Grupo Supervielle - Q1 2024
May 23, 2024
Transcript
Ana Bartesaghi (Head of Investor Relations)
Good morning, everyone, and welcome to the Banco Supervielle First Quarter 2024 Earnings Call. This is Ana Bartesaghi, Treasurer and IRO. Today's conference call is being recorded. As a reminder, all participants will be in listen-only mode. If you want to ask questions at the end of our presentation, you need to be connected to a Zoom platform from any device. We will not be able to answer questions if you are connected from a phone line. Also, please make sure your first and last name appear in the Zoom platform you are using. You will be able to ask a question by voice or send questions in written form via the Q&A box in the Zoom platform anytime during the call. Speaking during today's call will be Patricio Supervielle, our Chairman and CEO, and Mariano Biglia, our Chief Financial Officer.
Also joining us is Alejandro Stengel, First Vice Chairman of the Board and CEO at Banco Supervielle. All will be available for the Q&A session. As a reminder, today's call will contain forward-looking statements based on management's current expectations and beliefs, and subject to several risks and uncertainties. I refer you to a forward-looking statement section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. Patricio, please go ahead.
Julio Patricio Supervielle (Chairman and CEO)
Thank you, Ana. Good morning, everyone. Thank you for joining us today. Starting with a discussion of the quarter results on slide three. We are pleased to have started the year delivering robust profitability and market share gains in loans. At the same time, we've maintained healthy asset quality metrics and attractive capitalization with Tier 1 at 25% to support growth initiatives. Profitability achieved another record high ROE of nearly 34% in real terms. This good performance was driven by an unusually high net interest margin of 62%, reflecting our effective asset and liability management and increased spreads. Our strong bottom line was also supported sequentially improved efficiencies as we continue to improve the digital, virtual, and automatic channels, while transforming our branch network, establishing a solid base to drive higher productivity as growth resumes.
In turn, our healthier loan mix, following the shift in loans towards middle market corporates and payroll customers, where we have reciprocity with, with our transactional products, together with significantly lower exposure to consumer loans and tight credit scoring contributed to the NPL ratio, hitting another record low of 1.1%. So how have we been able to achieve our good results? Let me provide a brief overview of the progress we have made across our various strategic initiatives. Starting with SMEs and corporate, we are firmly committed to attracting new clients and expanding our share of wallet. To accomplish this, we are focused on enhancing the corporate experience, improving our Net Promoter Score, and driving operational efficiency.
During the quarter, we successfully scaled our Virtual Hub service model to capture the companies in the entrepreneurs and SME segment, which received gold recognition in the country's award for Financial Innovators in the Americas, presented by Fintech Americas. On the back of improved dynamics, we're actively developing products tailored to highly attractive export-oriented value chains, such as oil and gas, mining, and agribusiness, while keeping a strong focus on selectively tapping regional economies and with attractive prospects. On retail, digital client base have expanded significantly, now comprising 64% of total clients, up 2%, two points, two percentage points sequentially, and seven percentage points from a year ago. Reflecting the strong adoption of our digital wallet, over half of our retail transactions are now completed through our app, a remarkable increase from just thirty-seven, thirty-seven percent a year ago.
Moreover, our pioneering 24/7 Inversión Rápida feature, unique among Argentine banks, continues to perform well, with customers up 28% sequentially. We are confident that our Human Banking retail relationship model will elevate customer satisfaction, enhance cross-selling opportunities, and further improve our NPS. IOL, our online retail brokerage platform, continues to excel, accounting for 20% of total fee income, as it captures additional market share and further strengthen its leadership position. The new crypto offering, introduced in January, in collaboration with Ripio, has been well received by existing customers, and while it is still in its early days, we are seeing consistent growth in both customers and transactions. Our efforts to drive higher operating efficiencies while remaining close to our customers, continue to bear fruit, with bank branches and headcount down year-on-year by 12%....
