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Grupo Supervielle S.A. Reports 2Q18 Consolidated Results

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2Q18 Attributable Comprehensive Income down 11%
YoY and 36% QoQ while Net Income decreased 46% QoQ and 63% YoY

Grupo Supervielle S.A. (NYSE:SUPV) (BYMA: SUPV), ("Supervielle"
or the "Company") a universal financial services group headquartered in
Argentina with a nationwide presence, today reported results for the
three and six-month periods ended June 30, 2018. All figures presented
throughout this document are expressed in nominal Argentine pesos (AR$)
and all financial information has been prepared in accordance with IFRS
in compliance with the adoption ruled by the Central Bank.

Second Quarter 2018 Highlights

  • Attributable Comprehensive Income of AR$475.3 million down 10.8% YoY
    and 36.2% QoQ. ROAE of 12.6% in 2Q18 lower than 28.8% in 2Q17 and
    20.6% in 1Q18. ROAA of 1.8% in 2Q18, decreasing by 150 bps YoY and QoQ.
  • Attributable Net income of AR$270.7 million, down 46.4% YoY and 62.5%
    QoQ.
  • NIM of 19.2% in 2Q18, contracted by 230 bps YoY and 40 bps QoQ. AR$
    Loan portfolio NIM of 22.3% in 2Q18 decreasing by 520 bps YoY and 200
    bps QoQ. This decrease is explained by the sudden increase of the
    Badlar rate in the quarter impacting the cost of funds both in the
    banking business portfolio and even more in the consumer finance
    portfolio, while loans will reprice on a lagged basis.
  • Net Income from financial instruments and Exchange rate differences of
    AR$716.8 million up 19.8% YoY and down 11.0% QoQ. Sequential
    performance reflects the trading loss following a short FX position
    held by the trading desk at the onset of the AR$ devaluation.
  • Efficiency ratio was 66.3% in 2Q18 compared with 65.7% in 2Q17, and
    59.0% in 1Q18.
  • Loans to deposits ratio was 101.8% in 2Q18 compared to 104.0% in 2Q17,
    and 119.7% in 1Q18.
  • Deposits increased 76.7% YoY and 36.2% QoQ to AR$75.7 billion (FX
    neutral 24.2%). AR$ deposits increased 64.5% YoY and 31.0% QoQ, while
    foreign currency deposits (measured in U$S) increased 24.0% YoY and
    5.3% QoQ.
  • Loans increased 70.3% YoY and 14.1% QoQ to AR$75.8 billion (FX neutral
    5.1%). AR$ Loan portfolio increased 51.3% YoY and 7.2% QoQ. Foreign
    currency loans (measured in U$S) increased 52.2% YoY and decreased
    2.8% QoQ, while measured in local currency, increased 164.6% YoY and
    39.4% QoQ.
  • Highly atomized loan portfolio, with top 10 debtors as of June 30,
    2018, representing 9.7% of the portfolio while top 100 debtors
    represent 25% of total portfolio. In addition, 49% of the SMEs and
    Middle Market loan portfolio is collateralized, and loans to payroll
    and pension clients represent 67.5% of total retail loan portfolio.
  • NPL increased by 60 bps YoY and 40 bps QoQ to 3.6% in 2Q18. Consumer
    Finance Segment NPL was 18.0% in 2Q18 compared to 11.4% in 2Q17 and
    15.7% in 1Q18.
  • The Retail banking segment registered a 90 days delinquency ratio of
    2.0% in 2Q18, well below its NPL ratio of 3.0% reflecting the 67.5%
    share of payroll loan clients. By contrast, the Consumer Finance
    Segment 90 days delinquency ratio was 17.2% in 2Q18, similar to its
    18.0% NPL ratio. The difference between both ratios is due to Central
    Bank regulations.
  • Cost of risk was 5.6% in 2Q18 mainly explained by a 21.4% Cost of Risk
    in Consumer Finance Segment, while the Bank's Cost of Risk was 3.3%.
    Coverage increased to 89.9% in 2Q18 from 85.9% in 2Q17 and 89.7% in
    1Q18, due to a 20 bps increase in the Bank´s coverage ratio from
    131.5% in 1Q18 to 131.7% in 2Q18, while Consumer Finance's coverage
    decreased from 66.3% in 1Q18 to 64.0% in 2Q18.
  • Proforma Consolidated Common Equity Tier 1 Ratio of 13.1% in 2Q18,
    down from 15.8% in 1Q18 mainly reflecting the acquisitions of MILA and
    IOL in 2Q18 and loan growth. AR$2.0 billion remained at the holding
    level for future capital injections. Equity to Asset ratio of 12.7% in
    2Q18 compared to 10.7% at June 2017 and 15.7% at March 2018.

