Grupo Supervielle SA (SUPV) 2018 Q3 法說會逐字稿

Good morning, and welcome to the Grupo Supervielle Third Quarter 2018 Earnings Call. A slide presentation will accompany today's webcast, which is available in the Investors section of Grupo Supervielle's Investor Relations website, www.gruposupervielle.com. (Operator Instructions) As a reminder, today's conference call is being recorded.

At this time, I would like to turn the call over to Ana Bartesaghi, Treasurer and IRO. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining us today. Speaking during today's call will be Patricio Supervielle, our Chairman of the Board of Directors, who will discuss the overall macro environment; and Jorge Ramirez, our Chief Executive Officer and Vice Chairman of the Board, who will review our strategy and results for the quarter. Also joining us is Alejandra Naughton, Chief Financial Officer. All will be available for the Q&A session.

Before we proceed, I would like to make the following safe harbor statement. Today's call will contain forward-looking statements, and I refer you to the 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 statement to reflect new or changed events or circumstances.

I would now like to turn the call over to our Chairman, Patricio Supervielle.

Thank you, Ana. Good morning, everyone. Thank you for joining us today. If you're following the presentation, please turn to Slide 3. We reported solid results in the quarter. Net income more than tripled sequentially and increased over 50% year-on-year. We also achieved higher operating efficiency on protected asset quality as we took corrective actions to adjust to the sudden changes in the -- on the macroeconomic environment.

For the next few minutes, I'm going to provide an overview of the key macro indicators, which changed significantly over the past few months. This will put into context, how this has impacted the Argentine financial industry as a whole, and more specifically, our company. Jorge will then discuss our strategic initiatives and the positive results we are achieving in greater detail.

Please turn to Slide 4. Third quarter macroeconomics was dominated by a 40% devaluation and a new agreement with the IMF, which resulted in a commitment by the government to reach [a primary fiscal deficit] in 2019. The agreement also introduced a tight monetary policy based on monetary aggregate and a pre-determined non-intervention exchange rate zone with a goal of lowering inflation and reducing FX uncertainty.

As shown on Slide 5, we also experienced significant increases in minimum reserve requirements, which impacted our business. And demand deposits, which accounts for over 1/2 of our deposits, minimum reserve requirements doubled between June and September, reaching 41% at the end of the third quarter, and standing at 44% to date.

For time deposits, minimum reserve requirements increased at a similar pace to 35% by the end of the third quarter and stands at 38% to date. Importantly, only 13% and 18% of the minimum reserve requirements for demand and time deposits, respectively, have remunerated. The new program included the unwinding of the LEBAC stock with the aim of terminating these securities by year-end. Note, this dynamic is also driving overall higher deposits from non-financial entities as LEBACs unwind. The Central Bank is using short-term [Leliqs] to monitor the interest rates and manage the monetary base.

With the implementation of the IMF program, the monetary policy rates have declined to low 60s from a high of 74% in early October, and the average Badlar rate, the benchmark rate for the Argentine financial system, remains relatively stable in the low 50s. Importantly, the exchange rates have also begun to stabilize trending towards the lower boundary of the non-intervention zone.

Looking forward, market consensus anticipate a scenario of further declines in inflation and interest rate. As Jorge will discuss in his presentation, we have quickly been adapting our business to [these] new challenging conditions in order to protect asset quality and profitability.

Moving on, on the Argentine financial sector on Slide 6. In the current macro environment, system loan growth has decelerated during the quarter, with peso-denominated loan growth slowing to 2.4% sequentially and contracting over 1% in October. System dollar-denominated loans measures in U.S. dollars in turn contracted over 2%, both quarter-on-quarter and in October. Industry deposits continue to expand above loan growth with peso-denominated deposits up 7% sequentially in the quarter and almost 6% in October. Importantly, U.S. dollar-denominated deposits measured in dollars continue to increase and were up 2% sequentially, with the stock of total U.S. dollar-denominated deposits at the highest level on the -- of the past 16 years and almost 3% below the maximum level reached in 2002. We experienced a similar trend in loans, which we expanded deposits -- while we expanded deposits significantly above market growth rates.

