Earnings Call Transcript - SUPV Q3 2025

Ana Bartesaghi, Treasurer and IRO

Good morning, and welcome to Grupo Supervielle's Third Quarter 2025 Earnings Call. I'm Ana Bartesaghi, Treasurer and IRO. Today's conference call is being recorded. Speaking today are Patricio Supervielle, our chairman and CEO; and Mariano Biglia, our CFO. We're also pleased to welcome Alejandro Catterberg, President of Poliarquía Consultores, one of Argentina's leading political analysts, who will briefly share his perspectives on the post-election political and reform outlook. Gustavo Paco Manriquez, Banco Supervielle's CEO; and Diego Pizzulli, CEO of InvertirOnline, will also be available during the Q&A session. Before we begin, please note this call may include forward-looking statements. Please refer to our earnings release and SEC filings for further details.

Julio Patricio Supervielle, Chairman and CEO

Good morning, everyone, and thank you for being here today. I want to start with an optimistic view on the broader macroeconomic situation. After the recent midterm elections, Argentina is moving into a new phase. We are seeing a gradual shift towards normalization and reform, with the financial system set to play a key role in this transition. The growth of credit and a more active banking sector are crucial for achieving sustained economic recovery and inclusive growth. In this new context, we aim to return to profitability and maintain long-term value, supported by strategic initiatives that unlock the full potential of our business. Although we are optimistic about what lies ahead, the most recent quarter came with challenges. Systemic pressures and strict monetary policies, characterized by excessively high real interest rates and historic reserve requirements before the elections, severely impacted economic activity and affected the entire banking sector. This situation greatly compressed our financial margins and limited our lending capacity, leading to a net loss of ARS 50.3 billion in the third quarter of 2025. However, we are beginning to observe early signs of stabilization. Confidence has improved post-election, interest rates have dropped sharply with potential for further reductions, and monetary conditions are gradually easing. As we reflect on these early improvements, Alejandro Catterberg will share his thoughts on the political landscape and what to expect from the government's reform agenda. First, I will highlight a few key points from the quarter. Loan growth remains strong, increasing by 8% in real terms, which is slightly above industry performance. The corporate segment drove this growth, while retail lending saw a slight decline due to tightened origination standards. Asset quality weakened as anticipated, with the non-performing loan ratio rising to 3.9%, mostly due to the retail sector. Nevertheless, our non-performing loan ratio for individuals is still lower than our retail loan share, which underscores our focus on payroll and pension clients. On the funding side, there was robust growth in deposits, which surged 15% quarter-on-quarter in real terms and more than 40% year-on-year. Dollar deposits reached a record high, increasing by 31% sequentially. Our strategy for remunerated accounts is gaining traction and is helping strengthen client relationships. Profitability was significantly affected mainly by margin compression and increased risk costs. However, we managed to mitigate this partially through strict cost controls, which decreased by 2% quarter-on-quarter and by 12% year-to-date in real terms. We maintain a strong capital base to support growth as monetary policy continues to ease and lending demand picks up. Our CET1 ratio stood at 13.2% at the end of the quarter and rose to 14.5% in October, aided by lower deferred asset tax deductions. We are on track with our strategy, focusing on scaling our SuperApp, enhancing customer engagement, and increasing cross-sell opportunities, particularly at Yole, where we experienced another robust quarter in terms of volume and fee growth. Despite the challenges faced in the quarter, our focus remains on managing what we can and continually investing in our business to enhance our competitive standing and ensure long-term success. Now, I will hand it over to Mariano to delve deeper into our financial performance and insights.

