations and evaluations as of the date of these separate financial statements preparation.

 

As of these financial statements issuance date, such statements are pending of transcription to Inventory and Balance Sheet Book.

 

12

  

GRUPO SUPERVIELLE S.A.

(Expressed in thousands of pesos in homogeneous currency) 

 

1.1.1           Going concern

 

As of the date of these consolidated condensed interim financial statements there are no uncertainties with respect to events or conditions that may raise doubts regarding the possibility that the Group continues to operate normally as a going concern.

 

1.1.2           Measuring unit

 

Figures included in these condensed interim financial statements are expressed in thousands of Argentine pesos, unless otherwise stated.

 

The Group´s interim condensed financial statements recognice changes in the currency purchasing power until August 31, 1995. As from such date, in virtue of existing economic stability conditions and pursuant to Communication “A” 2365 issued by the Argentine Central Bank, accounting measurements were not re-expressed until December 31, 2001. In virtue of Communication “A” 3702 issued by the Argentine Central Bank, the application of the method was resumed and became effective on January 1, 2002. Previous accouting measurements were considered to be expressed in the currency as of December 31, 2001.

 

Pursuant to Communication “A” 3921 issued by the Argentine Central Bank, in compliance with Decree 664/03 issued by the National Executive Power, the application of the re-expression of financial statements in homogeneous currency was interrupted as from March 1, 2003. Therefore, the Group applied said re-expression until February 28, 2003.

 

In turn, Law N° 27,468 (B.O. 04/12/2018) amended article 10° of Law N° 23,928 and its amendments, thus establishing that the abolition of all legal and regulating standards that set and authorize price indexing, monetary updating, cost changes or any other manner of re-increasing debts, taxes, prices or fees for goods, works or services does not include financial statements, regarding which the application of article 62 of the General Corporations Law N° 19,550 (T.O 1984) and its amendments shall prevail. Likewise, the aforementioned legal body set de abolition of Decree N° 1269/2002 dated on July 16, 2002 and its amendments and instructed the National Executive Power, through its controlling agencies, to set the date as from which said regulations became into effect in relation with financial statements to be submitted. Therefore, on February 22, 2019, the Argentine Central Bank issued Communication “A” 6651 which established that financial statements shall be prepared in a homogeneous currency as from January 1, 2020. Therefore, these condensed interim financial statements have been re-expressed as of June 30, 2020.

 

1.1.3       Comparative information

 

The information included in these condensed interim financial statements and in the aforementioned notes as of December 31, 2019 and June 30, 2019 is presented, exclusively with comparative purposes regarding the information as of June 30, 2020.

 

It is worth to be mentioned that, Communication “A” 6778, issued by the Argentine Central Bank, required the retroactive application of the impairment model set forth in section 5.5 of IFRS 9 with temporary withdrawal of non-financial public sector´s debt instruments and the re-expression of financial statements pursuant to IAS 29. In virtue of the aforementioned, the Group has applied the following:

 

(i)Retroactive re-expression of figures included in the Financial Situation as of December 31, 2019 for the purpose of submitting such figures as if the new accounting policies had been in force since January 1, 2019, and
(ii)Retroactive re-expression of figures included in the Income Statement, Other Comprehensive Income and Changes in the Shareholders’ Equity Statement as of March 31, 2019 for the purpose of submitting such figures as if the new accounting policies had been in force since January 1, 2019.

 

1.1.4           Changes in accounting policies and new accounting standards

 

With the approval of new IFRS, modifications or derogations of the standards in force, and once such changes are adopted through Adoption Bulletins issued by Federación Argentina de Consejos Profesionales en Ciencias Económicas (FACPCE), the Argentine Central Bank will determine the approval of such standards for financial entities. In general terms, no anticipated IFRS application shall be allowed unless upon adoption such anticipated measure is specified.

 

The following are changes that were made effective over the course of the quarter ended on June 30, 2020:

 

13

 

GRUPO SUPERVIELLE S.A.

(Expressed in thousands of pesos in homogeneous currency)

 

(a)       Impairment of financial assets

 

Pursuant to Communication “A” 6430 and 6847 Financial Entities shall start to apply provisions on Financial Assets Impairment included in paragraph 5.5 of IFRS 9 as from fiscal years starting on 1 January, 2020, except for Non-financial Public Sector´s debt securities, which shall be temporarily excluded from the scope of said provisions. Likewise, Communication “A” 6990 issued by the Argentine Central Bank set the postponement of the application of the section targeted to “B” group Companies until January 1, 2021,a category that includes Cordial Compañía Financiera S.A.; therefore, provisions of said Entity are held under the minimum provisions regulations set by the Argentine Central Bank.

 

Upon the application of impairment model included in section 5.5 of IFRS 9, a decrease of about 452,9 million and 869,5 million would have been recorded in the shareholders ´equity as of June 30, 2020 and December 31, 2019 respectively.

 

   June 30, 2020   December 31, 2019 
Provisions recorded in financial statements   8,033,936    6,660,618 
Provisions pursuant to section 5.5 of IFRS 9   8,680,878    7,902,704 
Difference (*)   646,942    1,242,086 

 

(*) These balances do not include the effect of income tax

 

IFRS 9 foresees an expected credit los model, by means of which financial assets are classified in three impairment stages, based on changes in credit quality as from its initial recognition and show how a Company measures impairment loss and applies the effective interest method. Note 1.2 offers greater detail on how expected credit loss is measured.

 

Pursuant to Communication “A” 6778 issued by the Argentine Central Bank, Financial Entities shall apply the following in virtue of the effects of the application of section 5.5 of IFRS 9:

 

(i)              Utilized internal models that shall meet IFRS 9 requirements; thus, applying such models to all assets included in such regulation with temporary exception abovementioned, and

(ii)             Apply the Regulation retroactively, thus setting the transition date on January 1, 2019.

 

The following chart includes the reconciliation between uncollectibility risk provisions as of 12-31-2019 pursuant to the criteria set by the Amended Text on “Debtors Classification” and “Minimum Uncollectibility Risk Provisions” set by the Argentine Central Bank and the new uncollectibility risk provisions pursuant the expected credit loss model set by IFRS 9 with temporary exceptions above mentioned in the first paragraph:

 

 

Category of financial instrument  Credit risk
provision
pursuant to
minimum-provisions-related
Standards set by
the Argentine
Central Bank
   Re-measurements   Reclassifications   Credit risk
provision
pursuant to
IFRS 9 (as per
scope of
Communication
“A” 6847)
 
Loans and other financing   -    -    -    - 
Other financial assets   72,200    -    208,807    281,007 
Loans and other financing   -    -    -    - 
   Other Financial Entities   13,722    -    -    13,722 
   NFPS and Res. Abroad   -    -    -    - 
Advances   730,851    -    945,028    1,675,879 
Documents   862,361    -    (448,968)   413,393 
Mortgage loans   484,249    -    39,753    524,002 
Pledge loans   49,136    13,763    47,734    110,633 
Personal loans   1,145,065    11,679    (218,035)   938,709 
Credit Cards   720,261    -    (105,563)   614,698 
Financial Lease   86,597    -    71,213    157,810 
Others   2,466,195    -    (539,469)   1,926,726 
Debt securities   4,122    -    (83)   4,039 
Contingent commitments   417    -    (417)   - 
TOTAL   6,635,176    25,442    -    6,660,618 
                     
* Cordial Compañía Financiera S.A.´s balances of provisions are held under minimum provisions Standards pursuant to Communication “A” 6990 issued by the Argentine Central Bank.

 

14

 

GRUPO SUPERVIELLE S.A.

(Expressed in thousands of pesos in homogeneous currency)

 

Note 1.2 includes further information on the definition of credit risk provision pursuant to the expected credit loss model set by IFRS 9 with scope set by the Argentine Central Bank.

 

(b)     Re-expression by inflation of financial statements

 

Pursuant to IAS 29 “Financial Information in hyperinflationary economies”, financial statements of an entity, whose functional currency accounts for that currency of a hyperinflationary economy shall be expressed in terms of a current measurement unit as of the reporting fiscal year closing date regardless of whether such statements are based on the historical cost method or a current cost method. To such ends, in general terms, such entity shall calculate the inflation recorded as from the acquisition date or revaluation date, when applicable, in non-monetary items. Such requirements also include the comparative information of financial statements.