Let me now turn to -- the call to Jorge, who will review our strategy and financial performance and outlook. Please, Jorge, go ahead.

Thank you, Patricio. Good day, everyone. Turning to Slide 7. Our growth in our loan book decelerated to 10% sequentially and was stable on an FX neutral basis. Our ability to adopt a business model to a rapidly changing environment allowed us to expand our asset base 21% sequentially. As the Central Bank continue to unwind the LEBAC stocks, we captured the higher share of non-financial institution deposits, mainly Sight Wholesale Deposits to fund investments in the high-margin 7-day Leliq securities issued by Central Bank. Also, as Patricio mentioned earlier, minimum reserve requirements more than tripled [on the portion of the above-mentioned Leliqs that were] applied to meet minimum reserve requirements.

Moving on to Slide 8. In the retail environment, together with a heightened focus on asset quality, peso-denominated loans rose 4%, while FX currency loans measured in U.S. dollars were down 11%. In line with current market conditions, we continue to reduce our exposure to the Consumer Finance segment, which now represents less than 10% of our total portfolio compared to 11% in the second quarter and 12% in the first quarter. [While we also have tightened credit scoring across segments, the higher share of corporate loans, which now represents 54% of the portfolio was mainly due to the combination of lower growth in Consumer Finance loans and the FX impact on U.S. dollar-denominated corporate loans.]

Turning to Slide 9. Reflecting the FX dynamics, I just explained, the total corporate book was up 16% sequentially as reported, while our peso-denominated loans posted high single-digit growth. As we further tightened credit scoring standards, we're also experiencing deceleration in retail loans to 8% sequentially. We also saw lower demand for mortgage loans in the current environment. Our Consumer Finance loan portfolio contracted by 3% sequentially, as we continue to align our risk appetite to the current environment.

Finally, as we, kind of, stated in more detail in our earnings report, our portfolio remains well diversified across a broad range of economic sectors and highly optimized by keeping good collateralization levels.

Moving on to finally on Slide 10. We reported a one-off expansion of our deposit base, up 28% sequentially and significantly above industry growth. Mitigating the effects of current market dynamics, including neutral demand along with steep interest rate increases and higher non-remunerated minimum reserve requirements, we significantly expanded [Sight] Wholesale Deposits to fund investment in high-margin 7-day Central Bank securities. This further increase of almost 70% in specialty account deposits. The sale of foreign exchange deposits increased by 400 basis points sequentially to 33% of total deposits, reflecting a higher mix of U.S. dollar-denominated deposits and the sharp currency devaluation in the currency -- currency devaluation in the quarter, pardon me. Reflecting the strong expansion in deposits, the loan to deposits ratio adjusted down to almost 86%. Let me also call out that the current loans to assets, was down to 57% from almost 63% in the prior quarter, as a result of the increase in minimum reserve requirements and the investment in Central Bank securities.

As you can see in more detail on Slide 11, our Argentine peso-denominated deposit base increased 21% sequentially. As a result of the dynamics I just explained, the share of wholesale deposits rose to 41% this quarter from[26%] in the second quarter. Retail and senior deposits represent a 40% share, while corporate deposits accounted for 29% of deposits. Noninterest-bearing deposits still account for a sizeable portion of our total deposits, representing 37%.