Mariano Biglia, CFO

Thank you, Patricio, and good day to all. Our third quarter results were significantly influenced by temporary macroeconomic and regulatory challenges, leading to a 43% sequential decrease in net financial income. With one-day interest rates peaking over 90% and 150% after adjusting for reserve requirements, our funding costs rose by ARS 56 billion. Deposit rates adjusted almost immediately, but the repricing of loans lagged due to their longer duration, resulting in a temporary compression on spreads. Furthermore, local market volatility ahead of the midterm elections affected bond prices, leading to lower yields in our investment portfolio. At the same time, the Central Bank increased minimum reserve requirements by more than 23 percentage points and shifted compliance to a daily basis, further tightening liquidity and negatively impacting us by nearly ARS 21 billion. Additionally, the significant rise in real interest rates caused a negative spread on our UVA mortgage portfolio, which affected our financial margin by close to ARS 18 billion. Consequently, our peso net interest margin declined to 11.7% and total net interest margin fell to 10.8%, down 1,100 basis points and 1,000 basis points, respectively, from the previous quarter. Now let's move to review our expectations for full year 2025. We now predict real loan growth of 35% to 40%, primarily driven by corporate lending while retail lending gradually picks up as disposable income improves. Deposits are projected to grow by 30% to 35%, with increased shares in U.S. dollar-denominated deposits. In terms of asset quality, we expect a non-performing loan ratio between 4.7% and 5.1%, reflecting recent asset quality trends among consumers amid a more challenging environment. As a result, we now project the net cost of risk to be between 5.8% and 6.3%. Net interest margin is expected to range between 15% and 18%, influenced by high interest rates and reserve requirements affecting our fourth-quarter results. Moving forward, we forecast net fee income growth of 5% in real terms, while placing emphasis on operational efficiencies, which will involve reducing headcount and non-staff expenses. Operating expenses in real terms are expected to decline by 8% to 10%. We anticipate our full-year return on equity to be between negative 5% and 0%. Finally, we project ending the year with a common equity tier 1 ratio between 12.5% and 13.5%. Looking ahead, we plan to provide a preliminary outlook for 2026 early next year once we have more clarity on reserve requirements, liquidity conditions, economic activity, and the broader macroeconomic environment. Additional details concerning our quarterly performance and outlook can be found in the appendix of our earnings presentation. This concludes our prepared remarks. We are pleased to welcome Alejandro Catterberg for a brief overview of Argentina's political outlook before we move to Q&A.