 

With the purpose of stating whether an economy is classified as Hyperinflationary in accordance with IAS 29, the provision sets forth a series of factors to be considered, which includes an accrued inflation rate in three years close to or higher than the 100%. That is the reason why, pursuant to IAS 29, the Argentine economy must be considered as a high inflation economy as from July 1, 2018.

 

In short, pursuant to IFRS 29 re-expression mechanism, monetary assets and liabilities shall not be re-expressed since such assets and liabilities are expressed in a measurement unit in force as of the reported period closing. Assets and liabilities subject to adjustments tied to specific agreements, shall be adjusted pursuant to such agreements. Non-monetary items measured at current values at the end of the reported period, such as the realization net value or others, shall be re-expressed. The remaining non-monetary assets and liabilities shall be re-expressed in accordance with a general price index. The loss or earning of a net monetary position shall be included in the net income of the reported period in a separate item. It is worth to be mentioned that earnings or losses over the monetary position of instruments at fair value through profit and loss in OCI is included in Other Comprehensive Income of the period/fiscal year. Upon the sale of such instruments its result is reclassified in the line “Results from sale or withdrawal of financial instruments rated at amortized cost” in the net income of the period/fiscal year.

 

Pursuant to Communication “A” 6651, issued by the Argentine Central Bank on February 22, 2019, financial statements shall be prepared in a constant currency as from fiscal years starting on January 1, 2020. In this sense, Communication “A” 6849 issued by the Argentine Central Bank sets the re-expression frequency of the accounting information in a homogeneous currency on a monthly basis, and the index utilized to such ends accounts for the National Consumer Index drawn up by INDEC (basis month: December 2016) and for such items with previous initial date, IPIM issued by FACPCE is utilized, pursuant to Ruling JG 517/16. Likewise, transition date, in virtue of the retroactive application has been set on January 1, 2019.

 

(c)    Other Changes in the Accounting Framework set by the Argentine Central Bank

 

Pursuant to Communication “A” 6847, financial entities will be allowed to re-categorize, as from Januray 1,2020, instruments of the non-financial public sector rated at fair value through profit and loss and at fair value through profit and loss in OCI at an amortized cost criterion, while utilizing the accounting value of such date as addition value. As for instruments affected by this option, interest accrual and accessories shall be interrupted as long as the accounting value is above its fair value. Upon such measurement, the abovementioned financial instruments, at fair value as of June 30, 2020 there would be no significant impact on equity and results for the period.

 

(d)    Definition of a business – Changes in accordance to IFRS 3

 

On October 22, 2018, IASB released changes, which include the definition of business with the purpose of helping entities determine whether a transaction must be recorded as a combination of business or the acquisition of an asset. Such changes:

 

(i)Clarifies that, the definition of business, an acquired group of activities and assets, shall include at least a good and a substantial process that together shall contribute significantly to the capacity of developing products;
(ii)Removes the evaluation of whether market players can replace the lack of processes or goods and continue with the production of products;
(iii)Add explanatory guidelines and examples to help entities evaluate whether a substantial process has been acquired;
(iv)Restrict definitions of a business or product by focusing on goods and services granted to clients and remove the reference to the capacity of reducing costs, and
(v)Add an optional concentration trial that enables a simplified evaluation of whether a set of activities and acquired businesses are not a business.

 

15

GRUPO SUPERVIELLE S.A.

(Expressed in thousands of pesos in homogeneous currency)

 

Entities need to apply changes in transactions which acquisitions date as from the beginning of the first annual period over which it has been informed as of January 1, 2020.

 

The Entity does not see any initial effect unless a combination of businesses is made effective.

 

(e)   Definition of significant or relatively significant Changes to IAS 1 and IAS 8

 

On October 31, 2018, IASB released these changes with the purpose of improving the understanding of the definition of significant or relatively significant, coordinating the drawing up of the definition in IFRS and the Conceptual Framework to avoid any misunderstanding whatsoever that may stem from the different definitions, in that sense, IASB has added support requirements in IAS 1 in the definition to add importance and clarity in its application. Additionally, said board provides existing guides regarding the definition of significant and relatively significant in a single place together with the definition.

 

This change affects mainly section 7 of IAS 1, section 5 of IAS 8 and removes section 6 of IAS 8. Such change is applicable in a prospective manner to annual periods as from January 1, 2020.

 

The Entity considers that such changes have no significant effect in its financial statements.

 

(f)   Changes in the Financial Information Conceptual Framework

 

IASB has issued a new Conceptual Framework. Said change will not imply any changes in the accounting standards in force. However, entities that utilize the Conceptual Framework to define accounting policies for those transactions, events or situations that are not included in the accounting standards in force, apply a new Conceptual Framework as from January 1, 2020, thus evaluating whether their accounting policies are still the most suitable ones.

 

The Entity considers that such changes have no significant effect in its financial statements.

 

(g)   Change in the Reference Interest rate (IBOR) – Changes to IFRS 9

 

On September 26, 2019, IASB released a change that requires additional disclosures regarding the uncertainty resulting from the reform in the reference interest rate. Such release accounts for the first reaction to potential effects that IBOR reform may produce in financial statements and modifies specific cash flow coverage accounting requirements assuming that the reference interest rate is not modified as a result of such reform. These changes have become effective as from January 1, 2020 with retroactive effect.

 

The Group considers that such changes have no significant effect in its financial statements.

 

The following sets forth changes that have not become in force as of June 30, 2020:

 

(a)Sale or contribution of assets between an investor and its associate or joint Venture – changes in IFRS 10 and IAS 28.

 

IASB carried out changes specifically on IFRS 10 “Consolidated Financial Entities” and IAS 28 “Investments in associates and joint ventures”. Such changes clarify the accounting of sales or contribution of assets between the investor and its associates and joint ventures and confirm that the accounting treatment depends on whether non-monetary assets sold or contributed to the associate or joint venture account for a “business” (as defined in IFRS 3).

 

When non-monetary assets account for a business, the investor will recognize earnings or losses of the sale or contribution of assets. If assets do not account for a business, earnings or losses are recognized by the investor only up to the amount recognized by the investor in the associate or joint venture. These changes are applied with retroactive effect.

 

IASB has decided to delay the application date for this modification until the research project over the interest method is concluded.

  

The Group is evaluating the impact of the application of this new standard.

 

(b)IFRS 17 “Insurance contracts”

 

On May 18, 2017, IASB issued IFRS 17 “Insurance contracts” which provides a comprehensive framework based on principles for measurement and presentation of all insurance contracts. The new rule will supersede IFRS 4 Insurance contracts and requires that insurance contracts be measured using cash flows of existing enforcement and that income be recognized as the service is rendered during the coverage period. The standard will come into force for the fiscal years beginning as from November 1, 2021.

 

16

GRUPO SUPERVIELLE S.A.

(Expressed in thousands of pesos in homogeneous currency)

 

The Group is evaluating the impact of the application of this new standard.

 

1.2      Impairment of financial assets

 

The Group evaluates, based on a prospective approach, expected credit losses (“ECL”) related to financial assets rated at amortized cost or fair value with changes in another comprehensive income, the exposure resulting from loan commitments and financial guarantee contracts with the scope set by Communication “A” 6847 issued by the Argentine Central Bank.

 

The Group measures ECL of financial instruments reflecting the following:

 

(a)       A probability amount, weighed and unbiased, that is defined through the evaluation of a range of possible result;

 

(b)       The temporal value of money; and

 

(c)       The reasonable and sustainable information available at no cost nor excessive effort on the submission date on past events, current conditions and future economic condition forecasts.

 

IFRS 9 sets forth the following “Three stages” model for the impairment based on changes in the credit quality from initial recognition:

 

·            If, on the submission date, the credit risk of a financial instrument has not increased significantly since its initial recognition, the Group will classify such instrument in “Stage 1”.

 

·            If a significant increase in credit risk (“SICR”) is detected, from its initial recognition, the instrument is moved to “Stage 2”, but such instrument is not deemed to contain a credit impairment.

 

·            If the financial instrument contains credit impairment, it is moved to “Stage 3”.

 

·            For financial instruments in “Stage 1”, the Bank measures ECL at an amount equivalent to the amount of expected credit loss during the useful life term of the asset that result from potential default events within the next 12 months. As for Financial Instruments in “Stage 2” and “Stage 3”, the Group measures ECL during the useful life term of the asset (hereinafter “lifetime”). Note 1.2.1 includes a description of how the Group defines when a significant increase in credit risk has occurred.

