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Grupo Supervielle S.A. (SUPV 4.87%)
Q3Â 2020 Earnings Call
Nov 20, 2020, 9:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning and welcome to Grupo Supervielle's Third Quarter 2020 Earnings Conference 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 call is being recorded.
At this time, I would like to turn the call over to Ms. Ana Bartesaghi, Treasurer and IRO. Please go ahead.
Ana Bartesaghi -- Treasurer and Investor Relations Officer
Thank you. Good morning, everyone and thank you for joining us today. Speaking during today's call will be Patricio Supervielle, our Chairman and CEO and Mariano Biglia, our Chief Financial Officer. Also joining us are Alejandro Stengel, Second Vice Chairman of the Board and Bank's CEO and Jorge Ramirez, Third Vice Chairman of the Board. Alejandra Naughton, Board Member of several Grupo Supervielle's subsidiaries will also be joining us for today's call. All will be available for the Q&A session.
Note that starting first Q '20, as per Central Bank regulations, we began reporting results applying Hyperinflation Accounting in accordance with IFRS rule IAS 29. For ease of comparability, we have restated 2019 results to reflect the effects of inflation adjustment. Therefore all results in this presentation are adjusted for inflation as of September 30, 2020, unless otherwise noted.
For your convenience, our earnings report filed yesterday after market closed, also includes managerial results in nominal terms, as well as more details on Hyperinflation Accounting.
Before we proceed, I would like to make the following Safe Harbor statement. Today's call will contain forward-looking statements, which are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties, including as a result of the COVID-19 pandemic and I refer you to the forward-looking statements 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.
I would now like to turn the call over to our Chairman, Patricio Supervielle.
Julio Patricio Supervielle -- Chairman of the Board and Chief Executive Officer
Thank you, Ana. Good morning, everyone and thank you for joining us today. If you're following the presentation, please turn to Slide 3, starting with our financial performance. We delivered double-digit return on average equity in real terms this quarter despite the continued challenges presented by COVID-19 restrictions, a recessionary macro environment and a changing regulatory framework.
In this context, given our flexibility, we continue to balance the profitability risk equation, while managing the credit cycle, achieving satisfactory net financial margins. Despite lower loan and deposit growth, note that average peso deposits and assets increased sequentially. We have made additional COVID-19 anticipatory provisions this quarter that increase coverage following a further in-depth top-down analysis of certain industries that we believe could be highly impacted by the pandemic, given the current outlook. We also continue to review our expected loss models and are closely monitoring our loan book and risk models to adjust accordingly as the situation evolves. We kept our expenses below inflation, a result of strict cost controls achieving 90 basis points sequential improvement in the efficiency ratio to 61%. Finally, with strong liquidity and our Tier 1 expanding to 14% on an increased capital base, we are well-positioned to continue to navigate this complex and rapidly changing environment.
Turning to our strategic initiatives. We're advancing on different fronts to better position the company to rapidly seize growth opportunities, namely our digital transformation, the launch of IUDU and evolving our service model in our branch network. Now let's take a closer look at our digital transformation on Slide 4. In this context, clients continue to adapt digital across our business. To give you a flavor of this -- of how this is evolving, I'll highlight some of the metrics on this slide. Transactions at non-automated bank tellers consolidated at historical low levels of 7% despite the gradual relaxation in COVID-19-related measures and significantly below the 19% transactions observed in 4Q '19. 76% of our total time deposits in October were made through our digital channels, up from 70% in July and only 47% in January.
SMEs also continued to rapidly embrace the digital adoption since July with e-checks nearly doubling while e-factoring increased by 60% during the same period. Finally, our online broker InvertirOnline continues to deliver robust growth with new accounts up over 150% between February and October and transactions more than doubling.
On Page 5, we outline our brand transformation initiative. We continue to evolve our branch network by introducing additional technology to enhance the customer experience, extend service hours and productivity. This includes full service formats and increasing self-service areas in other branches, while also broadening our service offerings to better reach SMEs. With this initiative, we aim at increasing the number of customers operating through 24-hours self-service lobbies, improve NPS, and faster digital customer acquisition.
Please turn to Slide 6. As announced yesterday, we have rebranded our consumer finance service subsidiary to IUDU and launched a new digital banking services platform. This transformation aims to enhance customer experience, capture deposits, broaden our offering to address additional client needs by plugging into the Supervielle ecosystem, while driving efficiency.
In this first iteration, the App allows customers to obtain personal loans, credit cards and car loans. In the second phase, during the first half 2021, our consumer finance business will undergo a fundamental change as IUDU restarts taking retail deposits. IUDU will also evolve in segment acquisitions from its traditional middle-to-lower income segments to a multi-segment approach. We're also plugging in the Supervielle ecosystem into the IUDU digital platform, starting with IUDU Pago, mobile points-of-sales, e-wallet, prepaid cards and e-bills. And the second stage will include bank insurance, foreign exchange and investment platforms. Finally, on the partnership front, we will be rebranding the Walmart partnership card. At the later stage, we plan to add multi partnerships and correspondents.