4% respectively, while further improving NPS. Turning to slide four, President Milei remains fully committed to achieving fiscal surplus and implementing bold structural reforms. While there is still much work to do, the policies implemented over the past five months are resulting in a gradual transition in Argentina to a more positive economic environment, conducive to a more sustainable, robust, and competitive financial system. To date, interest rate floors on time deposits have been lifted. The central bank has acquired $17 billion in reserves while keeping a fiscal surplus since the beginning of the year. Measures were also taken to address the challenge related to importers, commercial debt, and unpaid dividends, and we are pleased to see that inflation is decreasing faster than anticipated. Despite the recessionary environment, it is worth noting that social support remains strong.
In this context, the financial industry is experiencing a gradual resurgence in loan demand. However, passing the necessary reforms through Congress and the lifting of FX restrictions are crucial to resume sustainable growth and attracting investments. At Supervielle, we have a strong capital base and solid, agile foundation that positions us well to resume growth as demand continues to recover. Now moving to slide five. Reflecting anticipated macro improvement, we are strategically diversifying our asset portfolio, gradually shifting towards a larger share of private sector loans and reducing our portfolio of large holdings of central bank repos. The share of central bank repos over total assets declined seven percentage points to 33%, while loans expanded their share by six percentage points to 29% of total assets.
While increasing sequentially, the loan to deposit ratios stood at just below 44%, providing ample room to expand loan growth. As this transition unfolds, we anticipate these positive loan growth trends to continue as demand continues to recover, while NIM adjusts gradually from the exceptionally high levels experienced in recent quarters and converging to historical levels for the Argentine financial system. Turning to an overview of our loan book performance on slide six. Total loans were up 3% sequentially in real terms, while we gained 40 basis points in total market share as the economic environment began to normalize and confidence returned. Reflecting our focus on lower risk segments, SMEs and corporate loans accounted for 64% of our total loan book, while retail loans represented the remaining 36%. Corporate loans saw a 60 basis points share increase in the first quarter.
For the remainder of the year, we expect to maintain our focus on SMEs and mid-market clients, placing particular emphasis on the winning export value chains, including oil and gas, mining, and agribusiness. Therefore, corporate loans are expected to grow above retail loans. Within retail loans, we are selectively tapping lower risk segments. Reflecting this, we're expanding our share of car loans by 40 basis points in the quarter. More recently, we became the first private bank in the country to relaunch new 30-year mortgage loans. A return to adding mortgage products to our portfolio is an attractive value propositions in today's market. We're also scaling car, personal, and credit card loans. We're optimistic that there is room for further growth once inflation and nominal interest rates decrease. With this, let me turn the call to Mariano. Please go ahead.
Mariano Biglia (CFO)
Thank you, Patricio, and good day, everyone. Now let's turn our attention to slide seven, which provides an overview of our performance for the quarter. Net income increased to nearly ARS 47 billion, with ROE in real terms at 34%, a significant increase from net income of ARS 34 billion and ROE of 27% in the fourth quarter last year. Starting with revenues, net financial income was up just over 2%, mainly supported by higher spreads and volumes on our investment portfolio. A drop of nearly 750 basis points in cost of funds, following the lifting of floors on time deposits and decreases in interest rates. Net fee income, however, contracted 14%, as banking fees increased below the 52% inflation for the period. In turn, costs were down 18%, reflecting seasonality and structural cost efficiencies.
Moreover, the strategic shift in allocation towards middle market corporate and payroll customers, coupled with the update of our expected loss models in 4Q 2023, resulted in a 40% sequential decrease in net loan loss provisions. Other net losses declined 15%, mainly reflecting valuation adjustments of real estate to market value in 4Q 2023, and higher provisions for strategic initiatives. All these more than offset the 35% increase in inflation adjustment on higher monetary assets. As shown on the left chart of slide eight, we have been diversifying our asset base, gradually shifting towards a larger share of private sector loans, while significantly reducing our holdings in central bank securities. On the right, you can see the composition of our commercial and retail portfolios at quarter end, where we have gained share across most loan products.