 

·            A generalized concept in the measurement of ECL pursuant to IFRS 9 shall be considered prospective information.

 

·            Financial assets with impairment on credit value, either purchased or produced, account for those financial assets which have been impaired since initial recognition. ECL of this type of financial instruments is always measured during the asset lifetime (“Stage 3”).

 

The following chart summarizes the impairment requirements pursuant to IFRS 9 (for financial assets that do not entail impairment on credit value, either purchased or produced:

 

Changes in the credit quality since initial recognition  
 
Stage 1 Stage 2 Stage 3  
(initial recognition) (significant increase of credit risk since initial recognition) (Impaired credit)  
ECL over the next 12 months ECL during the financial instrument lifetime    

 

The following describes the Group´s judgements and assumptions for ECL measurement:

 

1.2.1. Significant increase in credit risk

 

The Group considers that a financial asset has experienced a significant credit risk increase when one or more than the following qualitative and quantitative criteria have been observed:

 

17

GRUPO SUPERVIELLE S.A.

(Expressed in thousands of pesos in homogeneous currency)

 

Individuals and Businesses

 

·       Maximum delay at a financial asset level between 31 and 90 days

·       Maximum situation Argentine Central Bank over 1.

·       At a Client level, an Internal Behavior Score below cutting point.1

 

Corporate Banking

 

·       Maximum situation Argentine Central Bank over 1.

·       Hold an Internal Rating of Classification “C” (Default probability over 30%).

 

Consumer Finance

 

·       Maximum delay at a financial asset level between 31 and 90 days

 

Sectoral Analysis – Covid-19 Risk

 

In virtue of the fact that internal impairment models do not reflect the current pandemic context properly as historical information is utilized, for this quarterly closing, a sectoral analysis produced by the Bank has been included as additional definition of the significant risk increase.

 

In such analysis the companies ‘default risk is evaluated according the type of activity depending on the impact level such companies have suffered given their features.

 

In this sense, such analysis has been applied in Small and Medium Size companies and E&P, such additional definition of significant risk increases for “Real State”, “Entertainment” and “Tourism & Gastronomy” activities. Such impact was measured as of June closing, though remaining activities are still under assessment in virtue of the evaluation of future impacts.

 

1.2.2. Individual and collective evaluation basis

 

Expected losses are estimated both in a collective and individual manner.

 

The Group´s individual estimation is aimed at calculating expected losses for significantly impaired risks. In these cases, the amount of credit losses is calculated as the difference between expected cash flows discounted at the effective interest rate of the operation and the value in the books of the instrument.

 

For collective estimation of expected credit losses, instruments are distributed in groups of assets depending on credit risk features. Exposures within each group are segmented in accordance with the similar features of the credit risk, including the debtor´s payment capacity pursuant to contractual conditions. These risk features need to play a key role in the estimation of future flows of each group. Credit risk features may consider the following factors, among others:

 

Entity Parameter Segment
Individual and Businesses Default Probability (DP) Personal loans (1)
Credit cards (1)
Advances
Documents
Mortgage loans
Refinancing
Others
Severity (LGD) Personal loans
Credit cards
Advances
Mortgage loans
Refinancing
Others

 

 

 1 Definition of cutting point for SICR – Payroll Plan High CL PC=>400. Remaining CL=>500. | Open market High Income CL=>700. Remaining CL =>700. | Retirees: High Income CL =>610. Remaining CL =>610.

 

18

 GRUPO SUPERVIELLE S.A.

(Expressed in thousands of pesos in homogeneous currency)

 

Entity Parameter Segment
Corporate Banking Default Probability (DP) (2) Small Companies
Medium Companies
Big Companies
Financial Sector
Severity (LGD) Advances
Documents
Leasing
Unsecured loans
Others
OCIF

 

Consumer Finance Default Probability (DP) Credit cards closed
Credit cards opened
Cash loan
Consumer and Directed Cash Loan
Refinancing
Consumer Loans Tarjeta Automática
Severity (LGD) Credit Cards
Loans
Refinancing

 

(1) For personal loans and credit cards, the segment dimension is added, since there is sufficient materiality. The segments are: Retirees, High Income Open Market, High Income Salary Plan, Non High Income Open Market, Non High Income Salary Plan, Entrepreneurs and SMEs, Former Retirees and Ex Salary Plan.

 

(2) The segments to calculate the probability of default in Business Banking were grouped by company size in Stage 1. For stages 2 and 3, the probability of default was calculated including all the business banking segments to form a statistical materiality group enough.

 

(3) As of the date of these financial statements, the balances of provisions related to Cordial Compañía Financiera S.A., are established under the Minimum Provision Standards as set forth in Communication “A” 6990 of the B.C.R.A.

 

Credit risk features utilized for the abovementioned segments are the following, among others: type of financial instrument, debtor´s activity sector, activity geographical area, type of guarantee, time elapsed of submitted financial statements and other key factors to calculate expected cash flows.

 

The suitable segmentation of financial instruments is monitored and reviewed on a regular basis by the Credit Risk and Stress Test Area.

 

1.2.3 Definition of default and impaired credit

 

The Group considers that a financial instrument is in default when such instrument entails one or more of the following criteria:

 

Individuals and Businesses

 

·Financial instruments delinquent after 90 days in contractual payments.

 

Corporate Banking

 

·Financial instruments with B.C.R.A. situation greater than or equal to 3.

 

Consumer Finance

 

·       Financial instruments delinquent after 90 days in contractual payments.

 

19

GRUPO SUPERVIELLE S.A.

(Expressed in thousands of pesos in homogeneous currency)

 

Abovementioned criteria are applied in a consistent manner to all financial instruments and are aligned with the definition of default utilized by the Bank in virtue of the administration of credit risk. Likewise, such definition is consistently applied to define DP, Exposure at Default (“hereinafter, “EAD”) and Loss Given Default (hereinafter, “LGD”).

 

1.2.4. Measurement of Expected Credit Loss – Explanation of inputs, assumptions and calculation techniques

 

ECL is measured on a 12-month basis or along the instrument´s lifetime, depending on whether a significant increase in credit risk has been recorded since initial recognition or whether an asset is considered to contain credit impairment. ECLs account for the product discounted from Default Probability (DP), Exposure at Default (EAD) and Loos Given Default (LGD), defined as follows:

 

• DP accounts for the probability of debtor´s breaching his/her financial obligation (pursuant to the “Definition of credit default and impairment” set forth in Note 1.2.3), either during the next 12 months or the remaining lifetime (DP lifetime) of the financial asset.

 

• EAD is based on the amounts the Group expects to owe at the moment of the default, during the next 12 months or the remaining lifetime (DP lifetime) of the financial asset (EAD Lifetime). For example, for a revolving commitment, the Group includes the current available balance plus any additional amount expected to become available until the current contractual limit at the moment of the default, when applicable.

 

• LGD accounts for the Group´s expectation regarding the loss amount in an exposure under default.

 

LGD changes depending on the counterparty type, the type and time elapsed of the claim and the availability of guarantees or any other credit support. LGD is expressed as a loss percentage for the exposure unit at the moment of default (EAD) and is calculated on a 12-month basis or along the instrument lifetime, where the 12-month LGD accounts for the loss percentage expected to incur if the default takes place within the next 12 months and lifelong LGD accounts for the loss percentage expected to incur if the default takes place during the remaining lifetime of the financial asset.

.

ECL is defined by projecting DP, LGD and EAD for each future month and each individual or collective exposure. These three components are multiplied and adjusted pursuant to the survival (that is, the exposure has not been pre-settled or entered into default in a previous month). The aforementioned effectively calculates ECL for each future month, which is later discounted as of submission date and is added. The discount rate utilized for the calculation of ECL accounts for the original or rough effective interest rate of such date.

 

As for the calculation of parameters utilized for the calculation of the aforementioned ECL, the Entity based its calculation on the internal model development know-how for the calculation of parameters, thus adapting the development of such models pursuant to IFRS 9.

 

The Group includes prospective economic information in its definition of DP, EAD and LGD over 12 months or Lifetime. See Note 1.2.5 for the explanation of prospective information and its consideration in the calculation of ECL.