As you can see on Slide 7, the Argentine economy continues to show some signs of recovery since the sharp drop in industrial production recorded last March and April. Industrial production posted a sharp increase in September, extending the rebound started in May and driving annual performance into positive territory as social distancing measures continue to relax gradually. It was further supported by a number of fiscal monetary and good stimulus measures.
We're also seeing higher prices for agricultural commodities strengthening the trade balance. In turn, domestic demand is expected to remain weak as labor conditions deteriorate further and services dependent on close contact continue to struggle, with consensus expectations calling for an 11.6% contraction in GDP for 2020. October inflation figures deteriorated, while the gap between the blue chip rate and the official exchange rate continue to widen, resulting in the Central Bank raising one-day repo rates from 19% in early October to 32% through November.
Looking at 2021, we expect a recovery in GDP of around 5% following the sharp contraction this year, along with the resumption of IMF negotiations and the series of government measures trending toward some fiscal restraint for 2021.
Let me now turn the call to Mariano Biglia, our CFO. Please, Mariano, go ahead.
Mariano Biglia -- Chief Financial Officer
Thank you, Patricio. Good day, everyone. Please turn to Slide 8 total. Total loans declined nearly 5% sequentially on weak overall demand, coupled with our cautious approach to lending in the current uncertain environment. Peso loans were relatively stable, while dollar denominated loans in original currency contracted following the overall industry trend observed in Argentina over the last year. Preferential rate loans to provide relief in the pandemic accounted for 10% of our total loan book at quarter end. This includes nearly ARS10 billion at a rate of 24% granted to SMEs, of which ARS4 billion were in short-term factoring transactions.
Please turn to Slide 9. Total funding slightly fell over 3% sequentially with total peso deposits declining below 2%, while dollar deposits in original currency were down almost 10% over the same period. This was mainly driven by higher seasonal balances in June, resulting from the 13th salary together with the drop in precautionary balances held during the first months of the lockdown as social distancing measures started to be gradually lifted this quarter. Despite the lower deposit balances at quarter end, note that average balances of peso deposits increased 10% quarter-on-quarter. The total loans to deposits ratio declined 110 bps to 61% in the quarter with the peso loan to deposit ratio remaining relatively stable at 57%. Importantly, we maintained strong liquidity levels both in pesos and dollars.
Moving to the P&L on Slide 10. Net financial income was relatively stable quarter-on-quarter at nearly ARS10 billion. Total NIM however contracted 230 basis points sequentially to 21.2%. This was mainly due to higher cost of funds resulting from the increase in market interest rates and the floor rate on time deposits which reduces spread. Peso loan NIMs were down a bit more, 330 basis points, reflecting higher cost of funds, along with increased volumes of loans granted to SMEs at a 24% preferential interest rate.
Now on to asset quality on Slide 11. With our conservative approach to risk management, we increased provisions by nearly 12% sequentially to ARS2.7 billion this quarter as we continued to revise our expected loss model. This included ARS1 billion in COVID-specific provisions, which amounted to ARS2.5 billion on an accumulated basis. Note that the ratio of provisions to our total loan book increased by 40 basis points sequentially to 8.1% in September. On the top right side of the slide, you can see the breakdown of the trend in the provisioning ratio by key customer segment. We observed a sequential decline in NPL ratios, mainly reflecting the write-off of commercial loan that was delinquent since the third quarter of last year. In turn, coverage increased to 181% from 127% in second quarter, mostly reflecting the anticipatory COVID-19 provisions, I just mentioned.
Overall, the NPL and coverage ratios continue to benefit from Central Bank regulatory easing on debtor classification amid the pandemic. NPL for the quarter may have also benefited from the Central Bank relief program that allows debtors to defer their loan payments maturing until December 2020. Excluding regulatory easing, coverage increased to 158% in September from 108% in June and 83% in December as we continue to refine our models and conduct top-down industry analysis as the lockdown was further extended. As usual, we will continue to closely monitor events as they could potentially impact our loan portfolio and risk models, and make the appropriate adjustments.
As you can see on Slide 12, we have a well-diversified loan book with minimal exposure to higher risk sub-segments such as travel and tourism, entertainment and restaurants. Agribusiness, food and beverage and wine, which make up a larger portion of our portfolio are performing well in this context. We are also adding new clients among value chains of large corporates in Argentina. Only 13% of our portfolio is concentrated in higher-risk sectors, mainly construction and, to a lesser extent, in retail and transportation with around 60% of these loans guaranteed.