Alejandro Catterberg, Political Analyst

Thank you. Thank you for the invitation, Patricio, Ana. Thank you for having me here. Thank you, everyone for joining. My idea is just to give a brief analysis of what happened or what the election gave us and what are the scenarios that we should start thinking from now on for Argentina. I would like to make basically four points. And then I don't know if we have time for Q&A. Happy to answer. Number one is that after a year of huge volatility, uncertainty, and a big number of self-inflicted mistakes and damage by the government, it ended up quite positive for the government. Of course, as we all know, the election ended up being better than expected a few weeks or months before the election, probably worse than what the government could have achieved if they had decided to follow a different strategy and path by the beginning of the year. But that is in the past. But basically, with the result of the election, the government had a huge opportunity to begin the second stage of their administration with a lot of political control and with huge opportunities in front of them. A few numbers of trends had been confirmed by what happened this year and especially in the elections. Number one, it's something that some of you heard me before saying is that we have a confirmation that we have a huge change in the political cycle. The political cycle that lasted for 20 years, which was dominated by the Kirchner and the other hand of the same coin, Macri, was over in 2023. This election cycle basically confirmed that. We no longer had Juntos por el Cambio. All of the parties that were part of Juntos por el Cambio suffered huge defeats or very bad electoral results. The radical party performed or got less than 1% at the national level. They lost a huge number of seats in Congress. Coalición Cívica led by Elisa Carrió had extremely bad results. They lost four of the seats they controlled in the House. The PRO party in the provinces that they run outside La Libertad Avanza performed very badly. Clearly, that idea that we have, and I've been saying for a while, there was a before and after 2023, has been consolidated with this electoral cycle. We are seeing the implosion of the political parties at the national level or the traditional political parties. We are seeing the implosion and the disappearance and the loss of influence of the leaders that dominated Argentina over the last 20 years. I'm talking about Mauricio Macri and Cristina Kirchner. We are seeing a huge fragmentation and atomization of politics in Argentina. As a consequence of all of that, we are seeing a greater role from the governors and the provinces. The governors and the provinces are becoming the main players besides, of course, La Libertad Avanza and Javier Milei. And that is changing the Argentine economy and politics, and we should—and I believe this trend will continue, and we are moving forward to a different organization of politics with a much more fragmented distribution of power with the governors and the provinces becoming more autonomous, less constrained by the national political leaders. And of course, that has correlated with some economic trends that we are having here in Argentina with many of these provinces starting to receive investments in the extractive industries for the first time in their history. And finally, as a consequence of all of this, we are seeing a consolidation of Javier Milei and La Libertad Avanza and especially the decisions that the President took after the victory. The changes within the government that the President made after the victory clearly send the signal that he is concentrating most of the power that he had delegated to other advisers like Guillermo Francos and Santiago Caputo. The key posts in the government are being fulfilled by Karina Milei's people and Javier Milei himself. Also, that is the broader picture of the things and the trends we have seen after the election. Number three, going to the Congress that we're going to see from December 10 in a few days from now and the agenda that is coming, you have probably read this, but there was a huge change and some positive surprises, especially in the Senate because most of the tight races ended up being in favor of La Libertad Avanza. So La Libertad Avanza ended up getting three extra Senators, which is better than what we thought, and the Peronism ended up losing three extra Senators, just out of expectation. So the Peronists went from 34 Senators to 28. That is a key piece of information, because the Senate has always been the most difficult part of the political system in Argentina to go through reforms. The Peronist have always been traditionally dominated by the Peronists because the Peronists traditionally dominate the provinces and the small provinces. Since the Peronists are losing the provinces, as I said before, they are fading away, that translates into the Senate and the number of seats that the Peronists are now controlling is no longer a majority. At some point, they may even lose the first minority. So it opened the door for the Senate to approve reforms. La Libertad Avanza until today has six Senators plus nine from the PRO, 15 in total. They go from six to 21. The PRO goes from nine to five. So they go from 15 to 26. They need to get 11 Senators to get the majority. And basically, those 11 Senators are very easy to reach. They need to make agreements with a number of Governors that are willing to collaborate with the government and are willing to vote for many of the reforms. There is a 'chair game,' in which now the government has more chairs than there are governors, so the governor will have the incentives to collaborate. I don't find any difficulty, so I don't expect any difficulty for the government to be able to gather a majority in the Senate during the summer when they will be discussing the reforms. In the House, the picture is quite similar. La Libertad Avanza has moved from 44 to 91 plus 18 from the PRO. So they are only 20 seats away from having the majority in the House, and there are 46 seats in the hands of the governors with whom they could easily reach agreements to get to that number. So the reform season will start in a few weeks from now. The government will be able to approve for the first time in the administration their budget. So like Milei and La Libertad Avanza ran the country for the last two years without a budget. Next year, we will have a budget approved by Congress. A big number of reforms will be discussed, including some labor reforms, some tax reforms, and some other issues regarding criminal policies or judicial matters, as well as many other aspects that were left behind in the buses law last year that are going to be put back on the table. Other issues like the Glacier Law will probably be discussed, and there is a high probability that it will be approved, which is critical for the mining industry because basically, it will delegate the decisions regarding Glacier policy to the provinces, allowing each province to decide what to do with that. On top of that, we have other reforms coming, institutional reforms that will be very important. The most important of all is that the government will have a new chance to complete the Supreme Court and to nominate some new judges to it. So I do expect that most of these reforms will be approved during the summer. I don't know if one or the other will be a fully game changer, but at some point, I think they are relevant and could change and increase productivity in the long term in Argentina. But also, what happens with the economic policies and the normalization of the economy, interest rates, and all of that are as relevant as the reforms coming from Congress. Finally, my last comment is that I have received many questions from clients or from investors like you saying, 'Well, listen, Ale, I've seen this picture before, I've seen this movie before.' In 2017, Macri won the midterm selection with almost the same amount of support and votes that Milei got and almost exactly in the same provinces that Milei won last month. So we all know what happened with Macri a few months after he won the midterm election. And I have to say that I find some differences this time compared to the previous time. Most of the differences, I think, play to the favor of Javier Milei or increase the chances that this time it works out better. On the economic side, clearly, this time, Milei has done the dirty work and the fiscal adjustment is already done. Mauricio Macri went to the midterm elections without having done the fiscal adjustment, and he was forced to do it after the 2018 crisis. The adjustment in relative prices has also been quicker under Milei than what Macri managed in 2017. We have a good emerging markets environment right now. Macri, two months after winning the midterm election, faced one of the toughest droughts in the agricultural sector, while Milei is going to face one of the greatest harvests in just two or three months from now. By this time, Macri had used up all of the market access. Milei has not yet returned to the markets. They will likely do so starting next year. In the past, Macri was dealing with an energy deficit of more than $5 billion. Argentina now has a surplus in the energy account of more than $7 billion due to Vaca Muerta's production. That's on the economic side. On the political side, clearly, Milei is facing a weaker Peronism and a much weaker Cristina Kirchnerism than Macri faced. Milei enjoys a much more favorable Senate than what Macri had, although the House was easier for Macri than for Milei. But overall, I think the chances to move forward with the reforms should be easier now for Milei than they were for Macri after the 2017 election. We have governors who have a more significant role and have the incentive to collaborate with the government because they currently have no alternative. We have an administration and probably a President that is much more committed to pushing the reforms and going deeper with surplus than what Macri was. Macri and Milei still had very similar public opinion support at the time. We finished our November survey, and the trust and confidence index I conduct for Universidad Di Tella increased 16% this month. Milei's approval rating went up six points this month. So basically, we are returning to the numbers we saw around June and July this year, before the whole deterioration process started. We have not yet reached the highest point that Milei was able to achieve at the beginning of 2025, but clearly, after the election, Milei recovered almost all of the deterioration suffered during the last three or four months of uncertainty. Moreover, besides the economic and political considerations, we have something that could be a game changer, which is the full support in economic and political terms from the U.S. Government and President Trump. All of that context, in my opinion, creates the conditions to improve the story and the probabilities for Milei to move forward and have a successful third year in office, which looks clearly better than what Mauricio Macri experienced. So for me, Argentina and the government have a huge opportunity ahead. I hope that the government and the President have learned from their past mistakes in the previous months and from some of the errors encountered in the first year of their administration. I hope that this time, he pushes for competent judges to go to the Supreme Court. I hope that this time, he's able to deliver on the promises and agreements made with the governors. I hope that this time, he's able to shift part of his narrative style and manner of communication and reduce the aggression against independent media. To put it simply, I think it is up to the government and Milei not to squander this opportunity. So with that said, Ana, thank you very much.