 

1.2.5 Prospective information considered in expected credit loss models

 

The evaluation of significant credit increases and the calculation of ECL include prospective information. The Group carried out a historical analysis and identifies key economic variable that affect the credit risk and expected credit losses for each portfolio.

 

Forecasts of these economic variable (“base economic scenario”) are provided on a six-month basis by the Research team of the Group and offer a better estimated outlook of the economy for the next 12 months. The impact of such economic variables on DP and LGD resulted from the statistic regression analysis to understand the impact the changes in these variables has had historically on default rates and LGD components.

 

In addition to the base economic scenario, the Research team of the Group also provides two potential scenarios together with scenario analysis. The number of other scenarios is defined in accordance with the analysis of the main products to ensure the lineal effect between the future economic scenario and related expected credit losses. The number of scenarios and its features are re-evaluated on a six-month basis, except a situation occurs in the macroeconomic framework that justifies a greater regularity.

 

20

 

 GRUPO SUPERVIELLE S.A.

(Expressed in thousands of pesos in homogeneous currency)

 

As of January 1, 2020 and as of June 30, 2020, as for its portfolios, the Group concluded that three scenarios have properly captured non-lineal items. Scenario analysis are defined by means of a combination of statistic and know-how judgement analysis, taking into account the range of potential results of which each scenario is representative. The evaluation of credit risk significant increases is carried out by means of the utilization of DP lifetime in the base scenario and other scenarios, multiplied by the related analysis of each scenario, together with qualitative and quantitative and backstop indicators (See Note 1.2.1). The aforementioned is defined if the financial instrument is in Stage 1, Stage 2 or Stage 3 and, therefore, whether to register a 12-month ECL or Lifetime. As with any economic forecast, projections and probabilities of occurrence are subject to a high degree of inherent uncertainty, and therefore actual results may be significantly different than projected. The Group considers that these forecasts account for its best calculation of potential results and has analyzed the non-lineal and asymmetric impacts within the different portfolios of the Group to establish that chosen scenarios are representative of the range of potential scenarios.

 

The most significant assumptions utilized to calculate ECL as of June 30, 2020 are as follows:

 

Parameter Segment Macroeconomic
variable
Optimistic
scenario
Base
scenario
Pessimistic
scenario
Default probability Individuals and Businesses EMAE 124.04 120.67 115.37
Corporate banking
Consumer finance

 

The following are estimations assigned to each scenario as of June 30, 2020:

 

Base scenario   80%
Optimistic scenario   10%
Pessimistic scenario   10%

 

Sensitivity analysis

 

The chart below includes changes in ECL as of June 30, 2020 that would result from reasonably potential changes in the following parameters: 

 

June 30, 2020  
ECL previsions   8,218,821 
Total portfolio   104,998,440 
Irregular Portfolio Coverage   128.69%
      
ECL per Scenario     
Favorable Impact   8,102,455 
High Impact   8,341,147 
      
Coverage Ratio per Scenario     
Favorable Impact   126.86%
High Impact   130.60%

 

1.2.6 Maximum exposure to credit risk

 

The chart below includes an analysis of credit risk exposure of the financial instruments for which expected credit loss provisions are recognized. The gross amount of financial assets books included in the chart accounts for the maximum credit risk exposure of such assets.

 

   June 30, 2020     
   Stage 1   Stage 2   Stage 3   Total 
Advances   28,604,835    579,605    1,218,479    30,402,919 
Documents   13,684,064    328,321    361,051    14,373,436 
Mortgage loans   8,093,032    2,655,301    969,673    11,718,006 
Pledge loans   766,371    415,786    257,865    1,440,022 
Personal loans   30,915,097    1,768,362    1,124,875    33,808,334 
   Individuals and Business   13,087,421    1,401,480    599,961    15,088,862 
   Consumer finance   17,827,676    366,882    524,914    18,719,472 
Credit cards   30,208,260    3,283,713    484,586    33,976,559 
   Individuals and Business   26,342,580    2,952,015    353,619    29,648,214 
   Consumer finance   3,865,680    331,698    130,967    4,328,345 
Financial Lease   2,863,438    108,530    167,385    3,139,353 
Others   31,819,284    3,807,778    2,818,492    38,445,554 
Total   146,954,381    12,947,396    7,402,406    167,304,183 

 

21

 

GRUPO SUPERVIELLE S.A.

(Expressed in thousands of pesos in homogeneous currency)

 

1.2.7 Guarantees and other credit improvements

 

A guarantee is an instrument by means of which the Entity´s debtor or a third party is committed upon any obligation default, to be offered as support for such debt settlement. The Entity accepts a guarantee with support before a potential breach on behalf of a debtor.

 

The Argentine Central Bank classifies these guarantees in three types: Preferred “A” (considered self-settleable), Preferred “B” (made up by mortgage or pledge loans) and remaining guarantees (mainly bank guarantees and fines).

 

In virtue of the administration of guarantees, the Group relies on a specific area devoted to the review of the legal compliance and suitable instrumentation of received guarantees. In accordance with the type of guarantees, the guarantors may be natural or legal persons (in the case of mortgages, pledges, fines, guarantees and liquid funds) and international top level Financial Entities (for credit letters stand by).

 

The Group monitors guarantees related to financial assets considered as impaired credits since such guarantee is likely to be executed to mitigate potential credit losses.

 

1.2.8 Credit risk provision

 

Credit risk provision recognized in the period is affected by a range of factors as follows:

 

• Transfers between Stage 1 and Stage 2 or 3 given financial instruments experience significant increases (or decreases) in credit risk or are impaired over the period, and the resulting “increase” between ECL at 12 months and Lifetime;

 

• Additional assignments for new financial instruments recognized during the period, as well as write-offs for withdrawn financial instruments;

 

• Impact on the calculation of ECL of changes in DP, EAD and LGD during the period, resulting from the regular updating of model inputs;

 

• Impact on the measurement of ECL as a result of changes in models and assumptions;

 

• Impact resulting from time elapsing as a consequence of the current value updating;

 

• Conversion to local currency for foreign-currency-denominated assets and other movements; and

 

• Financial assets withdrawn during the period and application of provisions related to assets withdrawn from the balance sheet during the period. The following charts explain changes in the provision for credit risk between the beginning and end of the period due to the following factors:

 

   Stage 1   Stage 2   Stage 3     
   ECL at 12
months
   ECL
Lifetime
   ECL
Lifetime
   Total 
Credit risk provision as of 12/31/2019   1,288,194    665,102    4,707,322    6,660,618 
Transfers:                    
From Stage 1 to Etapa 2   (69,245)   393,944    -    324,699 
From Stage 1 to Etapa 3   (7,586)   -    209,674    202,088 
From Stage 2 to Etapa 3   -    (215,732)   580,614    364,882 
From Stage 2 to Etapa 1   6,676    (94,880)   -    (88,204)
From Stage 3 to Etapa 2   -    5,353    (41,783)   (36,430)
From Stage 3 to Etapa 1   961    -    (48,410)   (47,449)
Net changes   1,061,496    826,655    54,106    1,942,257 
Withdrawn financial assets   (328,927)   (411,855)   (747,206)   (1,487,988)
Direct charge   (149,350)   (63,751)   (17,980)   (231,081)
Difference of quotation and other movements   29,873    31,986    95,896    157,755 
Credit risk provision as of 06/30/2020   1,832,092    1,136,822    4,792,233    7,761,147 

 

*Cordial Compañía Financiera S.A.´s balances of provisions are held under minimum provisions Standards pursuant to Communication “A” 6990 issued by the Argentine Central Bank.

 

22

 

GRUPO SUPERVIELLE S.A.

(Expressed in thousands of pesos in homogeneous currency)

 

1.2.9 Account withdrawal policy

 

The Bank withdraws, partially or as a whole, financial assets from the balance sheet, once all recovery efforts have been used up and has concluded that there are no reasonable expectations. Indicators of lack of reasonable recovery expectation include (i) the cease of execution activities and (ii) when the Bank´s recovery method is given by the guarantee execution and the value of the guarantee is not enough for a total reasonable recovery expectation.

 

The Group may withdraw financial assets from its balance sheet which are still subject to execution activities. Contractual amounts pending of collection of such withdrawn assets during the period ended on June 30, 2020 amount to 2,687,055. The Group seeks to recover amounts legally owed as a whole, but partially withdrawn in the balance sheet since there is no reasonable recovery expectation.