In corporate loans, promissory notes stand out, accounting for 52% of the corporate portfolio, as well as overdraft at twenty-six percent, and foreign trade at 15% of this book. With respect to retail, credit cards account for 33% of the book, followed closely by mortgages at 32%, personal loans at forty, twenty-four percent, and car loans accounting for 9% of the total retail book. Moving on to slide nine. Net financial income increased sequentially in the low single digits and nearly 140% year-on-year to ARS 299 billion, with NIM practically stable sequentially at approximately 62%. Following the lifting of floors on time deposits and decreasing interest rates, cost of funds posted a sharp sequential drop of over 740 basis points.
In turn, interest rate on loans increased over 300 basis points, mainly due to a higher adjustment of inflation-linked mortgages. The Q-on-Q performance also benefited from peso bond gains at a higher yield on increased volumes of inflation-linked government securities, capturing the inflation peak last December and January. Turning to slide 10. Our successful strategy execution has contributed to further improving the efficiency ratio, reaching 34%, down from 43% in the prior quarter and over 70% a year ago. Sequential improvement in efficiency was mainly driven by exceptionally high NIM, driving revenue growth, while we also continued to reduce personnel and administrative expenses. Turning to slide 11. Capitalization strengthened further in the quarter, with the Tier 1 ratio expanding 370 basis points sequentially to nearly 25% at quarter end.
The increase in capitalization reflects strong results, along with inflation adjustment of capital and taxes efficiencies from the merger of IUDÚ into the bank, which more than offset growth in risk-weighted assets. Now, moving on to our perspectives for 2024 on slide seven... 12, sorry. Considering the recent trends discussed, we have updated our perspective on the following line items. While we continue to expect peso loans to grow above inflation, we now see credit demand recovering gradually, starting in the second quarter as inflation eases. In terms of deposits, while expectation of peso deposits remain unchanged, growing slightly above inflation, dollar-denominated deposits are now anticipated to increase in their original currency. With respect to fee income, while the bank, bulk of bank fees to individuals are expected to reprice in line with inflation, dollar-denominated commissions are anticipated to grow below inflation when translated to pesos.
In terms of profitability, we are increasing our ROE expectation for the year to approximately 15%, up from the 10% discussed in our prior call. For the remainder of the year, we expect to see a softer second Q, reflecting negative interest rates, where lower inflation and loan growth are expected to drive higher profitability in the second half of the year. Expectations for all other metrics remain unchanged, including closing the year with a Tier 1 capital ranging between 20%-25%. Now, we're ready to open the floor for questions. Ana, please go ahead.
Ana Bartesaghi (Head of Investor Relations)
Thank you, Mariano. At this time, we will be conducting the question and answer session. As a reminder, to ask a question, you need to be connected to this Zoom platform. To ask a question, please press the Raise Your Hand button and press it again to withdraw it. You can also send your questions in written form via Q&A box. We would ask you to limit yourself to one question and a follow-up, and then you can raise your hand again. Just one moment while we call for questions. Our first question comes from Ernesto Gabilondo with Bank of America. Hello, and good morning, Ernesto. Please go ahead.
Ernesto Gabilondo (Head of Latin American Financials Equity Research)
Thank you. Good morning, Ana. Good morning, Patricio, Mariano, and all the team. Thanks for the opportunity to ask questions. My first question will be on your long-run expectations, and what would be the macro assumptions, that you're expecting for this and next year in terms of GDP, the level of inflation, the level of interest rates? I think those should be important to consider in order to think about the loan growth in this and next year. And well, we know that Argentina has a very low credit penetration, so considering all these assumptions, how would you see the loan growth for the second half of this year and next year? Thank you.
Julio Patricio Supervielle (Chairman and CEO)
Okay, I will start, and then, Mariano, will further expand. After the extraordinary high NIMs that we saw in fourth Q 2023, and as well as first Q 2024, we anticipate a decline in NIMs alongside falling inflation. Inflation figures could decline from 50% this first Q, to 20% in second Q. Declining interest rates have several effects. First, in March, we saw already a surge in demand for loans from the core SMEs and the corporate segments, both in pesos and dollars, and as well as in the retail sector, positively impacting our market share. For the remaining of the year, with declining inflation, we expect the loan book to grow in real terms above inflation, starting this quarter.