Moving on to P&L on Slide 12. Net financial income was up 21% sequentially, with net financial margin expanding 80 basis points to 11 -- to 18.2% in the quarter. Our strategy to invest in high-margin short-term Central Bank securities to mitigate the effects from recent steep interest rate increases on higher non-remunerated minimum reserve requirements resulted a NIM from our investment portfolio increasing to -- close to 37% from 25% in the prior quarter. This strategy more or less set softer margins [from a banking business] , which is impacted by [last] loan repricing, which resulted in a 160 basis point decline in loan portfolio NIM to 16.6%. Note, that net financial income from all foreign exchange operations resulted in a gain of ARS 285 million, our loan book [effectively repricing,] starting with the corporate portfolio. And we remain confident that as our portfolio reprices, our banking business will continue to gradually capture interest revenues from the higher interest rate environment.

Moving on to Slide 13. We saw soft growth from the net service fee income impacted mainly by lower fees charge this quarter as activity was interrupted by the weaker current environment. Income from insurance activities in turn were up 26% sequentially benefiting from easier comps, as the third quarter included onetime provisions to adjust to [new regime] under the guidelines.

Moving on to asset quality on Slide 14. We proactively took the decision to step up total coverage to 94% from almost 90% in the prior quarter and 85% year ago. Increasing coverage was mainly done in the Consumer Finance business, while coverage for our banking business stands relatively stable at higher levels of 129%. The increase in coverage drove up the cost of risk to 5.9% in the quarter from 5.6% in the second quarter. However, excluding the ARS 120 million in additional voluntary loan loss provisions, cost of risk would have been 5.3% slightly down sequentially and reaching 5.1% for the 9 months of this year.

We're also pleased to see that the initiatives implemented early in the year are delivering good results. The NPL ratio remain relatively stable sequentially and [maybe a] slowdown in loan growth as we further tighten credit scoring standards. In Consumer Finance, a contraction in loans to this customer base drove a 50 basis points quarter-on-quarter increase in this segment's NPLs. And while retail and corporate loans NPLs each rose 20 and 30 basis points sequentially, respectively, they still remain at historically low levels.

Taking a closer look at the retail book, the 90 days plus delinquency ratio of the blended book remains at 100 basis points below the NPL ratio.

Looking at asset quality for the Consumer Finance business as you can see on Slide 15, 3 months' vintage data shows a continued improvement in credit quality of new loans from ending March of this year and the tighter credit scoring in continuing third quarter. NPL creation of this segment also decreased sharply in the quarter and continued to decline in October, reflecting our initiative to tighter credit scores, which is turning in good results.

Now moving on to expenses on Slide 16. We delivered a sequential improvement of 700 basis points in the efficiency ratio, reaching 59.3%. Personnel and administrative expenses [increased low inflation, reflecting ramification of cost cutting] and containment measures along with our ability to quickly streamline the business. Importantly, we should achieve this even as we face additional personnel expenditures from the ramification of our Consumer Finance business, which resulted in nonrecurring cost of ASR 93 million for the quarter. We expect that some of these impacts will be offset through lower personnel cost in the 4Q '18. Excluding that [we've got severance charges and additional headcount from the mission we acquired MILA and InvertirOnline, personnel expenditures would have increased almost 11% sequentially.]

Next Slide 17. Our reported results creating profitability in the quarter, both sequentially and year-on-year. Higher net financial income was driven by investments in the high-margin Central Bank securities and the continued repricing of the loan book, principally in the corporate portfolio. This will offset the softer loan growth, [lost] loan repricing and our decision to reduce our exposure to the Consumer Finance [segment in this context.]

Stable loan loss provisions, excluding the additional provisions to step up coverage and effective cost controls that largely observe the costs incurred in the regularization of our Consumer Finance business also contributed to profitability. Return on average equity for the quarter reached 22.4%, recovering from a low of 12.6% in the prior quarter, while return on average assets improved sequentially to 2.7% from 1.8% in the second quarter.

Moving on to capitalization on Slide 18. We reported a consolidated performance Tier 1 capital ratio of 12.5% at the close of the quarter compared with 13.1% in June. This includes a 70 basis points impact on Tier 1 capital resulting from the sharp FX depreciation at the end of the quarter. A total of ARS 2 billion remain at the holding company for future capital injections. These includes ARS 100 million capital per division made this week in our auto loan subsidiary, MILA, and ARS 1 million injection plan for Banco Supervielle before year-end.