As shown on the slide, nearly half of our commercial loan portfolio remains collateralized with collaterals on non-performing commercial loans increasing to 78%. Similarly, loans to lower risk payroll and pension clients accounted for 73% of our total loans to individuals.
Now please turn to Slide 13 for some brief remarks on our views for the near term. While we are still suspending guidance, given the limited visibility ahead, the perspectives outlined on this slide present our overall views on the key drivers of our business for the remainder of the year and into early 2021. An expected mild rebound in economic activity should drive loan growth above inflation with deposit growth supported by foreign exchange market restrictions and the regulatory floor on interest rate paid to time deposits. If the challenging macro environment continues, asset quality may further deteriorate, particularly in the sectors we outlined earlier, together with the fact that grace periods are due in January on the risk added loans. We expect our prudent approach to lending in this environment, together with the strength of our portfolio, should help to mitigate the impact of a potential worsening environment.
At the same time, we expect NIM to remain pressured by higher cost of funds and lower yields on loans, while fee income is anticipated to remain impacted by regulations prohibiting repricing until February, along with caps in place for next year, in addition to a weak economic environment.
On the expense front, salaries are anticipated to grow at or below inflation, while we continue to move ahead on accelerating our digital transformation. Finally, capital and liquidity are expected to remain at adequate level, supporting long-term sustainability.
This concludes our initial remarks. Operator, now please open the call for questions.
Questions and Answers:
Operator
[Operator Instructions] Our first question comes from the line of Ernesto Gabilondo with Bank of America. You may proceed with your question.
Ernesto Gabilondo -- Bank of America -- Analyst
Hi, good morning, Patricio, Mariano, Alejandra, Jorge, Ana, and good morning everyone. Thanks for the opportunity and for the presentation. My first question is on NPLs. After ending the relief programs, when do you expect the peak of NPLs? And what should be the level of that NPL ratio next year? Then my second question is on the deferred portfolio. Can you elaborate what is the percentage of clients that have resumed payments during September and October? And what is the percentage of clients that will resume payments in the next months? And so far, how has been the behavior of those payments and what is the percentage of delayed clients? And just a last question, can you provide any updates regarding regulation? You mentioned something about caps. So anything related to that will be helpful. Thank you.
Julio Patricio Supervielle -- Chairman of the Board and Chief Executive Officer
Thank you very much. I would like to ask Mariano to answer those questions.
Mariano Biglia -- Chief Financial Officer
Sure. Thank you, Patricio. Hello, Ernesto. Regarding your first question regarding NPLs, we've seen a decline so far partially explained by the write-off of our commercial loan, but also because the relief programs of the Central Bank are still in place. The deferral of loans, which is an option for debtors, is still in place for loans until December as it has been extended. It was extended two times, the last one lasting until December this year. And for credit cards, there was the deferral of balances that were due in April. These deferrals are -- have a three-month grace period and then they start paying ninth consecutive instalments at a 43% interest rate. And then there was a second deferral for credit cards in September. So credit cards started paying in -- after this grace period, started paying in August. Then there was a new deferral. So we still have very little information on the behavior of deferred loans because we only have a couple of months of the first deferral of credit card, with the second deferral starting paying in January. And all of the deferral for loans, both individuals and corporations, will start also paying in January.
So this also explains the decrease in the NPL and it may take somewhere between the fourth quarter and the first half of the year when these loans start paying or showing some delay. We are building up provisions in advance of this event using our expected loss model. So that's why we increased our coverage to 181%, which include a 32% provision in ratio for these deferred loans. So we'll still have some time ahead to see what the finally NPL will be, but we expect to peak somewhere during the first half of next year.
And that is related also with your second question relating the behavior of the deferred portfolio. But it's important also to highlight that this was an option for customers. So we don't expect very high past-due loans after they start being due. Nonetheless, we build up these provisions just in anticipation.
Julio Patricio Supervielle -- Chairman of the Board and Chief Executive Officer
Let me -- sorry, I would like to complement on Mariano's answer. I'm sorry to interrupt you. Also the -- I think it's important to consider the overall risk model we have or the risk situation we have in -- for individuals business -- the individual business, because we have 73% of our loans for individuals at Banco Supervielle that are provided to payroll and pension clients. So it's a cash flow-based lending and I think this is an important mitigating factor when we navigate an uncertain scenario. Sorry. Please go ahead with your -- I think you wanted to ask something more.