 

1.3. Critical accounting policies and estimates

 

The preparation of condensed interim financial statements in accordance with the accounting framework established by the Argentine Central Bank requires the use of certain critical accounting estimates. It also requires Management to exercise its judgment in the process of applying the accounting standards established by the Argentine Central Bank to establish the Group's accounting policies.

 

The Group has identified the following areas that involve a higher degree of judgment or complexity, or areas in which the assumptions and estimates are significant for the consolidated financial statements that are essential for understanding the underlying accounting / financial reporting risks:

 

a)       Fair value of derivatives and other financial instruments

 

The fair value of financial instruments that do not list in active markets are measured through the use of valuation techniques. Such techniques are validated and regularly reviewed by qualified independent personnel of the area that developed such techniques. All models are evaluated and adjusted before being use in order to make sure that results express current information and comparative market prices. As long as possible, models use only observable information; however, factors such as credit risk (own or counterparty), volatilities and correlations require the use of estimates. Changes in assumptions regarding such factors may impact on the fair value reported for financial instruments.

 

b)       Allowances for loan losses and advances.

 

As of January 1, 2020, the Group adopted retroactively to January 1, 2019, with the scope mentioned in Note 1.1.4. (A)., section 5.5. of IFRS 9 referring to the impairment of financial assets. In this sense, the Group evaluates the expected credit losses (ECL) on a prospective basis of the credit risk associated with the financial assets measured at amortized cost, to the debt instruments measured at fair value with changes in other comprehensive income, to accounts receivable for leases, as well as commitments and guarantees granted not measured at fair value, with the exception of debt instruments of the Non-Financial Public Sector that are temporarily excluded from the provisions for impairment of financial assets, contained in section 5.5 of IFRS 9, as well as the provisions of Cordial Compañía Financiera S.A. as provided in Communication “A” 6990 of the B.C.R.A.

 

The measurement of expected credit losses is an area that requires the use of complex models and significant assumptions about future economic conditions and credit behavior (for example, the probability that the customer will go into default and that losses will result for the Group). The explanation of the inputs, assumptions and estimation techniques used to measure the ECL is presented in more detail in Note 1.2, including the key sensitivities of the ECL to changes in these elements.

 

It should be noted that, in the application of accounting requirements to measure ECL, significant judgments are necessary, such as:

 

23

 

GRUPO SUPERVIELLE S.A.

(Expressed in thousands of pesos in homogeneous currency)

 

(i) Determination of the criterion of significant increase in credit risk

(ii) Choice of appropriate models and assumptions for the measurement of ECL

(iii) Establishment of the number and relative weight of the prospective scenarios for each portfolio segment and the associated ECL, and

(iv) Establishment of groups of similar financial assets for the purpose of measuring ECL.

 

c)       Impairment of Non-Financial Assets

 

Intangible assets with finite lives and property, plants and equipment are amortized or depreciated along their useful lives in a straight-line method. The Group reviews the conditions related to these assets to determine whether events and circumstances justify a review of the amortization and remaining depreciation period and whether there are factors or circumstances that imply an impairment in the value of assets that cannot be recovered.

 

The Group has applied the judgment in the identification of impairment indicators for property, plant and equipment and intangible assets. The Group has defined that there was no evidence of impairment for any period included in the consolidated Financial Statements. Given the aforementioned, no recoverable value has been calculated.

 

The evaluation process for potential impairment of an asset of indefinite useful life is subject to and require a significant judgment in many points over the course of the analysis, including the identification of its cash-generating unit, the identification and allocation of assets and liabilities to a cash-generating unit and the definition of their recoverable value. The recoverable value is compared with the carrying value in order to define the non-recoverable portion of such value. When calculating the recoverable value of the cash-generating unit in virtue of the assessment of annual or regular impairment, the Group use estimates and significant judgments on future cash flows of the cash-generating unit. Its cash flow forecasts are based on assumptions that account for the best use of its cash-generating unit.

 

Although the Group believes that assumptions and forecasts used are suitable in virtue of the information available for the administration, changes in assumptions or circumstances may require changes in the assessment. Negative changes in assumptions utilized in an impairment tests of indefinite useful life intangible assets may result in the reduction or removal of the excess of fair value over the book value, which would result in the potential recognition of the impairment.

 

The Group decided that it would not be necessary to recognize an impairment loss in indefinite useful life intangible assets under such conditions.

 

d)       Income tax and deferred tax

 

A significant judgment is required to determine liabilities and assets from current and deferred taxes. The current tax is measured at the amount expected to be paid to the taxation authority using the tax rates that have been enacted or substantially enacted by the end of the reporting period. The deferred tax is measured over temporary differences between tax basis of assets and liabilities and book values at the tax rates that are expected to apply when the asset is realized or the liability settled.

 

Assets from deferred tax are recognized upon the possibility of relying on future taxable earnings against which temporary differences can be used, based on the Senior Management´s assumptions regarding amounts and opportunities of future taxable earnings. Later, it is necessary to determine whether assets from deferred tax are likely to be used and set off future taxable earnings. Real results may differ from estimates, such as changes in tax legislation or the result of the final review of affidavits issued by tax authorities and tax courts.

 

Likely future tax earnings and the number of tax benefits are based on a medium term business plan prepared by the administration. Such plan is based on reasonable expectations.

 

1.4. Changes in loans and other financing

 

Under certain circumstances, the Group renegotiates or changes contractual cash flows of loans granted to clients. In these cases, the Group evaluates whether the new terms are substantially different from initial terms. The Group carries out this practice while taking into account the following:

 

(i)         If the client is in financial difficulties, the Bank evaluates whether such change only reduces contractual cash flows to amounts expected to be paid by the borrower.

(ii)        Significant extension of the term when the borrower does not have financial difficulties.

(iii)       Significant change in the interest rate.

(iv)       Change in the currency in which the loan is denominated.

(v)        Integration of guarantees or credit improvements that significantly affect the credit risk related to the loan.

 

24

 

GRUPO SUPERVIELLE S.A.

(Expressed in thousands of pesos in homogeneous currency)

 

If, after the change, the loan terms are substantially different, the Group withdraws the original financial instrument and recognizes a new asset at fair value and recalculates a new effective interest rate for such asset. Therefore, renegotiation date is considered as the initial recognition date in virtue of the calculation of impairment and the definition of a new significant increase in credit risk. However, the Group also evaluates whether the new recognized asset is considered as an impaired asset, especially when the renegotiation stemmed from the lack of payment capacity on behalf of the client. The differences in the accounting value are recognized in the results as well as losses and earnings resulting from the withdrawal of such financial asset.

 

If the terms of the loan after the change are not substantially different, the renegotiation or change will not produce the withdrawal of the financial asset, and the Group will recalculate the gross accounting value based on reviewed funds flow while recognizing a guarantee or loss from the change in results. The new gross accounting value is recalculated as the value discounted from the modified funds flow at the initial effective interest rate.

 

1.5. Consolidation

 

A subsidiary is an entity (or subsidiary), including structured entities, in which the Group has control because it (i) has the power to manage relevant activities of the subsidiary (ii) has exposure, or rights, to variable returns from its involment with the subsidiary, and (iii) has the ability to use its power over the subsidiary in order to affect the amount of the investor´s returns. The existence and the effect of the substantive rights, including substantive rights of potential vote, are considered when evaluating whether the Group has power over the other entity. For a right to be substantive, the right holder must have the practical competence to exercise such right whenever it is necessary to make decisions on the direction of the entity’s relevant activities. The Group can have control over an entity, even when it has less voting powers than those required for the majority.

 

Accordingly, the protecting rights of other investors, as well as those related to substantive changes in the subsidiary´ activities or applicable only in unusual circumstances, do not prevent the Group from having power over a subsidiary. The subsidiaries are consolidated as from the date on which control is transferred to the Group, ceasing its consolidation as from the date on which control ceases.