Ana Bartesaghi, Treasurer and IRO

Thank you, Alejandro. We will now begin the Q&A session. The first question comes from Ernesto Gabilondo with Bank of America.

Ernesto María Gabilondo Márquez, Analyst

My first question will be on your loan growth expectations. You have guided between 35% and 40% this year. I know that you don't have guidance for next year yet, but can you give us some color on what are your growth expectations by segment? And maybe Alejandro can also add to this question. Can you share the names and amounts of private investment announcements so far, so we can detect the potential lending activity in the different regions and sectors? And then my second question is on your ROE expectations. You have mentioned expecting an ROE between minus 5% and 0% this year. And then again, you will provide guidance next year, but any color on how should we think about ROE next year? Just the general trends, high single digit or low double digit, I think, will be very helpful.

Julio Patricio Supervielle, Chairman and CEO

Ernesto, thank you for your questions. I'll take it first and then Mariano will probably complement it. In terms of loans, loan growth this year was constrained by tight monetary conditions. But since the midterm elections, we see the first signs of a turn. Real rates are falling, reserve requirements are easing, and credit demand is improving. In Q4 2025 and early 2026, we expect growth to come mainly from corporates and SMEs, particularly in the oil and gas sector, with retail likely picking up in the second quarter of 2026 as rates and employment conditions improve. If we consider everything we heard from Alejandro in terms of macro reforms and deflation continuing, we see real loan growth in 2026 reaching the range of 30% to 40%. That's the outlook for loan growth. To fund this growth, let me add that our strategy of remunerated accounts for corporates and payroll clients has now been extended to the entire ecosystem, which will strengthen our funding base. I think it anticipates what fintechs will do when they start to operate like Mercado Pago. So I think it's a smart move. In short, corporate and SME lending will lead the recovery and retail is expected to resume around Q2 2026. We believe 2026 will be a strong year.