Second, we also foresee a shift from repos to T-bills as they better preserve our financial margins. Do you want to expand on that?
Mariano Biglia (CFO)
Sure, Patricio. Hi, Ernesto. Thank you for your questions. Regarding our projections for loan growth and for some macroeconomic variables, we expect, following what Patricio mentioned, loans to start growing in real terms in the second quarter and increasing the pace of growth in the second half of the year. For the full year, it's still, of course, hard to tell, but with decreasing inflation even faster than originally expected, we can see loans growing at real rate in double digits. So maybe somewhere between 10%-20% this year, and growth can be much higher next year.
Departing from such a very low point when we are at less than 7% of loans to GDP, growth can, can be also very fast. So within that start, low starting point, next year growth, if inflation keeps going down, it can be really high. It's, it's difficult to say, to say a number, whether it will be 50% in real terms, 60%, but, but we can see very high rates of, of growth in 2025. Then, you asked about our projections of GDP. We expect, with, with the... We are in line with economic consensus of decreasing GDP for this year of 3.5%. We saw very low levels of activity in the first quarter.
Of course, part of that was expected. And then, the economy should start to recover gradually. A very important first call will be the lifting of the exchange rate controls. That should be something that we will see, probably by the end of the year. Some economists are more optimistic, say it can be achieved in the third quarter of this year. But at some point in time, we think those controls will be lifted, and that will also unlock growth. And in that regard, we expect next year, that's 2025, to see a growth in GDP of approximately 3%-3.5%.
Ernesto Gabilondo (Head of Latin American Financials Equity Research)
Excellent. Thank you. And just, follow up on these macro assumptions. So you were also saying, Patricio was saying inflation declining from 50% to 20% levels in the second half. But can you provide us this number also in annual terms? How do you see inflation for this year, inflation for next year, and also your expectations for, for the interest rates?
Mariano Biglia (CFO)
Sure. Yes, inflation for this year, we expect it to be in 160%. And for next year, we definitely keep decreasing, and it can get as low as 60%. We know there are some variations in these projections, with some economists expecting inflation to decrease at a higher pace. But our projections are in the range of 60%. And interest rates, we believe with a decrease, a sharp decrease that the Central Bank did during these first 5 months of the year, we think for the following months, it will keep...
The interest rate in the actual levels also the implicit interest rate in the last auction of treasury bonds shows that the market expectations are for interest rate decreases to stop in the following months. But of course, for next year, with increasing inflation, interest rates will also keep going down.
Ernesto Gabilondo (Head of Latin American Financials Equity Research)
No, perfect. Excellent. And then just a second question, and this will be on your ROE expectations, for this second quarter. In your press release, you mentioned you have a record high ROE of 34% in this quarter, but at the same time, you are guiding for the full year to have an ROE of around 15%. So just wanted to understand, how will be this evolution of the ROE throughout the year? I think that the second quarter will be the most challenging one, given that you will start to accelerate the loan book, but at the same time, you will have the impacts of lower rates. So, just wanted to understand, how should we think about the ROE evolution through the year?
Mariano Biglia (CFO)
Sure. Yes, well, you explained it very well. Second quarter will be the most challenging, probably, of the year, because our loan growth is starting to grow. But we are seeing negative interest rates in real terms, so that's also a challenge to hedge our equity. But I would say ROE for the second quarter will be in single digits, maybe ranging from 5%-10%. And then the evolution of the ROE will be increasing during the third and fourth quarter, as we continue to grow our loan book and replacing central banks and treasury bonds with loans. And that would make a total ROE for the year of 15%, which was our guidance.
Ernesto Gabilondo (Head of Latin American Financials Equity Research)
Perfect. Thank you very much.