 

The following chart provides the subsidiaries which are object to consolidation:

 

             Percentage of Participation 
             06/30/2020   12/31/2019 
Company  Condition   Legal Adress  Principal
Activity
  Direct   Direct and
Indirect
   Direct   Direct and
Indirect
 
Banco Supervielle S.A.   Controlled   Bartolomé Mitre 434, C.A.B.A., Argentina  Commercial Bank   97.10%   99.90% (1)   97.10%   99.90% (1)
Cordial Compañía Financiera S.A.   Controlled   Reconquista 320, C.A.B.A., Argentina  Financial Company   5.00%   99.90%   5.00%   99.90%
Tarjeta Automática  S.A.   Controlled   Bartolomé Mitre 434, C.A.B.A., Argentina  Credit Card   87.50%   99.99%   87.50%   99.99%
Supervielle Asset  Management S.A.   Controlled   Bartolomé Mitre 434, C.A.B.A., Argentina  Mutual Fund   95.00%   100.00%   95.00%   100.00%
Sofital S.A.F. e I.I.   Controlled   Bartolomé Mitre 434. C.A.B.A., Argentina  Real State   96.80%   100.00%   96.80%   100.00%
Espacio Cordial de Servicios S.A.   Controlled   San Martín 719/731. 1° Piso. Ciudad de Mendoza. Argentina  Retail Services   95.00%   100.00%   95.00%   100.00%
Supervielle Seguros S.A.   Controlled   Reconquista 320. 1° Piso. C.A.B.A., Argentina  Insurance   95.00%   100.00%   95.00%   100.00%
Micro Lending S.A.U.   Controlled   Bartolomé Mitre 434. C.A.B.A., Argentina  Financial Company   100.00%   100.00%   100.00%   100.00%

 

25

 

GRUPO SUPERVIELLE S.A.

(Expressed in thousands of pesos in homogeneous currency)

 

               Percentage of Participation 
               06/30/2020    12/31/2019 
Company   Condition   Legal Adress  Principal
Activity
   Direct    Direct and Indirect    Direct    Direct and Indirect 
InvertirOnline S.A.U.   Controlled   San Martin 323. 11° Piso. C.A.B.A., Argentina  Clearing and settlement agent   100.00%   100.00%   100.00%   100.00%
InvertirOnline.Com Argentina S.A.U.   Controlled   San Martin 323. 11° Piso. C.A.B.A.,
Argentina
  Representations   100.00%   100.00%   100.00%   100.00%
Supervielle Productores Asesores de Seguros S.A.   Controlled   Reconquista 320. 1° Piso. C.A.B.A., Argentina  Insurance Broker   95.20%   100.00%   95.00%   100.00%
Bolsillo Digital S.A.U.   Controlled    Bartolomé Mitre 434, C.A.B.A., Argentina  Computer Services   100.00%   100.00%   100.00%   100.00%
Futuros del Sur S.A.   Controlled    03 de Febrero 515, Rosario,  Santa Fe  Clearing and settlement agent   100.00%   100.00%   100.00%   100.00%

 

(1)Grupo Supervielle S,A,’s direct and indirect interest in Banco Supervielle S,A votes amounts to 99.87% as of 06/30/20 and 12/31/2019.
(2)All the subsidiaries carry out their activities in Argentina, the local and functional currency being Argentine pesos.

 

1.6. Consolidated Structured Entities

 

The Group has securitized certain financial instruments, mainly loans, originated by personal and pledge loans through the transfers of said instruments to financial trusts that issue multiple classes of debt securities and participation certificates.

 

Regarding the financial statements as of December 31, 2019 the following consolidated structured entities have been consolidated as of the date of these consolidated condensed interim financial statements:

 

                 Issued Securities 
Issuers  Financial
Trust
  Set-up on  Due of
principal
obligation
   Securitized
Amount
   Type  Amount   Type    Amount 
Cordial Compañía Financiera S.A.  21  06/24/2019  06/15/2022  $1,000,000   VDF  VN$ 220,000   CP    VN$ 780,000 
Cordial Compañía Financiera  22  11/13/2019  01/15/2021  $571,560   VDF  VN$ 469,260   CP    VN$ 102,300 
Micro Lending S.A.U.  III  06/08/2011  10/12/2016  $39,779   VDF TV A VDF B  VN$ 31,823 VN $ 6,364   CP    VN$ 1,592 
Micro Lending S.A.U.  IV  09/01/2011  06/29/2017  $40,652   VDF TV A VDF B  VN$ 32,522 VN $ 6,504   CP    VN$ 1,626 
Micro Lending S.A.U.  XVIII  12/01/2017  10/15/2022  $119,335   VDF TV A VDF TV B  VN $ 89,501 VN $ 7,291   CP    VN$ 22,543 

 

The Group controls a structured entity when it is exposed to, or holds the right to, variable returns and has the capacity to allocate returns through its power to run the activities of the entity, Structured entities are consolidated as from the date on which the control is transferred to the Group. The consolidation of such entities is ceased on the date on which such control is terminated.

 

As for financial trusts, the Group has evaluated the following:

 

• The purpose and design of the trust

• Identification of relevant activities

• Decision-making process on these activities

• If the rights that the Group owns allow it to direct the relevant activities of the trust

• If the Group is exposed, or is entitled to the variable results from its participation in said trust

• If the Group has the capacity to affect said results through its power over the trust

 

In accordance with the aforementioned, the Group has decided that it holds control on such financial trusts and, therefore, such structured entities have been consolidated.

 

26

 

GRUPO SUPERVIELLE S.A.
(Expressed in thousands of pesos in homogeneous currency)

 

The following chart details the assets and liabilities of Structured Entities that have been consolidated by the Group as of June 30, 2020:

 

   06/30/2020   12/31/2019 
Assets         
Loans  770,422    1,811,432 
Financial assets  74,103    123,634 
Other assets  228,756    331,342 
Total Assets  1,073,281    2,266,408 
Liabilities         
Financial liabilities  366,283    1,618,115 
Other liabilities  49,783    47,289 
Total Liabilities  416,066    1,665,404 

 

1.7.Foreign currency translation

 

(a)Functional and presentation currency

 

Figures included in the consolidated financial statements as per each entity of the Group are expressed in the functional currency, that is, in the currency of the main economic setting where it operates. Consolidated condensed interim financial ftatements are expressed in Argentine pesos, which is the functional currency and the reporting currency of the Group.

 

(b)Transactions and balances

 

Transactions in foreign currency are converted in the functional currency at the reference Exchange rate released by the Argentine Central Bank and those carried out in other currencies, at the repo rate in US dollars for the reference Exchange rate released by the Argentine Central Bank. Earnings and losses in foreign currency that result in the liquidation of such transactions and the conversion of monetary assets and liabilities denominated in foreign currency at closing exchange rates, are recognized in the integral income statement, under “Difference of exchange rate in gold and foreign currency”, except when such items are deferred in the shareholders’ equity for transactions classified as cash flow hedging, when applicable.

 

As of June 30, 2020 and December 31, 2019 the balances in US dollars were converted at the reference exchange rate determined by the Argentine Central Bank. In the case of foreign currencies other than US dollars, they have been converted to this currency using the types of passes reported by the Argentine Central Bank.

 

1.8.Cash and due from banks

 

Cash and due from banks includes cash available, freely available deposits in local banks and correspondent banks abroad, which are liquid short-term instruments and have a maturity of less than three months from the date of origination.

 

Assets recorded in cash and due from Banks are recorded at amortized cost which is close to its fair value.

 

Cash equivalents are made up by highly liquid short-term securities with three-month or shorter initial maturities, with fair value rating.