Ernesto Gabilondo -- Bank of America -- Analyst
Yes. No. Thank you, Patricio and Mariano. So, just regarding the NPL ratio, as you mentioned, the write-offs and relief programs have helped the NPL ratio to be low. But considering that most of the clients will resume payments in December, I would like to know when do you have past-due loans? When you have past 30 days, 90 days? Just to understand when we can start to see the NPLs going up. And we have seen NPL ratio at levels of 6%, 7%. Do you think that could be the level that could reach next year? And I know that you have already build, in anticipation, provisions to these NPL cycle, but just want to understand when will be the peak of NPLs and how the loans are past-due in your case.
Julio Patricio Supervielle -- Chairman of the Board and Chief Executive Officer
Mariano, do you want to?
Mariano Biglia -- Chief Financial Officer
Yes, let me add. As I mentioned before, the -- this part of the relief program is still in place. So we are not having much new past-due loans. We only have loans that were past-due before the relief program. So they may continue to have more days past-due, but this is only a small part of our portfolio. So when we start to see the maturities of these new instalments in credit cards, but also when loans resume paying, all instalments of loans that haven't been paying this month will be added as a final instalment at the end of the loan. So in January, they will start paying the instalment of the original schedule. And the peak, it's still difficult to estimate, but it could be in the levels we had at the beginning of the year, but then decreasing. We don't expect that high NPLs at the end of 2021 certainly.
Ernesto Gabilondo -- Bank of America -- Analyst
Thank you, perfect. Thank you. And then anything related to updates on regulation?
Julio Patricio Supervielle -- Chairman of the Board and Chief Executive Officer
Can you repeat that? To update on what?
Ernesto Gabilondo -- Bank of America -- Analyst
In regulation. You mentioned something about caps on interest rate. So anything you have as an update regarding regulation will be helpful.
Julio Patricio Supervielle -- Chairman of the Board and Chief Executive Officer
Yes, Alejandro, please, you want to answer that?
Emerico Alejandro Stengel -- Second Vice Chairman of the Board and Chief Executive Officer of Banco Supervielle
We expect the industry to -- the Central Bank to keep strong and heavy regulation and we see SMEs earning in as much as the -- there is an economic rebound and recovery. But we think that what we've seen so far in terms of floors on deposit rates, caps on commissions, subsidized credits, will continue to be the norm. Maybe, Mariano, you want to add on that. But I think that's basically the picture going into 2021.
Mariano Biglia -- Chief Financial Officer
Yes, exactly, Alejandro. Right now we have the floor on time deposit interest rates, we have caps on commissions and we have mandatory loans at -- mandatory lines at preferential interest rates and most of them are at the 24% interest rate. Now there are some new lines between 30% and 35% interest rates. And we expect that to continue for a while until we'll see some rebound in the economy. So far, we've seen some offsetting of these measures with lower minimum cash reserves requirement but caps and floors on commissions or interest rates may stay still for a while. That's my opinion.
Ernesto Gabilondo -- Bank of America -- Analyst
Okay, perfect. Thank you so much.
Julio Patricio Supervielle -- Chairman of the Board and Chief Executive Officer
[Speech Overlap] Sorry, I would like to -- sorry, I would like to add also that the Central Bank issued a regulation caps on fees for next -- beginning of next year. And this is -- that's another important piece of regulation and they set up a maximum. We can increase our fees 18% next in February next year. That's another cap, we have at this moment.
Ana Bartesaghi -- Treasurer and Investor Relations Officer
Yes. Ernesto just a small comment. In our press release after -- in page 57 in a two or three-page there, you'll have a whole set of all the regulations that are now and have -- are in place now and affect each of our P&L line. So I think you have there in a two-page report that's easy to read, a summary of regulations impacting the balance sheet.
Ernesto Gabilondo -- Bank of America -- Analyst
Perfect. Thank you, Ana.
Operator
Our next question comes from the line of Rodrigo Nistor with AR Partners. You may proceed with your question.
Rodrigo Nistor -- AR Partners -- Analyst
Hi, good morning, and thank you for taking my question. And once again congratulations on the level of detail in your disclosures. That's much appreciated. So my question, first -- my first question is regarding loan and deposit loan for 2021. What are you expecting for next year? And in terms of the mix, where growth should come from? And then more high-level question, maybe we expect a spike in inflation and a sharper peso depreciation in the short term. So my question is how banks and, in particular Supervielle can protect from that scenario? What those banks have? And are you really acting to minimize the effect of that scenario? Thank you.
Julio Patricio Supervielle -- Chairman of the Board and Chief Executive Officer
All right. Let me answer you, first of all, the first -- the last question on inflation. First of all, well, we have a hedge. Our capital is being hedged against inflation, and we are 100% ahead. And in terms of, we have 50% of our equity in real estate and on a non -- all are non-monetary assets. Also, we have a portfolio which is equivalent to 40% of equity in mortgage and commercial loans that adjust by UVA and also we have 10% of equity would be reinvested in treasury bonds that adjust by CER. In addition to that, we also have some coverage against the evaluation in dollars and dollar-linked bonds that represent approximately 22% of our equity. But in our overall picture, the -- for inflation, it's never good news for banks. We -- it is key to move fast and we have to adapt to -- in case inflation arises, to adapt to a rapidly changing scenario.