Moving to the outlook on Slide 19. We maintain our guidance for 2018. These includes loan growth in the range of 40% to 50% and most probably closer to the lower end of the range. Cost of risk between 4.6% to 5.1%, excluding the additional [voluntary] charges to step up coverage. NIM ranging between 18% to 20%, and efficiency ratio of between 59% to 63%. Attributable comprehensive income in the range of ARS 2.9 billion to ARS 3.3 billion, and the Tier 1 ratio between 12% to 13%. Note, we are keeping our guidance despite weaker market indicators for the year as per market consensus as you can see on this slide.

Our guidance is supported by the flexibility of our business volume to adjust to the rapidly changing market environment context and further supported by the possible results from recent correcting actions, including additional tightening of credit standards, cost-cutting measures and streamlining of the Consumer Finance operations. A gradual repricing of our portfolio that has captured the higher interest rate is also contributing to our expected performance.

In sum, we delivered solid results. The quarter was not without any challenges, but our team was up to the challenge as we regularly made adjustments to our business model. We need to continue to closely monitor credit quality as we're not expecting major positive shift in the near term. Our confidence in the corrective actions being undertaken will be successful. At that point, we will advance as a new and stronger financial institution.

We're now ready to take questions. Operator, please open the line for questions.

(Operator Instructions) Our first question comes from the line of Gabriel Nóbrega from Citi.

During this quarter, we saw that you increased a lot your special checking account deposits, and in my understanding, it was in order to be able to invest in government securities. What I really want to understand is, if loan demand continues to decrease, do you expect to invest all that we're expecting in [loan grant outs as in loans] into these government securities? And also, how easy would it be to rotate out of this when interest rates begin to come down in 2019? And I'll ask a second question afterwards.

Yes, clearly, as you very well described it is, with these current interest rate environment, loan demand has come down. And to be honest, it's healthier, it's really healthy that, that companies aren't borrowing that much in -- at this interest rate, the regular ones, because there's only so much time that you can be able to stand the impact of these high-interest rate levels. So what are the dynamics that we're seeing throughout is 4Q already is I think interest rates are coming down and they're coming down pretty rapidly. I mean, we're 10 percentage points down from the peak in the Leliq rates and our estimation or our view is that we might see interest rates in the month of December coming [below the 60% floor that is included in the] IMF agreement, especially since we're expecting that at the beginning of December, we might be seeing -- to consider if market consensus and REMS and surveys, stating declines in -- expected declines in inflation rates. And that was the precondition for interest rates to come down below the 60% mark. So everything is poised, and heading towards a -- the smaller overall interest rate levels in December. And if in case it continues to come down on -- interest rates continue to come down, we expect that once the situation normalizes, companies and individuals will go back to borrowing. And as a result of that, we will start deflating our exposure to Central Bank securities and go back to lending to companies and individuals, probably in -- at very beginning, it's going to be working capital financing. And then further along the road, we might see other longer-term lines like mortgage is coming back into the picture. But we need that -- those dynamics to play out. The only other addition I would like to make is that, we saw an increase in the special checking accounts and part of this is opportunistic, but yet we believe there is a fundamental structural shift in the mutual fund industry, in the sense that mutual fund industry has shifted from maintaining a short-term liquidity in terms of bank notes and moving towards maintaining it in specialty accounts in the bank. So as the situation normalizes, part of these deposits might go, but our estimation is a substantial portion of them will stay within the banking industry. And we had a first-mover advantage in this business. We took -- we moved very quickly and took advantage of -- we were seeing that these unwinding of events will result in additional deposits coming from the mutual fund industry. So we move very quickly to capture them and that is where I think the substantial portion of them will remain going forward in the bank.