Ana Bartesaghi (Head of Investor Relations)
Thank you, Ernesto. Our next question comes from Brian Flores with Citibank. Hello, good morning, Brian. Thank you for your question.
Brian Flores (VP in Equity Research)
Hi, team. Good morning. Thank you. Thank you a lot for the opportunity. Maybe I want to start with a more strategic question on your consumer franchise. As you have mentioned on the presentation, a lot of the digital efforts are already evolving, right? So more of your transactions are already happening with your apps. You're deploying these digital efforts. I just wanna maybe get your ideas here on how are you thinking about the digital competition, right? Because, for the consumer franchises, we have a lot of competition, maybe, Mercado Pago, Ualá.
So, I just wanna maybe ask you strategically, how do you think on this competition, and how are you preparing yourselves to you know, compete against them now that, as you mentioned in your guidance, we should expect loan growth to become more and more relevant right in the strategy. Thank you.
Mariano Biglia (CFO)
Alejandro, you want to go?
Emérico Alejandro Stengel (First Vice Chairman and CEO)
Thank you. Thank you, Brian, and good morning. We have, as you probably know, been focused on developing our digital wallet and making that a unique experience. That is one of our key initiatives, and it's ranked really very high and comparable to many other digital wallets, and digital wallets that are being developed by fintechs. This is precisely part of the recognition we got with the Fintech Americas Award. In this regard, what we see is that we are also making a big effort, and we've been recognized by the MODO platform. And we see there, too, that we are very well positioned among the banks that have the greatest use and the greatest stickiness of clients using the MODO platform as a strategic response to the Mercado Pago moves.
A lot of the answer to your question depends on what the regulator will do moving forward. As you know, the central bank has ruled that there has to be interoperable QR, and there has been a little bit of, wrestling, with Mercado Libre around that point. And so far, if progress is made in that direction, we see a huge opportunity to be able to leverage all the investments and the capabilities we've developed in our digital wallet in that direction. We also see big opportunities on the digitalization of insurance products, of, all the mortgage products, and all the car loans, for example, which have been our focus initially, for growth. So we are very confident that these capabilities, together with our new operating model, are positioning us very well in this new digital competitive arena.
Let me add to the answer of Alejandro. Last year, the beginning of the year, we launched a new service, an investment proposal for individuals, which is called Inversión Rápida, which is basically an answer to what Mercado Pago has been doing over the past several years, or which allows for, it's a way for individuals that have idle funds to invest them in a money market fund. So we did this, and I believe that we are still the only bank that is providing this service, which is 24/7. So any time during the week, during the night, weekends and so on, you can dispose of your funds and use them or invest them.
So this is a way. And the interesting thing is that although, let's say, of course, we lost some deposits in 0% deposits on savings accounts. But overall, when you see the profitability, on looking on financial revenues, on revenues we get from individuals, they have increased. So there was a compensation, and there was a reward for doing this. And the adoption was fantastic because we grew 10 times in terms of adoption or even more than that in terms of adoption year. So that's a way that we believe that we can compete with fintechs. And it's surprising that we are the only bank to do this, yet.
Brian Flores (VP in Equity Research)
Perfect. No, super, super helpful. And maybe just a quick follow-up on Ernesto's question. Are you gonna prioritize a specific segment? Because as you mentioned, we might see 10%-20% growth this year in real terms, but 0.5% of your loan portfolio is corporate. You have a big consumer franchise, so are you gonna prioritize one more of the other? And if you could just remind us on how fast you can reprice in terms of, you know, duration, each of the segments, would be really helpful. Thank you.
Mariano Biglia (CFO)
We have initially focused in SMEs. As you know, SMEs have very low leverage from the starting point, and are the ones that have been reacting quickly to the change and the fall of inflation, particularly in export-oriented value chains, as mentioned by Patricia before, like mining, agribusiness, and oil and gas. We have been more cautious on the retail side, but we see increasing demand there, too, and we're focusing on payroll clients, on pensioners. In the case of clients or non-clients or prospects that are coming on board, we're focused on asset-backed loans, like car loans and mortgages, going forward. We think that this approach will put us on a solid footing for when we really expect the retail part of the business to take off during the second half of this year.