Mariano Biglia, CFO

No. I think that's complete.

Julio Patricio Supervielle, Chairman and CEO

And then in terms of ROE for 2026, we have a long-term view, which is positive and particularly so after the outcome of the midterm elections. There are several drivers that support a positive trajectory for us in terms of ROE starting in 2026 and extending beyond. The first one is the gradual releveraging of banks. This is, of course, connected to the reforms that are expected to improve consumer confidence, disposable income and also an increase in money demand by Argentines. I think we can expect with more money demand that there will be lower liquidity requirements as of 2026, creating more room for leverage and expansion. Additionally, we will be looking to international markets for debt if conditions permit. We are doubling down on cost controls to lift operating leverage. We are also, as I mentioned earlier, advancing our key strategic initiatives, such as the remunerated account now extended to the entire ecosystem. Basically, all of this, with a focus on fee growth, better asset liability management, and prudent underwriting, will lead us toward improving ROE. Importantly, we are investing for the long term, and we are conscious that certain initiatives have longer paybacks, but they are designed to build durable earnings power for our franchise. While the path to 15% and 20% ROE may be extended, we are building all the necessary blocks to put in place. We believe that as leverage normalizes and reforms take traction, Supervielle can converge towards ROE levels in line with peers in the region.

**Unknown Executive, **

I think I might also ask about some big initiatives that Argentina has for the next year. The investments that have been announced so far in the different regions and sectors will be very helpful.

Alejandro Catterberg, Political Analyst

Ernesto, I don't have the exact list of especially the mining big projects that have been announced. But clearly, when you look at the geography and the political geography of Argentina, we are seeing a rapid change in the economic dynamics that are being created. Provinces that have traditionally relied on public funds from federal revenue-sharing are now beginning to receive direct investments and direct projects that are becoming a reality. For example, provinces in the north, you go to Jujuy, Salta, Rioja, San Juan, and Catamarca—with big mining projects spanning from silver to gold to lithium. Mendoza, a province that traditionally rejected mining because they were concerned about its impact on tourism and the wine industry, has finally embraced mining, particularly under Governor Cornejo, who has invested in copper projects. As you all know, we have the same geological formations as Chile, but for some reason, no one has found the massive copper reserves within the Argentinian side of the Andes. So Mendoza has started some projects. Neuquén and the southern provinces of Patagonia, particularly with Vaca Muerta in the oil and gas industry, are likely to see a similar shift. Meanwhile, the traditional La Pampa region, along with Córdoba and Mendoza, has agricultural production that's expected to have a good impact next year. Overall, the extractive industries are booming and accelerating. Many mining projects have been approved, and I think this will have a substantial impact. The way I like to analyze Argentina, especially on the political and social side, is that this is changing the distribution of political power. This trend will continue, regardless of whether Milei remains in power or if an alternative comes back.

Julio Patricio Supervielle, Chairman and CEO

Sorry, let me add to Alejandro. With all these investments announced by the oil and gas industry, once they start taking effect, all the value chains in these industries will start to move. This will drive growth and loan demand precisely in the value chains we are focusing on, which is why we recently opened a branch in Añelo and another branch in the mining ecosystem in San Juan. Even though we were present before, now we have a more direct presence because we want to focus on that.

Alejandro Catterberg, Political Analyst

But let me add something on the political side. One of the concerns I believe we might see starting next year is that as inflation concerns diminish, which shifted from being the primary issue to being shared with other economic concerns, we could start seeing labor issues arise. We may see demands from sectors of society that might suffer job losses in less productive industries in the suburbs of Buenos Aires, where new jobs are being created in the provinces. If you ask me what consequences or potential negative implications these changes could have for this government in the next year or future years, especially when considering the impact of artificial intelligence on the labor market, it seems that the tensions in society will evolve from inflation-related issues to employment generation.