And we have a very seasoned -- very highly seasoned team doing that, and particularly when the moving parts of Argentine liabilities in order to preserve good spreads or high margins, let's say. We would -- in high inflation, we would focus on funding -- on the funding side, developing cash management services, attracting CASA deposits. We will also work on the -- for individuals for -- in credit cards and personal loans, but reducing -- in the case of loans, generally speaking, we would reduce the tenures also because it's important in inflation to have the flexibility to move, and also we would -- for instance, we're working in factoring. Regarding your first question, I would like to have Mariano answer it. I understand it's a loans and deposits expectations for 2021. Do you want to answer that, Mariano?
Mariano Biglia -- Chief Financial Officer
Sure, Patricio. Hello, Rodrigo. Well, regarding loans, we think we are going to end this year 2020 with a growth below inflation, but we see some recovery for 2021, growing above inflation. Our estimates for inflation are 36% this year and 47% next year. So we expect to see some rebound of the economy and also some rebound of credit demand. We are starting to see something in personal loans, and we expect that to continue in 2021 with the commercial loans.
Regarding the proceeds, they have been increased widely above inflation this year and they will finish the year with a very high increase as liquidity has
Thus increased in companies and individuals. And we've seen a very high increase in all types of deposits, site deposits and time deposits, both from individuals, corporations and institutional. And for next year, the growth will be softer, but still also above inflation.
Rodrigo Nistor -- AR Partners -- Analyst
That was really clear. Thank you so much.
Emerico Alejandro Stengel -- Second Vice Chairman of the Board and Chief Executive Officer of Banco Supervielle
Maybe, I would like to add on a little bit as to where the growth would be coming from, Rodrigo. Good morning, this is Alejandro.
Rodrigo Nistor -- AR Partners -- Analyst
Good morning.
Emerico Alejandro Stengel -- Second Vice Chairman of the Board and Chief Executive Officer of Banco Supervielle
The overall consensus right now is that the economy should be rebounding at 5% GDP next year. And when you look at the impact that COVID has had, basically the supply side shock, it's over this time basically depleted inventories. So most sectors will actually -- will be working and creating increasing activity levels to replenish inventories. In particular, export sectors, also, they will be picking up, particularly the agribusiness sector. As you know, China is one of the few countries that has grown, has had net growth during 2020, and is positioned to grow at about 8% in 2021, and they are a big trading partner of our country. Therefore Agro commodities, in particular, as well as other sectors that we are very well-positioned in, like the wine industry and the citrus industry are probably likely to be significant drivers of growth and help the economy pick up.
Rodrigo Nistor -- AR Partners -- Analyst
Really interesting. Thank you.
Operator
Our next question comes from the line of Yuri Fernandes with J.P. Morgan. You may proceed with your question.
Yuri Fernandes -- J.P. Morgan -- Analyst
Hi, Ana, Alejandro, Jorge, and Mariano, Patricio, good morning, everyone. I have a first question regarding margins. What is the outlook here? I guess you provided this off the guidance that margins should be under pressure. But how big should be this pressure? Should we see additional 200 bps contraction in the coming quarter? Like, what is the view here? My concern is regarding the minimal remuneration rate. I guess now it's 37%, and for me, if you have to pay that for the time deposits, it makes it very hard to make money on the spread on deposits, right, because you have the reserve requirements, you need to allocate 5% of time deposits supportive [Phonetic]. So my question is, how big should be the margin pressure, considering these, considering the Stage 3 loans that should keep increasing as we start to see those reliefs ending? So what's the outlook here for margins?
My second question is regarding dividends. If you can provide us an update, I know there are regulations regarding the bank. The bank cannot pay dividend but you have other subsidiaries. So if you can provide us some color here about dividends, if you have an idea if you should pay next year. And also how you do that for the ADR holders? This was a topic I was discussing with Ana, but I just would like to know like what is there to look for dividends and what you have to look for dividends for the ADRs. Thank you very much.
Julio Patricio Supervielle -- Chairman of the Board and Chief Executive Officer
Okay. Thank you, Yuri. I would, first of all, give you a general idea on margins and then pass it on to Mariano. Our franchise has -- is working particularly with high-margin clients. That has been a case in -- and this is the characteristic of our franchise. When there is -- in a situation, when there is loan growth, the demand that is -- that starts to rebound, eventually, with economic rebound next year. Even with a pressure on margins, which we expect -- we do expect the pressure on NIMs, we believe that we will have some shield that we have some -- we will be able to defend these NIMs because, in our case, we will -- we'll continue working with providing loans with high-margin clients and reducing maybe Leliqs, whereas other banks, they would reduce Leliqs, but they will work with the clients that provide lower NIMs. So in this sense, we are -- typically in a pressure of NIMs, we are -- we have this type of protection. But I would like to -- for more specific answer, to have Mariano, please complement.