Brian Flores (VP in Equity Research)
Great! This is perfect. Thank you very much.
Ana Bartesaghi (Head of Investor Relations)
Thank you, Brian. So our next question comes from Marina Mertens, with Latin Securities. Hello, good morning, Marina. Please go ahead, and thank you for your question.
Marina Mertens (Head of Corporate Debt Research)
Hi, good morning. Thank you, and congratulations on the results. So the banking business in Argentina for the remainder of the year should look quite different since the central bank has been lowering rates and inflation has been coming down. So what do you expect? What do you envision for the remainder of the year and 2025?
Mariano Biglia (CFO)
Yes, well, we agree, Marina. As inflation is going down and interest rates are decreasing, the composition of the balance sheet will be changing and will be transitioning, as it has, as it already has during the first quarter. We are transitioning from a very low weight of our loan book in our total assets, or a very low loans to deposit ratio, to higher weights of the loan book. At some point, we expect to converge to historical levels. This will be achieved by replacing all the weight that now central bank securities or short-term, recently, short-term treasury notes have in our balance sheet. So when that composition changes, also will do the composition of our revenues.
So that will also be a change in the quality of our revenues, earning most of our revenues from our traditional banking business of receiving deposits and lending to individuals and corporations.
Marina Mertens (Head of Corporate Debt Research)
Great. Thank you.
Ana Bartesaghi (Head of Investor Relations)
Thank you, Marina. So, we have another question, a new question. This is from Carlos Gomez-Lopez, with Citibank. Hello, good morning, Carlos.
Carlos Gomez-Lopez (Head of LatAm Financial Institutions)
Hello, and thank you. Thank you for HSBC. We
Ana Bartesaghi (Head of Investor Relations)
Sorry, I don't know what did I say. I'm sorry for mention.
Carlos Gomez-Lopez (Head of LatAm Financial Institutions)
I used to be at Citibank, it's okay. So, I'm looking at slide eight in your presentation, and we see the big decline in central bank exposure. How do you expect this to evolve for the rest of the year? Will you continue to decrease your exposure to central bank and government securities? And traditionally, the banks have been reluctant to take on treasury securities. We understand that may be changing. Is there a limit as to how much exposure to the government you are willing to take?
Mariano Biglia (CFO)
Yes. Hi, Carlos. Thank you for your question. Yes, correct. As you said, we are starting to decrease the weight of the central bank securities and treasury notes in our balance sheet, as we replace them by loans, and we increased our loans to deposit ratio. But also recently, during this month, the central bank allowed us to replace short-term treasury notes instead of one-day repos. And that is the change that the central bank made, is that for the amount that we decrease repos, we can increase short-term treasury notes without exceeding the limit of exposure to the public sector. So that's on the regulatory side.
But also, these short-term treasury notes have a higher rate, so there's also an economic incentive to do that change of composition in the balance sheet. That's within our investment portfolio. Then for the longer term, we are, as I explained before, increasing in loans, and that will be finally replacing the overexposure to the government sector, whether it's central bank or the treasury. This is a, this is a transition.
Carlos Gomez-Lopez (Head of LatAm Financial Institutions)
Yeah.
Mariano Biglia (CFO)
We are in a transition year. And but of course, expecting that the business we are in is providing loans to the private sector. But this is a definitely a transition year. Yes, and you also asked about limits. There are limits, although this waiver that I mentioned of the central banks to increase our exposure, so we can increase it up to the amount that we decrease central bank exposure. And then we have the regulatory limit to exposure to the public sector, and also our own policies.
Carlos Gomez-Lopez (Head of LatAm Financial Institutions)
Well, I guess that is the question, what is your own policy? Because, again, from what you described, to see if I understand correctly, the central bank allows you to, at this point in time, increase your exposure to the treasury without that counting as increased exposure to the public sector. I mean, they're obviously giving a waiver there. I imagine you don't want to do that indefinitely, right?
