Grupo Supervielle (BYMA:SUPV) posted mixed results in 2Q 2019. Earnings amounted to ARS 1.9 billion, +302% y-o-y, and 210% q-o-q. It is worth noticing that 2Q19 results include ARS 664 million in inflation adjustment driven by the income tax provision, which translated into a negative effective tax rate, augmenting the quarter’s net income.
In terms of net interest income, while 2Q19 figures grew 13% between quarters, they dropped more than 50% in annual terms. This was the result of a steep increment in financial expenses (169% YoY), mainly due to higher interest rates on time deposits, which greatly outpaced the growth of financial income (53% YoY).
In a context of commercial banking business stagnation, a relevant portion of 2Q19 profit stemmed from securities income, totaling more than ARS 4.9 billion, versus a loss of ARS 509 million in the same quarter of 2018. The bank also posted a profit of ARS 271 million from FX results, compared to a loss of ARS 328 million in the previous quarter.
Such performance is in part the result of a credit market that remains stagnant. While deposits rose only 3% between quarters (49% YoY), private-sector credit showed no growth in the quarter (0.2% QoQ) and grew below inflation in annual terms (8% YoY). The ratio of non-performing loans to total credit stood at 5.1% as of June 2019 (3.6% in 2Q18; 5.3% in 1Q19), meaning a clear worsening of asset quality figures, although there was a mild recovery in the last quarter. Loan-loss coverage is 107%.