CEO Message

Commenting on second quarter 2018 results, Patricio Supervielle,
Grupo Supervielle's Chairman and CEO, noted:
"We are disappointed
with the results for the quarter. While our macro assumptions for the
year included stable foreign exchange, declining interest rates and
decelerating inflation, the macro backdrop changed suddenly in the
quarter resulting in a sharp currency devaluation, interest rate hikes
and higher inflation that led to results well below our expectations.
Despite the near-term challenges we are facing, our core business
remains healthy, with asset quality in SMEs and Middle Market at
historically low levels. Deposits performed well and continued to grow
exceeding loan book growth."

"During the second quarter our attributable net income declined 60%
sequentially and below our expectations due to three key factors. First,
our consumer finance business, which represents 11% of our loan
portfolio, posted lower than anticipated margins as a result of the
sharp increase in cost of funding along with higher loan loss provisions
as disposable income deteriorated further due to the challenging
economic conditions. While we started to tighten credit scores in this
segment earlier in the year and continued to take an even more stringent
approach to consumer finance lending throughout the second quarter, the
drastic macro changes impacted financial results. Second, our banking
business reported softer than expected margins from lagged loan
repricing given the sudden and sustained rise in interest rates.
This
is a temporary effect as we expect this business to deliver improved
performance in the coming quarters as longer-term assets are repriced to
the new environment. Lastly, our trading desk had a short position on FX
at the onset of the AR$ devaluation in addition to lower than
anticipated trading results, which impacted our bottom line this
quarter."

"In this context we took decisive action. First, we further tightened
credit standards throughout the Company. Second, we are implementing
cost cutting measures. Third, we made the decision to streamline and
change the management of our consumer finance operations. Effective
August 24, 2018, the consumer finance units of Grupo Supervielle, which
include: Cordial Compañía Financiera S.A., Espacio Cordial de Servicios
S.A., Tarjeta Automática S.A., and the recently acquired car lending
business Micro Lending S.A., will be led by Mr. Juan Martin Monteverdi,
current CEO of Espacio Cordial de Servicios S.A. By combining the four
companies under a unified leadership, we seek to drive increased
operational efficiency, accelerate the offering of a wide range of
consumer products, enhance customer experience, and increase cross
selling. Fourth, based on the repricing dynamics of our portfolio, our
banking business is anticipated to capture increased interest revenue
from rate hikes."

"However, we believe this will be insufficient to offset the weak
results in the second quarter of the year, and the impact of higher cost
of funds and lower loan growth in consumer finance. As a result, we are
revising downwards our guidance for the year."

"The Board, the executive team and I, remain fully focused on
executing our strategy and closely monitoring economic dynamics. We are
convinced of the resilience and strengths of our franchise, as well as
our policies and practices and believe the growth potential for the
financial sector in Argentina remains unchanged," concluded Mr.
Supervielle.