 

The composition of the cash on each of the indicated dates is detailed below:

 

Item  06/30/2020   12/31/2019   06/30/2019   12/31/2018 
Cash and due from banks   31,705,003    29,992,168    37,756,087    58,866,776 
Debt securities at fair value through profit or loss   2,162,649    645,779    58,041,179    22,076,108 
Money Market Funds   1,548,593    1,159,947    1,425,950    1,145,551 
Cash and cash equivalents   35,416,245    31,797,894    97,223,216    82,088,435 

 

27

GRUPO SUPERVIELLE S.A.
(Expressed in thousands of pesos in homogeneous currency)

 

For their part, the reconciliations between the balances of those items considered cash equivalents in the Statement of Cash Flow and those reported in the Statement of Financial Position as of the indicated dates are set out below:

 

Items  06/30/2020   12/31/2019   06/30/2019   12/31/2018 
Cash and due from Banks                    
As per Statement of Financial Position   31,705,003    29,992,168    37,756,087    58,866,776 
As per the Statement of Cash Flows   31,705,003    29,992,168    37,756,087    58,866,776 
Debt securities at fair value through profit or loss                    
As per Statement of Financial Position   3,607,931    645,779    59,833,701    26,412,661 
Securities not considered as cash equivalents   (1,445,282)   -    (1,792,522)   (4,336,553)
As per the Statement of Cash Flows   2,162,649    645,779    58,041,179    22,076,108 
Money Market Funds                    
As per Statement of Financial Position – Other financial assets   3,052,587    2,381,901    4,173,729    2,997,782 
Other financial assets not considered as cash   (1,503,994)   (1,221,954)   (2,747,779)   (1,852,231)
As per the Statement of Cash Flow   1,548,593    1,159,947    1,425,950    1,145,551 

 

Reconciliation of financing activities at June 30, 2020 and December 31, 2019 is as follows:

 

  Balances at   Cash Flows   Other non-cash   Balances at 
Items  12/31/2019   Inflows   Payments   movements   06/30/2020 
Unsubordinated Negotiable Obligations   6,913,832    2,365,871    (3,526,730)   129,745    5,882,718 
Subordinated Negotiable Obligations   2,408,052    83,060    (45,029)   43,623    2,489,706 
Financing received from the Argentine Central Bank and other financial institutions   10,243,392    19,766,915    (22,013,806)   -    7,996,501 
Lease Liabilities   1,075,035         (705,692)   903,289    1,272,632 
Total   20,640,311    22,215,846    (26,291,257)   1,076,657    17,641,557 

 

2.SEGMENT REPORTING

 

The Group determines operating segments based on performance reports which are reviewed by the Board and key personnel of the Senior Management and updated upon changes.

 

With the purpose of implementing a strategic vision focused on the individual client and Small and Medium Size Companies that require and values closeness and digital service models, the Retail Banking sector turned into a new area of Individuals and Businesses.

 

In this sense, Small and Medium Size Companies clients and the loan portfolio have been transferred from the Corporate Division to the Individuals and Businesses area. Such change became effective on Junuary 1, 2020. The comparative information as of June 30, 2019 and December 31, 2019 was modified with the purpose of showing the new organization and making it comparable to information as of June 30, 2020.

 

As from January 1, 2020, the Bank´s clients receive the following services:

 

Individuals and Businesses Segment:

 

-Small companies, individuals and companies that record anual sales of up to 100,000
-“Small and Medium Size Companies”, companies that record anual sales of over 100,000 up to 700,000

 

Corporate Baking Segment:

 

-Megras that record anual sales over 700,000 up to 2,500,000
-Big Companies. Grandes companies that record anual sales of over 2,500,000

 

The Group considers the business for the type of products and services offered, identifying the following operating segments:

 

a-Individuals and Businesses – Includes a wide range of financial products and services targeted to small comoanies, included in Entrepreneours & SMSs, and high income people identified with so-called Identité proposal. Likewise, the Bank offers services and products targeted to retirees and pensioneers.
b-Corporate Banking – Includes advisory services at a corporate and financial level, as well as the administration of assets and loans targeted to big clients.
c-Treasury: This segment is in charge of the assignment of liquidity of the Entity in accordance with the different commercial areas´ needs and its own needs, Treasury implements financial risk administration policies of the Bank, administers trading desk operations, distributes financial products, such as negotianle securities and develops business with the financial sector clients and whole sale non-financial sector clients.

 

28

GRUPO SUPERVIELLE S.A.
(Expressed in thousands of pesos in homogeneous currency)

 

d-Consumer – Includes loans and other credit products targeted to middle and lowed-middle income sectors and non-financial products and services.
e-Insurance: Includes insurance products, with a focus on life insurance, to targeted customers segments.
f-Mutual Fund Administration and Other Segments – Includes MFs administered by the Group, Includes also assets, liabilities and results of Micro Lending S.A.U., Invertir Online,Com Argentina S.A.U., InvertirOnline S.A.U., Bolsillo Digital S.A.U and Futuros del Sur S.A

 

Operating results of the different operating segments of the Group are reviewed individually with the purpose of taking decisions over the allocation of resources and the performance appraisal of each segment. The performance of such segments will be evaluated based on operating earnings and losses and is measured consistently with operating earnings and losses of the consolidated earnings and losses statement.

 

When a transaction is carried out between operating segments, they are taken in an independent and equitative manner, as in cases of transactions with third parties. Later, income, expenses and results from transfers between operating segments are removed from the consolidation.

 

The Group does not present information by geographical segments because there are no operating segments in economic environments with risks and returns that are significantly different.

 

The following chart includes information by segment as of June 30, 2020 and 2019:

 

Result by segments  Individuals
and
Businesses
Banking
   Corporate
Banking
   Treasury   Consumer   Insurance   Adm.
MF and
other
segments
   Adjustments   Total as of
06.30.2020
 
Interest income   9,544,313    5,717,209    9,592,498    1,862,729    -    30,551    (218,607)   26,528,693 
Interest expenses   (3,195,650)   (588,752)   (6,861,058)   (596,554)   -    (13,403)   237,083    (11,018,334)
Distribution of results by Treasury   1,918,200    (3,169,785)   1,251,585    -    -    -    -    - 
Net interest income   8,266,863    1,958,672    3,983,025    1,266,175    -    17,148    18,476    15,510,359 
Services Fee Income   3,150,055    325,291    107,738    794,132    -    563,552    (117,244)   4,823,524 
Services Fee Expenses   (941,977)   (75,605)   (43,225)   (306,080)   -    (17,487)   17,524    (1,366,850)
Income from insurance activities   -    -    -    -    635,599    -    94,153    729,752 
Net Service Fee Income   2,208,078    249,686    64,513    488,052    635,599    546,065    (5,567)   4,186,426 
Subtotal   10,474,941    2,208,358    4,047,538    1,754,227    635,599    563,213    12,909    19,696,785 
Net income from financial instruments at
fair value through profit or loss
   -    -    578,961    39,403    164,652    75,345    116,781    975,142 
Income from withdrawal of assets rated at
amortized cost
   -    -    (2,178,233)   -    -    -    -    (2,178,233)
Exchange rate difference on gold and
foreign currency
   92,733    27,181    171,319    11,623    (55)   23,616    71,676    398,093 
NIFFI And Exchange Rate Differences   92,733    27,181    (1,427,953)   51,026    164,597    98,961    188,457    (804,998)
Other operating income   473,882    993,305    89,912    130,230    4,637    63,491    (21,768)   1,733,689 
Result from exposure to changes in the
purchasing power of the currency
   (262,772)   (148,196)   1,792,588    (380,241)   (153,015)   (70,528)   (1,111)   776,725 
Loan loss provisions   (1,616,700)   (1,862,191)   20,914    (473,491)   -    (110)   -    (3,931,578)
Net operating income   9,162,084    1,218,457    4,522,999    1,081,751    651,818    655,027    178,487    17,470,623 
Personnel expenses   (5,541,066)   (501,057)   (343,010)   (714,595)   (129,495)   (195,567)   (55,060)   (7,479,850)
Administration expenses   (2,977,484)   (214,136)   (205,046)   (611,054)   (112,258)   (166,690)   87,610    (4,199,058)
Depreciations and impairment of
non-financial assets
   (733,579)   (53,277)   (88,196)   (57,180)   (8,183)   (2,617)   (26,000)   (969,032)
Other operating expenses   (1,615,454)   (608,530)   (282,861)   (242,269)   (114)   (35,201)   (14,557)   (2,798,986)
Operating income   (1,705,499)   (158,543)   3,603,886    (543,347)   401,768    254,952    170,480    2,023,697 
Result  from associates and joint ventures   -    -    -    815    -    -    (815)   - 
Result before taxes   (1,705,499)   (158,543)   3,603,886    (542,532)   401,768    254,952    169,665    2,023,697 
Income tax   518,174    72,956    (1,094,952)   94,871    (138,968)   (96,552)   121,784    (522,687)
Net income   (1,187,325)   (85,587)   2,508,934    (447,661)   262,800    158,400    291,449    1,501,010 
Net income for the period attributable to
owners of the parent company
   (1,187,325)   (85,587)   2,508,934    (447,661)   262,800    158,400    290,414    1,499,975 

