Argentina’s agreement with holdout creditors in 2016 opened the gates of the international capital markets for the first time in 15 years. While the new economic arena has awakened investors, many have been waiting for Argentines to make the first move. Grupo Supervielle jumped at the opportunity by launching its IPO on the New York Stock Exchange, breaking the two-year lull in Argentine cross-border IPOs. The Worldfolio’s Nicolas Carver sits down with Grupo Supervielle President Patricio Supervielle to discuss the bank’s new programs in SME loans, home mortgages, and Supervielle’s position in the potential flourishment of the Argentine financial sector.
Argentina has returned to the international capital markets through the agreements with holdout creditors in early 2016 and lifting currency restrictions. From the private sector perspective, how do you view the change in Argentina? Is it a sustained reintegration with the world economy?
The main reason Argentina has declined over the past decades is related to institutional weakness. We are optimistic because the current government is conscious of the need to strengthen the institutions. Achieving political consensus for key state policies and stable rules will be necessary to reach sustained growth.
Do you feel that the reforms have greater credibility because they have the backing and approval by the opposition-dominated Congress?
President Macri was chosen by a slight majority which is conscious of the need to reform and strengthen the institutions. So far Macri has been able to pass key laws by negotiating with the opposition in the Congress. This is a victory for democracy after 15 years of a populist government.
Regarding the financial sector: Argentina's is the smallest in the region and highly underpenetrated, revealing huge opportunity for growth. As the economy opens, financial institutions will want to offer more and better financial services. How will Supervielle grow in this environment?
Argentina has such a low credit penetration and such a modest financial system because savings were penalized. Under the new government, and an autonomous Central Bank, they have put forth the policy that savings must be rewarded in real terms. As long as the government continues to deepen this policy, savings will stay in Argentina. For many years, capital flight has been rampant in Argentina due to the consistent erosion of the currency's value. When believe that the Financial system has room to double or treble in the next 5 years, in real terms.
The Central Bank has outlined clear goals for gradual reduction of inflation through 2019, where it is anticipated to reach 5%. They frame these goals intended benchmarks for the private sector and individuals to save or negotiate deals accordingly. Are these measures and benchmarks enough for you to operate?
I applaud the initiative of the Central Bank, yet this must be consistent with sound fiscal policies to reduce the deficit. Every major economic crisis in Argentina has always had a fiscal reason. The government understands this and is moving forward accordingly. We believe that the government is adjusting the deficit as fast as it can, building political consensus for such fiscal consolidation.
The government's tax amnesty plan is beyond an attempt to repatriate $400 billion in foreign-saved assets, it is reversing a cultural trend to make Argentines save here. Is this enticing plan enough to establish long-term change?
Argentine savers need to see a continued reduction in the fiscal deficit, the common threat to long-term growth. Only then Argentines will fully invest in their country. I am optimistic that Argentines will invest in their country.
One year ago, you presided over Supervielle's IPO, which resulted in doubling your assets. How will you move forward now that you have opened to international capital markets?
We were happy to have so many first-time investors in Argentina and have 93% of our initial funds coming in from big-name foreign investors. This is very good news for the country and means a complete change of plans and corporate governance. Our leadership has become multifaceted as we bring in investors and give them a voice. We make sure that we communicate clearly our direction and build optimism, enthusiasm, and confidence of our investors.
We need to convey the opportunities we offer. On the corporate side, we will focus on energy, infrastructure, and agribusiness, where there will be huge opportunities. Also, with inflation coming down, there will be new market for mortgages. To give you an idea, mortgages were previously 1% of GDP, and it could grow 15 times now. There are tremendous opportunities for growth in the financial sector, as previously the system was primarily transactional. As inflation goes down, savings will go up, and there will be a huge demand for credit in real terms.
If you look into Supervielle's past over the past 20 years, we multiplied our market share 24 times. We were a tiny bank with 0.2% of the credit share in the private financial system in 2001; we are now at 4.8%. We position ourselves as a growth company, and a fantastic sales machine. More than 50% of our growth has been organic, the rest has been through successful acquisitions.
The financial sector itself in Argentina is expected to grow, presenting the greatest opportunities to the players who move quickest. How will you position yourselves in this new scenario?
We are quite unique because we are a financial platform which includes an investment bank, a consumer finance company, an insurance company, an asset management company, and a distribution platform of non-financial services. This gives us the opportunity to provide the widest palette of services possible to our two million clients. No one else does this.
In February 2017, you issued a $300 million bond, which you indicated will be used to expand your credit options and SME loans. How will execute this new capital in 2017 for growth?
We are able to invest a large part in mid-term loans as a way to guarantee large spreads. Because I believe that inflation will decrease we will be issuing fix-term peso loans over the next two years. In personal loans, we are issuing them for approximately 30-month terms.
We are doing 15-year mortgages today and will likely introduce 20-year mortgages to compete with Banco Nación's 30-year mortgage offering.
You have a strategic partnership with ZonaProp. How will you advance with these partnerships to grow your business?
We have a holistic view of the mortgage market. We will first look to our own two million clients to offer them mortgages, not only individuals but entrepreneurs, who may want to take a mortgage on their own house to finance their own corporation. At this point, we are also selecting and establishing strategic alliances with builders across the country, in order to partner in construction projects for financing, and to provide mortgages for their customers.
Finally, with Zona Prop - the largest vertical market in the country with 2 million visitors per month - I have high expectations for this channel due to its traffic, and people are beginning to realize that they have a pathway to homeownership through a mortgage.
What are the elements of Supervielle's DNA which persist through the long history of the bank?
We are a fantastic sales machine and the bank which has grown most in the financial system over the past 20 years. Although this used to be a family company, it is completely professionally run, with no family members in management, as we have a meritocratic culture. Our vision is to provide agile, simple, and amicable service.
We are leaders in certain markets segments, products and geographical areas. For instance we are the number one private bank for senior citizens with 13% share, in leasing and factoring we represent 13,5% and 6% market share respectively . We are the number one in the Cuyo region (Mendoza and San Luis)
Our leadership is based strong procedures, strict risk control and empowering our people to guarantee superior service.
We want to transform our product leadership for middle market and SMEs to become the primary bank with complete cash management and transactional services, and provide a wide array of services.
Interview by Nicolas Carver, follow him on Twitter at @WorldTempo