Financial Highlights & Key Ratios

                                                       
(In millions of Argentine Ps.)                                   % Change                  
INCOME STATEMENT     2Q18     1Q18     4Q17     3Q17     2Q17     QoQ     YoY     1H18     1H17     % Chg.
Net Interest Income     2,898.2     2,818.1     2,562.0     2,124.8     1,950.2     2.8%     48.6%     5,716.3     3,876.7     47.5%
NIFFI & Exchange Rate Differences     716.8     805.5     798.1     703.0     598.4     -11.0%     19.8%     1,522.2     935.3     62.7%
Net Service Fee Income (excluding income from insurance activities)     1,012.0     891.0     846.5     874.9     838.3     13.6%     20.7%     1,903.0     1,578.4     20.6%
Income from Insurance activities     145.3     148.7     148.3     108.0     112.8     -2.3%     28.8%     294.0     222.8     32.0%
Loan Loss Provisions     -989.2     -726.1     -606.3     -518.9     -442.8     36.2%     123.4%     -1,715.4     -803.6     113.4%
Personnel & Administrative Expenses     -2,760.9     -2,446.5     -2,604.5     -2,121.4     -2,060.1     12.9%     34.0%     -5,207.3     -3,995.3     30.3%
Profit before income tax     456.0     1,020.4     651.1     737.4     666.9     -55.3%     -31.6%     1,476.5     1,122.4     31.5%
Attributable Net income     270.7     722.6     467.6     556.2     504.3     -62.5%     -46.3%     993.3     796.1     24.8%
Attributable Comprehensive income     475.3     744.8     472.6     560.9     532.9     -36.2%     -10.8%     1,220.1     844.9     44.4%
Earnings per Share (AR$)     0.59     1.58     1.02     1.43     1.39                              
Earnings per ADRs (AR$)     2.96     7.91     5.12     7.17     6.94                              
Average Outstanding Shares (in millions)     456.7     456.7     456.7     387.3     363.8                              
BALANCE SHEET     jun 18     mar 18     dec 17     sep 17     jun 17     QoQ     YoY                  
Total Assets     120,789.0     96,569.6     92,202.4     81,557.9     69,684.3     25.1%     73.3%                  
Average Assets1     104,287.2     90,832.7     85,498.9     73,226.9     64,741.4     14.8%     61.1%                  
Total Loans & Leasing     75,830.0     66,479.5     60,692.9     53,154.2     44,536.2     14.1%     70.3%                  
Total Deposits     75,672.7     55,540.2     56,408.7     47,170.8     42,817.0     36.2%     76.7%                  
Attributable Shareholders' Equity     15,345.4     15,114.2     14,369.6     14,032.8     7,490.6     1.5%     104.9%                  