Mariano Biglia -- Chief Financial Officer
Yes, Patricio. Good morning, Yuri. Well, effectively regarding NIMs cost of fund is rising with floors for time deposit interest rates, so we'll see some -- definitely some pressure in the fourth quarter. On the other hand, the increase in interest rates due to expected higher inflation gives also more profitability on site deposits and in all of the deposit sides of our balance sheet. So we still can sustain another great net interest margin level, although, lower than, for sure, than the second quarter, where we see a big margin because of all the liquidity in the market, which gave us increased site deposits.
Then for the longer term, as Patricio explained, we will substitute lower-yield assets with higher-yield assets such as loans to personal loans and loans to SMEs. So we can -- we will be able to sustain net interest margins even when interest rates decline. And at the same time, that should be in a context where cost of risk will be also declining. So now we have very high interest rate -- net interest rate margins, but a high cost of risk because we are creating anticipatory provisions. For the longer term, we might see some contractions in NIM, but at the same time, a lower cost of risk.
Yuri Fernandes -- J.P. Morgan -- Analyst
That's super clear. Can you remind us what is your Stage 3 loans nowadays as a percentage of your portfolio and how this should evolve? My point is, for the next year, I guess, today, you are recognizing NII from the loans you relief, right, like those credit cards that they are likely rescheduling the loans for the next year. You are recognizing NII for those loans. So I think there is a relationship between Stage 3 and those loan rates. Can you just provide more color here on those relief because that could be a headwind for the next year too, right?
Mariano Biglia -- Chief Financial Officer
We are accruing the interest rate at 43% interest rate in credit card rescheduled and accruing the same loan interest rate for rescheduled instalments of loans to individuals or corporations. So next year, we'll continue to accrue that interest rate as long as the loans and credit cards mature and if they enter Stage 3, then we stop accruing interest or -- but at that same point, any unpaid instalments of these loans or credit cards have only a time between they stop accruing interest and they are eventually or collected or written off. So I don't see a very high pressure to net interest margin on that side.
Yuri Fernandes -- J.P. Morgan -- Analyst
Super clear. And regarding dividends?
Julio Patricio Supervielle -- Chairman of the Board and Chief Executive Officer
Mariano, do you want to add to -- to answer the question on dividends also? Please.
Mariano Biglia -- Chief Financial Officer
Well, regarding dividends, in fact, they're still in place. And authorization required from the Central Bank to pay dividends from the bank, that is for us to receive dividends from the bank at the holding company. But we have other sources of dividends from the insurance company, the asset management company and the other subsidiaries, which are not subject to Central Bank regulations on dividends. Also, at least during this year, we expect to reinvest profits in the -- at the bank level, regardless of Central Bank regulation to maintain our capital ratio.
But if we decide to pay any dividends at the central level [Phonetic], we have that source of liquidity from the other subsidiaries which, in fact, that's what happened in past years. All dividends that we paid from the holding company to investors have a source of funding from dividends of the other subsidiaries paid to the holding company. We never received dividends from the bank in the last year. So that limitation -- that doesn't make really a point for us.
Yuri Fernandes -- J.P. Morgan -- Analyst
And for the ADRs? Can you really [Indecipherable] or you need to use the blue swap?
Ana Bartesaghi -- Treasurer and Investor Relations Officer
I can comment on that if you want, Yuri. We -- if we want the access to the market, having the official exchange rate, we need to request authorization from the Central Bank. This year we requested that authorization, we didn't get it because we know that companies in general, they are not getting that -- those authorizations. So we paid any way and the same did many other companies in Argentina as it is through the blue chip swap rate. And we will also, with the -- in 2020 dividend, we gave all the shareholders, not only the ADR holders, the option to collect the dividends in dollars or in pesos. But in the -- if they accepted or if their option was in dollars, also that went through a blue chip swap rate. But that's the way we did it this year, other companies as well did that, because we are not getting any authorization to access the official mark -- market, I'm sorry.
Yuri Fernandes -- J.P. Morgan -- Analyst
Super clear, Ana. Thank you very much everybody and again congratulations on the disclosure you have, best-in-class disclosure in Argentina. Thank you.
Operator
[Operator Instructions] Our next question comes from the line of Alejandra Aranda with Itau. You may proceed with your question.