All right. That's very clear. And if you allow me to do a second question. During the quarter, we saw that your NPL ratio has actually deteriorated and this is already to be expected due to the recent macroeconomic challenges. What I want to understand with you is that from what you have been seeing so far, is there more space for NPL ratios to keep on increasing? Or do you believe we are close to the top?

We're seeing the impact of the -- the impact of monetary policy just starting to know so. And it will be only logical to expect some further deterioration in the mature line in the NPL ratios. And clearly, we'll be -- we're part of that. And we will see -- we expect to see some further deterioration. The thing though is that if you look at the composition of our NPL, the good news in this quarter was that all the measures that we're taking to put under control, kind of, the NPLs on the Consumer Finance business, which had been increasing substantially in the first 2 quarters of the year, have come under control and have seem to peak. And if you look at the slide in which we show the NPL creation, the NPL creation is dropping sharply and even if you expand the quarter for the October figure, it's below the '13 figure. So we're having positive news on that front. And we're having slight deterioration on the company front and on the corporate front. And the other thing that we'd like to point your attention to is our NPL ratio on our retail banking portfolio because the NPL ratio we have to report because of Central Bank moves is higher than the actual NPL ratio delinquency and this has to do with the fact that almost 67% of our customer base collect the monthly paycheck either in pension or payroll with us. So a substantial portion of these customers may be delinquent or a portion of these customers that account for 1% of the portfolio may be delinquent with other banks, but they are still current with us, okay. So the risk is that 100 basis points between the actual delinquency rate and the one we have to report. So all in all, I mean, we remain cautious on the NPL front. We believe that the worst is still not over and -- but it's reaching -- it's closing -- it's getting closer to peaking at some point in time between the 4Q and the 1Q of next year.

Our next question comes from the line of Mario Pierry from Bank of America.

Let me ask you two questions as well. The first one is about your loan repricing. When I look at your rate on your loan book, it went up to 33.8% from 30.4% 1-year ago. I understand right that it takes longer for the loan book to reprice. But I was just wondering if you are being conservative in not trying to pass too much of increases on the rates of your loans in order not to have asset quality problems because when I look here the breakdown, when I look at retail banking personal loans, the average interest rate that you're charging or that you're getting today is 43% and it was 41% 1-year ago. So my question is how much of this is related to your strategy and how much of this is related to the fact that it just takes longer for the loan book to reprice? And then the second question that I have is related, as you mentioned, right up the Consumer Finance NPLs. It seems to have stabilized, but on the other hand, the corporates NPLs went up to 0.8%. This is a significant increase from 0.2% 1-year ago. If you can give us a little bit more details what kind of factors you're having problems with? Is this related to the construction sector? So I'm just trying to get a little bit of a more color on the corporates NPL deterioration.

Okay. Mario, regarding the loan repricing, yes, it is a combination of factors. I mean, the loan is with a rise of interest rates on retail, the first thing that happens is that you can automatically lend principal to the same person because of the hike of interest rate. So what we're currently doing is, we're rolling over what is maturing. So it's taking time to reprice essentially because the weight of the stock is still much more important than the new loans that we're granting, so that is why we have that. We are also correcting our credit on the rating standards and that also is playing a role in terms of new loan origination. Here the book that reprices faster is the profit book. And on that one, we've been able to pass that through. The other thing you have to consider is that with the current environment of high-interest rates, you have a negative yield curve in Argentina and not a positive one. So long-term interest rates for some loans are lower than the short-term interest rates. And so that is also playing in as a factor also. And are we being cautious in terms of -- as part of our strategy not to drive further [deterioration] on the credit quality of the portfolio. And not that much, I mean, we're working more on the tightening of the credit underwriting standards. [And in the recourses in terms of not offering that thing in also individuals,] which is one of the concerns we have. Moving to your next question, yes, you're right, the NPL moved from 0.2% to 0.8%, you are near -- I mean, the 0.2% was an extraordinarily low figure and it also had to do with the rate at which we're growing. So at that time, so it may be a little bit deceiving on a more stable basis. In terms of the sectors that -- in terms of the sectors -- it's not a specific sector. We're not seeing problems [on the construction] and especially between nothing to do with the notebook, if that's where you were aiming at. And I would say that in the industries that are suffering are the ones that are related to -- that are either highly netted are the ones that are highly dependent on financing for their sales. But the good news on this front is that this turmoil are all the events that transpired throughout 2018 hit Argentina at the very beginning of the trade cycle. So it's not that we're having this crisis at the end of our 5- or 9-year or 10-year expansion, credit expansion cycle. So companies and individuals are still -- have still low leverage. And that is good news in the sense that we -- while we expect some further deterioration in the ratios and we do not expect these to come -- to be a dramatic thing going forward.