Mariano Biglia (CFO)
Definitely not. As I said, this is a transition, and we have our own limits, of course. I mean, essentially, when you have on the other side, the central bank or the government, it's a different animal, I would say. So, this is, as I said, a transition, and we have our own limits in order to take treasury securities.
Carlos Gomez-Lopez (Head of LatAm Financial Institutions)
Okay.
Mariano Biglia (CFO)
Which are not the same limits we had on repos.
Ana Bartesaghi (Head of Investor Relations)
Yes, this allow for this very short term, the caps only. It's not for any other treasury one we may have. So it's for this time, while we wait for the loan book to, or loan credit demand to accelerate.
Carlos Gomez-Lopez (Head of LatAm Financial Institutions)
Okay, so that's only for the LECAPs in the short term?
Mariano Biglia (CFO)
Yes, exactly.
Carlos Gomez-Lopez (Head of LatAm Financial Institutions)
Okay.
Ana Bartesaghi (Head of Investor Relations)
Only for the amount you have in repos as of May 15, I think it was the date where this adopted date.
Mariano Biglia (CFO)
Also, these notes are very short term, so although they are treasury risk, they have a lower risk than other longer-term bonds.
Carlos Gomez-Lopez (Head of LatAm Financial Institutions)
Okay.
Ana Bartesaghi (Head of Investor Relations)
This is a transition, as Patricia mentioned.
Carlos Gomez-Lopez (Head of LatAm Financial Institutions)
Okay. To change the subject and go back to the future, which is the loans. I mean, we are all very excited about the new UVA loans, mortgages, and you have been at the forefront of making an offer. I just wanted to know if we have already seen, you know, any of these loans granted? We know there have been inquiries and petitions, but when do you expect to actually lend that, and what is a realistic prospect as to, you know, what amount you could give, let's say, this year or next year?
Mariano Biglia (CFO)
That's a tough question.
Julio Patricio Supervielle (Chairman and CEO)
We already know that there are already mortgages that have been-
Ana Bartesaghi (Head of Investor Relations)
Yes
Julio Patricio Supervielle (Chairman and CEO)
... being already granted.
Ana Bartesaghi (Head of Investor Relations)
Next, I think in the coming days, we should be, we having more from our side as well. But we know one loan, at least, as we saw in Bloomberg yesterday, was granted by one non-private.
Mariano Biglia (CFO)
But definit-
Carlos Gomez-Lopez (Head of LatAm Financial Institutions)
Thank you so much.
Mariano Biglia (CFO)
... definitely, there is a huge demand in expectation. I would say most of the people in Argentina, they need, they're looking forward to mortgages. This is unbelievable that the potential demand is absolutely unbelievable.
Carlos Gomez-Lopez (Head of LatAm Financial Institutions)
Mm-hmm.
Mariano Biglia (CFO)
And, it reflects probably what happened in the last few years, when no one... People were forced to stay in their houses, renting, renting in apartments and so on, and now they want, they want to move on. So it's unbelievable, the demand that is already in there. We know it.
Carlos Gomez-Lopez (Head of LatAm Financial Institutions)
But we understand there are operational problems, and there are some definitions that have to be made before you can actually start lending in, you know, in large amounts. Is that correct?
Ana Bartesaghi (Head of Investor Relations)
Yes, the effects measures, some of them, they are not good for the final buy and sell of the houses. These are operational things that we understand will be removed soon-
Julio Patricio Supervielle (Chairman and CEO)
Yes
Ana Bartesaghi (Head of Investor Relations)
in the coming days. They told us they were working on that.
Julio Patricio Supervielle (Chairman and CEO)
Some of them are starting to be addressed, like for example, the parking required when you purchase local dollars.
Ana Bartesaghi (Head of Investor Relations)
The $200 million-
Julio Patricio Supervielle (Chairman and CEO)
And the-
Ana Bartesaghi (Head of Investor Relations)
Daily.