Alejandra Aranda -- Itau BBA -- Analyst
Hi, good morning. My question is, could you explain a little bit what happened with taxes during this quarter? And what would be the effective normalized tax rate for next year that we should be expecting?
Julio Patricio Supervielle -- Chairman of the Board and Chief Executive Officer
All right. I will defer this question of taxes to Mariano. Thank you.
Mariano Biglia -- Chief Financial Officer
Yes, good morning, Alejandra. Effective tax rate, as you could see, was very low in the third quarter as we took some special income tax deductions arising from guarantees extended to SMEs. And in addition, some differences derived from the adoption of inflation adjustment reduced our deferred tax liabilities and hence reduced also the income tax expense. So looking forward, we expect to end the year 2020 -- the full year, with an effective tax rate maybe similar to what we can see in the nine-months period, which is lower than 20%. But for 2021, we expect it to be closer to the statutory tax rate, which is right now, 30%.
Alejandra Aranda -- Itau BBA -- Analyst
Okay, thank you. And just a brief follow-up on coverage that you answered before. Do you have a number where you feel comfortable with?
Julio Patricio Supervielle -- Chairman of the Board and Chief Executive Officer
We are constantly assessing our risk models and this is -- there is a constantly -- constant monitoring of the risk we have on our loans. So at this stage, we are -- our provisions -- we are fully comfortable with the provisions we have. But, of course, this, in the future, will depend on the evolution of the economy and of our clients and it will evolve. It might happen that we might continue to building -- to build provisions in fourth quarter and first half 2021. I don't know, Mariano, if you want to add on that. Maybe talk about the way the changes that have occurred in the expected loss models.
Mariano Biglia -- Chief Financial Officer
Yes, right now, we are comfortable with our coverage ratio at 180%. We updated our expected loss models constantly, we updated the macroeconomic variables that we use as an input. We did so in the second quarter, and then we update the portfolio as of each quarter-end, and we'll again revise the model as in December. There's not a fixed number where we should reach or where we should stay. That will depend on many factors. Right now, the coverage ratio is also somehow distorted by two factors, which are the loans and credit cards that are being deferred and the adding of 60 days to each debtor classification, which affects our NPLs.
So we also look at our total provision in ratio, which is right now at 8.1%. That's definitely a high number. We expect that, at some point in 2021, to decrease, but it will be evolving, because we build up provisions, as we need. We might start to see some new NPLs in the fourth quarter or in early 2021 when deferred loans starts maturing. So at the end of the day, coverage, whether measured by total provision ratio or coverage on NPLs will be evolving with this provisions that we build up, new NPLs and also write-offs that we need to do as we did this quarter.
Alejandra Aranda -- Itau BBA -- Analyst
Okay, thank you very much.
Mariano Biglia -- Chief Financial Officer
Thank you.
Operator
Our next question comes from the line of Carlos Gomez with HSBC. You may proceed with your question.
Carlos Gomez -- HSBC -- Analyst
Hello and good morning. Let me also congratulate you on the results and on the disclosure, which my colleagues have said is the best in the system and we hope that everybody emulates it. So, thank you. Thank you very much for that. Two questions, first, regarding the protection of capital that you have with inflation-linked assets or instruments. You mentioned real estate at 50%, CER at 20% and I think there were another two elements. Correct me if I'm wrong. This is new, right? You did not used to have such exposure to real estate. When did you accumulate it and how effective do you think that they will be protecting your balance sheet going forward?
Second, you have a large business of lending to retirees and double sector workers. We see that real pensions are going to go down because inflation adjustments has been removed and is now more discretionary. Will that eventually have an effect on your asset quality or your total volume of business? Thank you very much.
Julio Patricio Supervielle -- Chairman of the Board and Chief Executive Officer
Mariano, you want to answer that?
Mariano Biglia -- Chief Financial Officer
Yes. Hello, good morning, Carlos. Let me answer your first question regarding the inflation protection. We have a 50% hedge with real estate and other non-monetary assets, that's a total of the non-monetary assets part of our balance sheet. And approximately half of that or between 25% and 27% of our net equity is real estate. We had these real estate, which are some owned branches, where we own the building, and some investment property and we owned almost the same assets since last year. We may have added some assets, but not very -- not material. The main change with 2019 is that now we are -- we have adopted inflation adjustment. So maybe real estate assets were very undervalued in our books, because they were at historical costs in our books in 2019, and and now they have been updated for inflation.
We do revaluate now our investments in real estate. But we are also adding inflation. And then we have the other 50% of our equity, which is hedged with UVAs and investment in bonds also that adjust for inflation. UVA loans also come mainly from last year and many of them from 2017 when we rented a mortgage loan and what we did increase during this year was our position in inflation-adjusted bonds, and then in dollar-linked bonds.