Okay. That's very clear. Just like a follow-up then on the interest rates that you're charging of the loans. I do get it right the fact that you have a bigger balance in stock of loans and that impacts your ability to reprice. But if I were to compare to the interest rates that you're charging on your credit card, how does it compare to 1-year ago and the interest rates on -- let's say, on auto loan [of some] ? Just to get an idea.

This year, it's closer to 90%. Last year, I think, it was closer to -- 90% per annum ATR. And I think last year was something around the 40-something level.

[What notice we did?]

[Credit cards.]

[On numbers.]

Yes, but that's okay, but I think what's the [cushion] value, he's asking. What he is asking, what's the way that we're charging customers [were 2 revolving on the other's rate of return, okay. And yes, it's related to that like I mentioned.] It's 90% nowadays. It used to be close to 50% last year, between 50% to 40% last year.

Okay. So it means then we should continue to see then this loan book continue to reprice upwards. Do you think we're going to get to a level -- when do you think your net interest margin on your loan book starts to expand?

It's moving to stability in early this week. That's when I think -- I don't see -- I mean, we're starting to see rates of the Central Bank notes coming down, but still needs to get into [liabilities rates.] And so probably, if the trend that we're seeing since the beginning of October sustained itself in the next couple of months, I think that that is when we'll start seeing some capturing of higher margins.

Our next question comes from the line of Yuri Fernandes from JP Morgan.

Actually, it's a follow-up on Mario's questions on the net interest income from loans. Can you also give me more color, what you're expecting for the next quarter on this margin? Because as you said, the Leliq has coming -- has been coming down, and I understand, there is a delay for the Badlar, the cost of first-time deposits. But the spread between the Leliq and the Badlar has been narrowing. So what I mean like, the Badlar has been stable, at [lows] 53%, 54%, while the Leliq moved from those 70% to 60 lows. So how that may impact your total NII [by the next quarter] ? Because most of your growth on NII, they came [from secured] and my concern is this can be a pressure. So that's the first question. And the second question is on your coverage. It moved higher and you had been guiding that in the previous call. My question is just where you allocate that that higher provisions? It seems that it was on the credit cards, I saw a big increase on the provision of your credit card and then [if you all did increase that much.] But just to be sure, if that was the case and also if you plan to continue increasing your coverage ratio going on?