Ernesto María Gabilondo Márquez, Analyst

And just a follow-up with Patricio on the ROE expectation. So you were mentioning that Supervielle is positioned for the long term, but the ROE of 15% to 20% may be extended. So, considering what you posted or what you're guiding for this year, would it be reasonable to see around a single-digit ROE next year and then moving to your medium-term target by 2027 or 2028?

Julio Patricio Supervielle, Chairman and CEO

Mariano, do you want to answer?

Mariano Biglia, CFO

Ernesto, yes, let me complement on this. I think for next year, although we haven't given guidance yet because we want to first see how monetary policy and regulation evolve post-elections, it is reasonable to think that we will reach our medium-term target ROE by the end of next year. Therefore, for the full year, we expect to be at high single digits or low double digits, depending on how quickly things evolve—lower interest rates, which we are already observing in November as an inflection point for interest rates. We are also seeing some flexibilization in the last regulations decreasing non-remunerated cash requirements. There's still some ways to go looking ahead, as cash requirements remain significantly high. We anticipate that cash requirements will continue easing. Furthermore, we also expect a decrease in NPLs, which we believe will occur next year, allowing us not only to reduce the cost of risk but also to resume real growth on the retail side. Some industries lag in recovery, and many of those have significant employment; thus, the dynamics should allow us to reduce the cost of risk, boost retail growth, and lower cash requirements. This will contribute to achieving our medium-term ROE target which, again, will depend on the pace of improvements.

Ana Bartesaghi, Treasurer and IRO

Our next question comes from Brian Flores with Citi.

Brian Flores, Analyst

I have two questions here. I think the first one is about growth. You mentioned in the presentation that you want to achieve a more balanced loan mix between corporate and retail, and you're prioritizing corporate, as you mentioned a strong demand and the unlocking of a lot of pent-up demand. Just wanted to clarify if this means that corporate loans could reach around 50% of the loan mix in 2026? And also, naturally, this brings lower yields. So just wondering if we should see a recovery in risk-adjusted NIMs by the second half of 2026, perhaps? And then I'll ask my second question.

Julio Patricio Supervielle, Chairman and CEO

We believe that the right approach, considering also the competitive landscape of new banks coming into the country, is to have a balanced approach in terms of serving enterprises, SMEs, and families or individuals. Having said that, loan demand will resume in the second quarter of 2026 for individuals as consumer confidence and disposable income improve. But to answer your question, today, the balance between enterprises and Mariano will confirm that, enterprises and individuals is tilted towards enterprises, corporations, meaning more than 50%. I believe that this will continue to be the case, at least in the first half of 2026. Then, when we see conditions for individuals and loan demand improving again, we can probably expect it to balance out to 50-50, or perhaps more heavily weighted towards retail demand, assuming an optimistic outlook towards the end of the fourth quarter of 2026.

Mariano Biglia, CFO

I think that covers the weight of corporate and retail completely. What I can add is that on the corporate side, we expect to see more balance with retail by the end of next year. However, in the second half of the year, we might also see a change in terms, as most lending is currently focused on working capital, which is only short term. We expect to see more loan demand for longer-term investments, not solely working capital. This will consequently help with yields.

Brian Flores, Analyst

No, super clear. And then on risk-adjusted NIMs, should we think about a U-shaped recovery by late 2026, as you mentioned, with cost of risk coming down perhaps? Is this a correct observation, Mariano?

Mariano Biglia, CFO

Yes, I think it could happen sooner than that. As you know, with the expected loss model that is pro-cyclic, we are already provisioning all the deterioration, even the early deterioration we see in the retail portfolio. So when we see conditions improving, the cost of risk should decrease very quickly, and that should generate an important recovery in real terms for the growth of the retail portfolio. Consequently, we should be able to see a recovery in risk-adjusted NIMs for the retail portfolio, which will also extend to the whole portfolio perhaps earlier on in the year without needing to wait for the second half.