Julio Patricio Supervielle (Chairman and CEO)
Yeah. And this will help a lot, Carlos, to increase demand and to make it more agile. But these things, as soon as they start working out, it will be very, very important in driving demand up very quickly.
Carlos Gomez-Lopez (Head of LatAm Financial Institutions)
Thank you so much.
Ana Bartesaghi (Head of Investor Relations)
Thank you, Carlos. We have a new question from Ernesto Gabilondo with BofA. Ernesto, please go ahead.
Ernesto Gabilondo (Head of Latin American Financials Equity Research)
Thank you, Ana. Just a couple of questions. The first one is on your loan to deposit ratio. So considering this excess cash that you have in securities, and that you will use them to expand the loan book, how should we think about the loan to deposit ratio evolving in the next years? And my second question is on regulation. Do you think that a big part of the tough regulation is already lifted, or do you think still there are some things that can be removed or lifted? And if that is true, what... Do you have an estimate on how this removal of tough regulation can help your business?
Mariano Biglia (CFO)
Yes, Ernesto, I will take the first part of your question regarding the loans to deposit ratio. We came from just over 30% as of December last year. We are now over 40%. By the end of the year, we can be close to 50%, and we increasing in loans faster than we increase in deposits. For following years, we should be reaching levels that we had in the past. For instance, 90%. Remember also that right now, we don't have other sources of funding, because we don't need them. But in the past, we always had capital markets instruments, securities in part of our portfolio or issuing negotiable obligations.
So when we start to issue also that type of instrument, in order to manage liquidity, we will also see the loans to deposits increasing significantly.
Julio Patricio Supervielle (Chairman and CEO)
Concerning your second question, I'll try to make an answer. Maybe Alejandro can help me also. First of all, I think that the main regulation that is restricting the entire economy, and of course, the financial system, is the foreign exchange restrictions and all that is related to that. This is critically important that they are being lifted as soon as possible, because it will instill new investments, it will bring confidence to the market, and hopefully, instill growth, and getting out of recession. For the banks, also, it is important because, first of all, having clear rules on FX restriction will help also all export-oriented industries. For us, it's also...
It has been a traditional business, when you lift foreign exchange restrictions, you have individuals, our clients, that they want maybe to have their savings in dollars. So for us, it's also a very interesting opportunity to make commissions. This has been traditional in the banking system, and this, it's a substantial revenue that banks used to get when there was no restrictions, and it would happen again. So, we are preparing for this, and hopefully, as I said, these restrictions, they should remove it as soon as possible. Do you want to comment on that?
Emérico Alejandro Stengel (First Vice Chairman and CEO)
I think you're quite right, Patricio. The biggest is, and it is overarching. Then you have many other things. For example, you might be aware of the increase on gross income tax that we have to pay in different jurisdictions, which is also making the process of lending far more expensive than it was. That is something that should be lowered to expedite and to make it more accessible to the public. Also, if you look specifically at some products, take mortgages that we would like to grow and expand, there should be also some easing on the conditions for securitization to provide a good support.
The banks can originate the mortgages and then through some securitization, which in turn leads to the question of the creation of investment funds and framework, which does not allow them. So it is a huge opportunity when you look at all these different changes that could come around, and therefore take you from the very small 4% of credit to the private sector, to something closer to, at least in the first stage, around 20%, by 20 or 35%, which would be closer to something reasonable over the next 4 years, no?
Ernesto Gabilondo (Head of Latin American Financials Equity Research)
Oh, excellent. Thank you very much, Patricio, Alejandro, and Mariano.
Julio Patricio Supervielle (Chairman and CEO)
Pleasure, Ernesto.
Ana Bartesaghi (Head of Investor Relations)
Thank you, Ernesto. Thank you all. So ladies and gentlemen, we have reached the end of today's Q&A session. Thank you for joining us today and for the questions. We appreciate your interest in our company. We look forward to meeting more of you over the coming months and providing financial and business updates next quarter. In the interim, we remain available to answer any questions that you may have. So have a good day.