Yes. Okay. Let me start with the last question. We have provided guidance to reach a 100% coverage by the end of next year. And if possible, we will try to accelerate that. So that is something that we'll be doing fine tuning in the next quarters to see if we can get faster to a 100% coverage [thereon.] We will try to get faster to that, okay. In terms of where this was allocated, that portion of it was allocated in the Consumer Finance business. And the remainder is [voluntary provisions at the bank level. And then we're seeing -- I mean, we're seeing deterioration into the lines, it's not concentrated on the credit card portfolio in itself. So we don't see a special concentration coming from credit card portfolio. Regarding your second question in terms of margins, the recent dynamic that you have to bear in mind which is explaining the narrowing between the Badlar rate and the Leliq rate, which is -- For this fourth quarter, any increase on time deposits compared to the baseline of the end of the third quarter in time deposits again if all the minimum current reserve requirement can we set up with using Leliqs. So that means that practically if you bid of wanting that additional peso in time deposit, that pesos doesn't have any minimum reserve requirement -- of minimum reserve requirement. So that is explained knowing of the gap in these, which doesn't necessarily mean that we will lose margin because the counterpart to that is that we continue having a -- from what it was the bulk of it price to September was a non-remunerated, now it's a 100% remunerated. So the margins will benefit from that part. And on the other hand, the weight reduces just in much more quickly is weight for the special checking accounts. So we're keeping a spread, I mean, it moves -- the spread remains pretty much fixed but it moves as the absolute levels of the Leliq rate on the way to pay for those deposits. So in terms of margins, the outlook from where we're standing today is that it should be good and probably increasing in the 4Q rather than compressing.

Okay. So margins should increase quarter-over-quarter from these even though like you weighted this pressure because you are being able to managing your special checking account? That that's message.

That's right. So can I just add on top of that, that the time deposit is in the right space.

Our next question comes from the line of Carlos Gomez from HSBC.]

Actually, two brief ones. The first one is, if you can give us an update as to how you will deal with inflation adjustments? We understand that you will have to do inflation-adjusted accounting for your 20 years, contiguous time line and whether you have set out on a particular way to do it? And I know it's very early and it is still November and things change in Argentina, but what do you expect for next year in terms of loan growth and perhaps reduction?

Carlos, Alejandra speaking regarding inflation accounting. You know that even though according IFRS, Argentina fulfills the characteristics of a hyperinflationary environment. Actually, the panorama remains unclear in Argentina because it's important to know that [trajectory] from 2003 is still in effect. Argentine companies are not allowed to file financial statement [affected] by inflation. So this is the situation that we are facing. I would say that according with information that we have up to now under local regulation, we'll keep on presenting our numbers, results, the adjustment of inflation accounting. However, as you mentioned because this reality of Argentina evaluation with our presentation for 20 years in front of you to see, we will -- we have to adjust our numbers. So facing that situation, we have to 2 options. One option is to use -- keep on presenting our financials under U.S. GAAP reconciliation and our planning, the methodology of U.S. GAAP that is different because it implies to apply dollar as a dominating currency. Or to apply IFRS full compliance as SEC requires. We know that in Argentina, we will not apply IFRS compliance in full because we are not applying the IFRS 9. So this is a challenge we post. As we do not present in Argentina IFRS compliance in full, these financials are not compliant with the requirements of SEC. So summing up, we are considering 2 options. We did not make the decisions yet, but the 2 options are either present under -- [to our 20S 2 options;] one, U.S. GAAP reconciliation, including the assessment for inflation accordingly with U.S. GAAP reconciliation or IFRS full compliance. We are now working on that decision. We didn't make it yet.

Can I ask you there, if it's a decision that each company will make individually or is there a discussion to do it collectively for the -- all the listed banks in Argentina?

No, no. Of course, each company has a -- the decision. Of course, we'll have the conversations in the banking association, but anyway, at the end of the day, of course, it's a decision of the company. You need to bear in mind that these decisions have different implications in order to adapt your IT processes, your regulation. So I think and I know that each company have completely different situation in terms of the execution of the adjustment. So the thing is that the legal framework in SEC allows 2 options. So probably one company might prefer one and another prefer other. But anyways, each company has its right to decide and how to present their financial. And on local, up to now, locally, we'll present in local GAAP without inflationary statements.

Carlos, on your second question, as we're still working on the numbers, we are not providing guidance of 2019 yet.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like turn the call back to Ana for closing remarks.

Thank you for joining us today. And we appreciate your interest in our company. We look forward to meeting more of you over the coming months and providing financial and business update next quarter. In the interim, we remain available for answer any questions that you may have. Thank you and enjoy the rest of your day.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.