Brian Flores, Analyst

No, super clear. And my second question is on risk management because obviously, we're all excited about the Argentina story. And I think Alejandro started by pointing out that one of the key concerns we hear is, 'We have been here before.' Patricio, you mentioned a lot of optimism, right, in not only the political but also the economic landscape. But I just wanted to hear your thoughts on what if things do not go well if the reserve requirements remain high? Are there any considerations by you or the Board regarding alternatives, such as partnerships, asset sales, or M&A if the base case scenario does not pan out and we have a less bullish scenario?

Julio Patricio Supervielle, Chairman and CEO

Well, yes, I mean the risk scenario that a lot of people are discussing is the policy that the government is enforcing regarding reserves and foreign exchange. I think there is a risk when many people choose to travel abroad and spend money abroad because of the perception that it is relatively cheap. While the Central Bank has been maintaining tight control on FX with support from the USA and so on, things globally are volatile and could potentially become a problem. I believe, of course, they should prioritize inflation and ensure that it comes down rapidly, which is why I think they are keeping strict regulations on currency exchange. Regarding our franchise, we are continuously working to enhance our resilience, especially in how we originate loans and adopt origination standards for individuals. We anticipated the deterioration that occurred in the market this year earlier than other banks. I think we are performing well on that front. Since Paco joined the company, he has instilled a complete reshuffle of the bank's culture toward becoming much more customer-centric and making our staff fully accountable. We now have a highly engaged, aligned, and committed team willing to go the extra mile. Our ecosystem also includes a very strong company in InvertirOnline, which is on the verge of entering the next phase of growth. Over the past four years, they have achieved remarkable success as the leading digital broker in the country for retail investors. Moving forward, they will maintain their efficiency and scale, but are now focusing on affluent clients and enterprises. They have the teams to execute this strategy and will invest accordingly to ensure swift growth. This strategy provides us with a great opportunity for cross-selling to acquire more banking clients. Therefore, I believe we are well-prepared for competition and the challenges ahead. We've endured various prior crises and are ready for this one.

**Unknown Executive, **

Additionally, we are always open to exploring strategic alliances. We are analyzing many of them. Furthermore, we have had discussions with large retailers in order to form strategic partnerships. Therefore, we are open and recognize the changes transforming our industry. We want to create a very attractive, modern bank, which is why we are open to new business opportunities.

Ana Bartesaghi, Treasurer and IRO

Maybe our next question comes from Camila Azevedo from UBS.

Camila Villaça Azevedo, Analyst

I'll keep it brief. I want you to elaborate more on asset quality topics. Could you please give more color about the NPL dynamics during the quarter? Do you think that the numbers seen in the quarter was the peak? Or are you seeing any signs of a peak? When should we expect it to happen in both segments? And what accurate coverage ratio level do you anticipate given this context?

Julio Patricio Supervielle, Chairman and CEO

Well, first of all, asset quality deterioration this quarter mirrors system-wide trends as the credit cycle adjusts to the macroeconomic environment. After a very unusually benign period of low NPLs, we saw a rise across existing and new customers, driven by pressures on disposable income and tariff adjustments, and also the shift to a disinflationary environment where debt no longer erodes in real terms. This was most evident in the retail sector. We had anticipated this deterioration, which prompted us to tighten our origination criteria in personal auto and car loans at the start of the year, along with reinforcing collections and client support. Unfortunately, the sharp pre-election rate hikes caused additional stress on our individual NPL shares. Interestingly, our individual NPL share in the market remains below our retail loan share, exhibiting relative resilience. I believe that, going forward, this deterioration is manageable, and we expect gradual improvements as macro conditions and consumer confidence normalize. If you want to add or, Mariano, complement?

Mariano Biglia, CFO

Yes, I can just complement on the NPL expectations. I believe we could see a peak in the fourth quarter as an outfall of early deterioration comes through. We might see NPLs stabilizing by the end of or during the fourth quarter. The conditions of improvement will also allow not only a drop in NPLs but also increased loan growth as a result. That's how we envision the scenario. However, we may still observe the NPL ratio increasing in the fourth quarter due to the impact of high interest rates on economic activity. I think that will represent the peak.