Net income for the period attributable to

non-controlling interest

   -    -    -    -    -    -    1,035    1,035 
Other comprehensive income   74,682    52,699    133,003    -    -    -    1    260,385 
Other comprehensive income attributable to
owners of the parent company
   74,682    52,699    133,003    -    -    -    (266)   260,118 
Other comprehensive income attributable to
non-controlling interest
   -    -    -    -    -    -    267    267 
Comprehensive income for the period   (1,112,643)   (32,888)   2,641,937    (447,661)   262,800    158,400    291,450    1,761,395 
Comprehensive income attributable to
owners of the parent company
   (1,112,643)   (32,888)   2,641,937    (447,661)   262,800    158,400    290,148    1,760,093 
Comprehensive income attributable to
non-controlling interests
   -    -    -    -    -    -    1,302    1,302 

 

 

29

GRUPO SUPERVIELLE S.A.
(Expressed in thousands of pesos in homogeneous currency)

 

Assets by segments  Individuals
and
Businesses
Banking
   Corporate
Banking
   Treasury   Consumer   Insurance   Adm.
MF and
other
segments
   Adjustments   Total as of
06.30.2020
 
Cash and due from banks   8,635,909    398,157    21,763,028    399,844    2,938    4,585,253    (4,080,126)   31,705,003 
Debt securities at fair value through
profit or loss
   -    -    3,341,328    201,235    -    65,368    -    3,607,931 
Loans and other financing   46,507,893    40,562,666    3,768,212    5,268,015    543,287    62,241    (1,001,172)   95,711,142 
Other Assets   2,660,550    5,102,759    72,367,153    2,622,865    1,405,572    569,653    10,798,019    95,526,571 
Total Assets   57,804,352    46,063,582    101,239,721    8,491,959    1,951,797    5,282,515    5,716,721    226,550,647 
                                         
Liabilities by segments                                        
                                         
Deposits   82,798,146    16,184,930    61,153,113    2,563,124    -    -    (4,095,074)   158,604,239 
Financing received from the
Argentine Central Bank and
others financial institutions
   13,337    -    7,899,235    956,295    -    72,929    (945,295)   7,996,501 
Unsubordinated Negotiable obligations   39,272    22,149    6,174,363    -    -    7,781    (360,847)   5,882,718 
Other liabilities   5,338,516    1,936,855    5,258,088    1,681,368    964,138    4,597,326    5,463,931    25,240,222 
Total Liabilities   88,189,271    18,143,934    80,484,799    5,200,787    964,138    4,678,036    62,715    197,723,680 

 

Result by segments  Individuals
and
Businesses
Banking
   Corporate
Banking
   Treasury   Consumer   Insurance   Adm.
MF and
other
segments
   Adjustments   Total as of
06.30.2019
 
Interest income   13,285,001    7,947,726    1,843,711    3,289,647    -    176,136    (1,075,429)   25,466,792 
Interest expenses   (4,782,151)   (2,078,774)   (13,566,444)   (2,107,659)   -    (108,033)   1,191,833    (21,451,228)
Distribution of results by Treasury   2,215,273    (2,836,932)   621,659    -    -    -    -    - 
Net interest income   10,718,123    3,032,020    (11,101,074)   1,181,988    -    68,103    116,404    4,015,564 
Services Fee Income   2,970,010    671,620    23,925    1,079,240    -    389,783    (130,483)   5,004,095 
Services Fee Expenses   (687,051)   (57,933)   (35,771)   (397,770)   -    (20,799)   43,257    (1,156,067)
Income from insurance activities   -    -    -    -    554,618    -    116,208    670,826 
Net Service Fee Income   2,282,959    613,687    (11,846)   681,470    554,618    368,984    28,982    4,518,854 
Subtotal   13,001,082    3,645,707    (11,112,920)   1,863,458    554,618    437,087    145,386    8,534,418 
Net income from financial instruments at
fair value through profit or loss
   7,823    -    14,131,691    (67,525)   275,700    91,217    159,121    14,598,027 
Exchange rate difference on gold and
foreign currency
   819,137    149,870    (1,079,673)   (1,109)   -    9,258    (12,895)   (115,412)
NIFFI And Exchange Rate
Differences
   826,960    149,870    13,052,018    (68,634)   275,700    100,475    146,226    14,482,615 
Other operating income   767,204    496,758    85,400    197,171    4,430    102,372    (55,092)   1,598,243 
Result from exposure to
changes in the purchasing
power of the currency
   (1,057,624)   (1,249,509)   (263,911)   (668,592)   (244,995)   (185,375)   311,090    (3,358,916)
Loan loss provisions   (2,094,198)   (1,454,118)   26,910    (1,295,266)   -    (10,167)   -    (4,826,839)
Net operating income   11,443,424    1,588,708    1,787,497    28,137    589,753    444,392    547,610    16,429,521 
Personnel expenses   (5,852,997)   (606,653)   (353,870)   (764,596)   (94,508)   (223,025)   (97,104)   (7,992,753)
Administration expenses   (2,966,410)   (200,575)   (206,449)   (631,666)   (138,258)   (131,795)   33,985    (4,241,168)
Depreciations and impairment of
non-financial assets
   (665,607)   (61,672)   (64,503)   (62,313)   (4,443)   (4,560)   (25,921)   (889,019)
Other operating expenses   (1,771,762)   (852,798)   (252,613)   (387,584)   (1,273)   (69,909)   (10,583)   (3,346,522)
Operating income   186,648    (132,990)   910,062    (1,818,022)   351,271    15,103    447,987    (39,941)
Result from associates and
joint ventures
   -    -    -    3,255    -    -    (3,255)   - 
Result before taxes from
continuing operations
   186,648    (132,990)   910,062    (1,814,767)   351,271    15,103    444,732    (39,941)
Income tax   (103,156)   (56,350)   (126,908)   271,860    (133,439)   (30,012)   (354,678)   (532,683)
Net income   83,492    (189,340)   783,154    (1,542,907)   217,832    (14,909)   90,054    (572,624)
Net income for the period
attributable to owners of the
parent company
   83,492    (189,340)   783,154    (1,542,907)   217,832    (14,909)   90,726    (571,952)
Net income for the period
attributable to non-controlling
interest
   -    -    -    -    -    -    (672)   (672)
Other comprehensive income   -    -    (2,297)   -    (117)   -    (2)   (2,416)
Other comprehensive income
attributable to owners of the
parent company
   -    -    (2,297)   -    (117)   -    1    (2,413)
Other comprehensive income
attributable to non-controlling
interest
   -    -    -    -    -    -    (3)   (3)
Comprehensive income for the
period
   83,492    (189,340)   780,857    (1,542,907)   217,715    (14,909)   90,052    (575,040)
Comprehensive income
attributable to owners of the
parent company
   83,492    (189,340)   780,857    (1,542,907)   217,715    (14,909)   90,727    (574,365)
Comprehensive income
attributable to non-controlling
interests
   -    -    -    -    -    -    (675)   (675)

 

30

GRUPO SUPERVIELLE S.A.
(Expressed in thousands of pesos in homogeneous currency)

 

Assets by segments  Individuals
and
Businesses
Banking
   Corporate
Banking
   Treasury   Consumer   Insurance   Adm.
MF and
other
segments
   Adjustments   Total as of
12.31.2019
 
Cash and due from banks   8,737,149    1,161,964    19,163,798    364,799    3,845    2,750,064    (2,189,451)   29,992,168 
Debt securities at fair value through
profit or loss
   -    -    354,759    105,371    -    185,649    -    645,779 
Loans and other financing   47,517,441    43,703,955    4,230,470    6,590,342    515,689    34,925    (1,608,591)   100,984,231 
Other Assets   2,683,777    1,335,366    20,524,958    3,119,019    1,239,693    611,816    8,638,345    38,152,974 
Total Assets   58,938,367    46,201,285    44,273,985    10,179,531    1,759,227    3,582,454    4,840,303    169,775,152 

 

Liabilities by segments  Individuals
and
Businesses
Banking
   Corporate
Banking
   Treasury   Consumer   Insurance   Adm.
MF and
other
segments
   Adjustments   Total as of
12.31.2019
 
Deposits   72,034,254    12,083,178    17,807,558    1,852,021    -    -    (2,669,630)   101,107,381 
Financing received from the Argentine
Central Bank and others financial institutions
   14,318    -    10,221,962    1,078,869    -    52,276    (1,124,033)   10,243,392 
Unsubordinated Negotiable obligations   123,256    86,976    6,685,927    -    -    17,673    -