Emerico Alejandro Stengel -- Second Vice Chairman of the Board and Chief Executive Officer of Banco Supervielle
Regarding your second question, Carlos, this is Alejandro speaking, good morning. When we look at the behavior of our retiree franchise, we find it actually to be one of the anchors of our performance. In relative terms, in this context, their income levels have not had as much volatility as the rest of the economy. Their income has been relatively stable. And this has proved to be a significant strength. Going forward, the fact that their income will be indexed with different criteria and inflation, it might have some effect, and we've seen a little bit of that in terms of the overall site deposits that they leave.
But we see there's still a significant appetite for credit and personal loans. And in terms of the asset quality, we are very careful in those segments to maintain a good coverage and the relationship of the size of each instalment to the overall income and that has proved to be very effective in containing NPLs even through recessions at this. So we expect that protection to be effective toward the end of this year, and as the economy picks up next year, we think it also will continue to work.
Alejandra Aranda -- Itau BBA -- Analyst
Can I ask are the loans fixed rate or variable rate?
Emerico Alejandro Stengel -- Second Vice Chairman of the Board and Chief Executive Officer of Banco Supervielle
No. They are fixed rate.
Carlos Gomez -- HSBC -- Analyst
Thank you. Thank you so much.
Emerico Alejandro Stengel -- Second Vice Chairman of the Board and Chief Executive Officer of Banco Supervielle
Mainly personal loans, fixed rate. Yeah.
Carlos Gomez -- HSBC -- Analyst
Thank you.
Operator
Our next question comes from the line of Juan Recalde with Scotiabank. You may proceed with your question.
Juan Recalde -- Scotiabank -- Analyst
Hi, good morning. Thank you for taking my question. My question is related to the asset management business. So we have seen a strong growth in the new accounts and transactions in InvertirOnline. In other markets in the region, we have seen the asset management industry grow significantly. So I wanted to ask what's the -- what's your outlook for the asset management industry in Argentina and in your business in particular? And how much -- what part of the total earnings of the Group do you think that may come from that business? Thank you.
Julio Patricio Supervielle -- Chairman of the Board and Chief Executive Officer
All right. The -- well, InvertirOnline has been -- has benefited from, I think, the same phenomena that is occurring in other parts of the world in terms of a rapid -- a very rapid expansion of trading during the pandemic. We positioned last year in order to become, let's say, the most relevant digital player in Argentina and by providing, let's say, simple access to investment possibilities. And among these, we did some several strategic moves. But in terms of there were reductions of commissions, but one particular move was also remunerating the ideal average balances that were on -- in the accounts, which we are, in fact, the only brokerage house that do this. So these major -- these strategic initiatives have produced that the company today is -- almost have 200,000 clients starting from 17,000 clients last year.
But regarding the, let's say, this -- the context of the brokerage business and asset management business in Argentina, it's a difficult context. I mean, because basically savings are not there, because people don't like to have pesos and they want to turn it into dollars. And so that's the fact. And unfortunately, and as long as this continues, we will have to live with that. So basically what this platform is helping people eventually to defend the purchasing power of their savings and it's not -- in terms of revenues -- your question in terms of revenues for the company, for the Grupo Supervielle, I don't know, maybe Mariano want to answer that, because it's a profitable company, but still it is small. But please, Mariano, you can answer that question.
Mariano Biglia -- Chief Financial Officer
Yes. It's -- between the brokerage business and the asset management company, we have approximately 15% of our revenues. The brokerage company is still a small company, but growing very fast, while the asset management company is more mature and dependent more on the growth of the bank customers and balance sheet. But that's approximately the percentage of those businesses in the group.
Juan Recalde -- Scotiabank -- Analyst
Very clear. Thank you.
Operator
[Operator Instructions] Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn this call back over to Ms. Ana Bartesaghi for closing remarks.
Ana Bartesaghi -- Treasurer and Investor Relations Officer
Thank you for joining us today. 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. Thank you and stay safe and healthy.
Operator
[Operator Closing Remarks]
Duration: 65 minutes
Call participants:
Ana Bartesaghi -- Treasurer and Investor Relations Officer
Julio Patricio Supervielle -- Chairman of the Board and Chief Executive Officer
Mariano Biglia -- Chief Financial Officer
Emerico Alejandro Stengel -- Second Vice Chairman of the Board and Chief Executive Officer of Banco Supervielle
Ernesto Gabilondo -- Bank of America -- Analyst
Rodrigo Nistor -- AR Partners -- Analyst
Yuri Fernandes -- J.P. Morgan -- Analyst
Alejandra Aranda -- Itau BBA -- Analyst
Carlos Gomez -- HSBC -- Analyst
Juan Recalde -- Scotiabank -- Analyst