Camila Villaça Azevedo, Analyst

Super clear. Yes, the coverage ratio, please.

Mariano Biglia, CFO

Regarding the coverage ratio, as mentioned before, we follow expected loss models. When NPLs are very low, coverage tends to be very high. In fact, in the past, we were above 200%. Now that those provisions are being utilized, we see coverage decreasing, but it should always remain above 100% compared to NPL. So we expect to see it in the range of 110% to 120%.

Ana Bartesaghi, Treasurer and IRO

The next questions come from Ricardo Cavanagh with Itau.

Ricardo Cavanagh, Analyst

As I look into 2026, for me, it's not just another year. It has a big déjà vu of Argentina of the '90s, with positive expectations for credit and credit to GDP was double where it stands. So my question would be: What new actions do you believe you still need to take, and what new risks do you think you still need to face in order to generate new results in a new and different environment? Perhaps the first question is if you agree with this possibility or this positive outlook as well.

Julio Patricio Supervielle, Chairman and CEO

I think that we need to ensure we increase the leverage of the bank, which is a challenge for all banks, but specifically for our case. Additionally, savings in Argentina is still an issue. The share of savings to GDP remains low. We need to build a bridge to ensure that the bank gets leveraged. I believe that this bridge will come from using the international markets, and we will be looking to tap into international debt markets if conditions allow for it. Another matter of interest is replicating what we did in 2017, particularly with peso-linked debt. Currently, there isn't a market for peso-linked debt, but we did this back in 2017. This is also something to consider, although it may be aspirational. If confidence in Argentina is rebuilt, there may also be possibilities for asset rotation. This would mean originating loans, and perhaps selling those loans to the local capital market or possibly to international markets. This is something that could occur, and we are always exploring these opportunities since it would significantly bolster growth without utilizing capital.

Ana Bartesaghi, Treasurer and IRO

I think we have the last questions come from Pedro Offenhenden from Latin Securities.

Pedro Offenhenden, Analyst

I had one question on how do you assess liquidity conditions in the system going forward—in the system and in the bank going forward? Do you see liquidity as a potential constraint for great growth in 2026?

Julio Patricio Supervielle, Chairman and CEO

As the monetary base remains very small, even in historical terms, we're already seeing a rebound in money demand post-elections. This is key—the increasing money demand. This should support system-wide deposit growth. As confidence consolidates, we could expect a gradual lengthening of deposit duration, with more people investing in longer-term deposits. Another issue that is also central is that the Central Bank should favor financial intermediation. Currently, around 30% to 35% of system deposits come from money markets, which is not normal. If the Central Bank aims to promote credit to the private sector, they eventually need to regulate differentiated reserve requirements to make deposits more attractive than money market funds. To tackle liquidity constraints, I believe our strategy is sound; the rollout of cash management solutions for corporates, payroll accounts, and the entire ecosystem positions us well for capturing more stable and high-quality deposits. As I mentioned earlier, we will also be looking into tapping international markets if conditions permit.

Ana Bartesaghi, Treasurer and IRO

Thank you, Pedro. We covered some questions in the Q&A, and I believe we addressed all of them. Ignacio, I think the majority of them were taken care of. We will formally provide the rest of the key performance indicators regarding guidance at the beginning of the year. As Mariano mentioned, this will give us more clarity about reserve requirements and rates. We previously discussed non-performing loans. Regarding canceled shares, they are automatically canceled after being held by the treasury for three years. By the end of this year, we expect 3% of the capital to be canceled, but no more than that. I think we have reached the end of the Q&A session with no further questions. Thank you all for joining us today. We appreciate your patience, especially since there is another call from a different bank happening at the same time. Thank you again for being here.

Julio Patricio Supervielle, Chairman and CEO

I do appreciate your questions. It was a difficult quarter, but I'm optimistic for 2026. We do have the best CEOs in Argentina to lead the bank—with Paco and Diego for InvertirOnline, I'm very optimistic about the future. Thank you very much.