Average Attributable Shareholders' Equity1

    15,044.8     14,490.1     14,188.7     10,824.9     7,419.5     3.8%     102.8%                  
KEY INDICATORS     2Q18     1Q18     4Q17     3Q17     2Q17                 1H18     1H17      
Profitability & Efficiency                                                            
ROAE     12.6%     20.6%     13.3%     20.7%     28.8%                 16.3%     23.5%      
ROAA     1.8%     3.3%     2.2%     3.1%     3.3%                 2.5%     2.7%      
Net Interest Margin     19.2%     19.6%     20.0%     19.6%     21.5%                 19.0%     20.4%      
Net Financial Margin     17.4%     19.9%     20.0%     19.8%     20.6%                 18.2%     21.2%      
Net Fee Income Ratio     24.3%     22.3%     22.8%     25.2%     27.8%                 23.3%     27.2%      
Cost / Assets     10.9%     11.1%     12.6%     12.0%     13.1%                 10.8%     13.2%      
Efficiency Ratio     66.3%     59.0%     68.2%     63.5%     65.7%                 62.6%     68.2%      
Liquidity & Capital                                                            
Loans to Total Deposits3     101.8%     119.7%     107.6%     112.7%     104.0%                              
Liquidity Coverage Ratio (LCR)4     133.0%     116.9%     113.9%     122.6%     126.5%                              
Total Equity / Total Assets     12.7%     15.7%     15.6%     17.2%     10.7%                              
Proforma Consolidated Capital / Risk weighted assets 5     14.5%     17.0%     19.6%     20.7%     13.0%                              
Proforma Consolidated Tier1 Capital / Risk weighted assets 6     13.1%     15.8%     18.4%     19.5%     11.6%                              
Risk Weighted Assets / Total Assets     78.8%     88.1%     80.1%     85.2%     88.2%                              
Asset Quality                                                            
NPL Ratio     3.6%     3.2%     3.1%     3.1%     3.0%                              
Allowances as a % of Total Loans     3.3%     2.8%     2.6%     2.5%     2.6%                              
Coverage Ratio     89.9%     89.7%     88.0%     85.2%     85.9%                              
Cost of Risk     5.6%     4.7%     4.4%     4.5%     4.4%                 5.1%     4.2%      
MACROECONOMIC RATIOS                                                            
Retail Price Index (%)7     8.8%     6.7%     6.1%     5.1%     5.4%                              
UVA (var)     7.5%     6.9%     4.9%     4.3%     7.1%                              
Pesos/US$ Exchange Rate     28.86     20.14     18.77     17.32     16.60                              
Badlar Interest Rate (eop)     32.7%     22.6%     23.3%     21.8%     20.1%                              
Badlar Interest Rate (avg)     27.3%     22.9%     22.5%     20.8%     19.6%                              
TM20 (eop)     33.9%     22.6%     23.7%     22.8%     20.9%                              
TM20 (avg)     28.6%     23.4%     23.4%     21.6%     20.3%                              
OPERATING DATA                                                            
Active Customers (in millions)     1.9     1.9     1.9     1.9     1.8                              
Access Points 8     376     340     326     324     321                              
Employees     5,418     5,406     5,320     5,222     5,146     0.2%     5.3%                  
1.     Average Assets and average Shareholder´s Equity calculated on a
daily basis
2. Total Portfolio: Loans and Leasing before Allowances. According to
IFRS, this line item includes Securitized Loan Portfolio and loans
transferred with recourse.
3. Loans/Total Deposits ratio was restated in previous quarters due to
the inclusion in the balance sheet of the securitized and
transferred loans.
4. This ratio includes the liquidity held at the holding company level.
5. Regulatory capital divided by risk weighted assets taking into
account operational and market risk. The regulatory capital ratio
applies only to the Bank and CCF on a consolidated basis and does
not include the liquidity held at the holding company level- The
Proforma consolidated capital ratio, includes the liquidity retained
at Grupo Supervielle level after the equity offering, which is
available for growth. As of June 30, 2018, the liquidity amounted to
Ps. 2.0 billion. This ratio has not been restated for 2017 quarters.
6. Tier 1 capital divided by risk weighted assets taking into account
operational and market risk. The regulatory Tier 1 capital ratio
applies only to the Bank and CCF on a consolidated basis and does
not include the liquidity held at the holding company level. The.
Proforma Consolidated Tier 1 capital ratio includes the liquidity
retained at Grupo Supervielle level after the equity offering, which
is available for growth. As of June 30, 2018, the liquidity amounted
to Ps.2.0 billion. This ratio has not been restated for 2017
quarters.
7. Source: INDEC
8. The increase in the number of Access Points in 1Q18, reflects the
opening of 1 bank branches located in Neuquen and the presence in 13
Walmart Stores. The increase in the number of Access Points in 2Q18,
reflects the opening of 2 bank branches and 32 Mila branches.
 

2Q18 Earnings Call Dial-In Information

Date:     Friday, August 24, 2018
Time: 9:00 AM (US ET); 10:00 AM (Buenos Aires Time)

Dial-in Numbers:

1-877-407-0789 (U.S. and Canada), 1-201-689-8562 (International),
0-800-444-6247 (Argentina), or 0800-756-3429 (U.K.)

Webcast:

http://public.viavid.com/index.php?id=131061

Replay:

From Friday, August 24, 2018 at 12:00 AM US ET through Friday,
September 7, 2018 at 11:59 pm US ET. Dial-in number:
+1-844-512-2921 (U.S./Canada) or +1-412-317-6671 (international).
Pin number: 13682751

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