Grupo Supervielle S.A. (NYSE:SUPV) Q4 2021 Earnings Conference Call March 2, 2022 7:00 PM ET
Ana Bartesaghi – Treasurer & Investor Relations Officer
Mariano Biglia – Chief Financial Officer
Patricio Supervielle – Chairman & Chief Executive Officer
Alejandro Stengel – Second Vice Chairman of Board & Vice Chief Executive Officer
Conference Call Participants
Ernesto Gabilondo – Bank of America
Juan Recalde – Scotiabank
Yuri Fernandes – JPMorgan
Alejandra Aranda – Itau
Good morning, everyone, and welcome to the Grupo Supervielle Fourth Quarter 2021 Earnings Call. This is Ana Bartesaghi, Treasurer and IRO. A slide presentation will accompany today’s webinar, which is available in the Investors section of Grupo Supervielle’s Investor Relations website. Today’s conference call is being recorded. As a reminder, all participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. [Operator Instructions]
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 Vice CEO; and Oscar Ramírez, First Vice Chairman of the Board; Alejandra Naughton, Board Member of several Grupo Supervielle subsidiaries will also be joining us for today’s call. All will be available for the Q&A session.
As a reminder, today’s call will contain forward-looking statements, which are based on management 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.
Mariano Biglia, our CFO, will start the call discussing our performance for the quarter and our near-term outlook. Mr. Patricio Supervielle, our Chairman and CEO, will follow with an update on our mid-term strategy initiatives.
Thank you, Ana. Good morning, everyone. Thank you for joining us today. Please turn to slide four of our earnings presentation. Economic activity continuing to grow at our pre-pandemic levels, market conditions made significant macro and regulatory changes, including high inflation, negative real interest rates, change in currency and industry loans at historical lows.
Productivity in the quarter was negatively impacted by one-time personal expenses related to healthcare to patients, together with losses in Q2, reflecting inflation and higher loan loss provisions. Profound regulations and higher taxes also impacted performance, resulted in an attributable net loss of nearly AR$607 million where we posted regular profitability, when excluding non-recurring personal charges.
In relation of our strategy to capture operating efficiencies has allowed us to reduce personnel expenses. Through the non-recurring, early recurring charges, our efficiency ratio improved 170 basis points sequentially, although it remains highly impacted, a lower revenue base.
Also, we retained strong liquidity and an adequate capital base, closing the year with a Tier 1 ratio of 12.7%, aboard our strategic transformation initiatives and long term sustainability.
We remain high inflation, real estate investments or it is on sovereign forms. The ESG form in line with our goal to more broadly integrate ESG criteria in our strategic planning, we’ll begin reporting under the adequate framework in our 2021 sustainability report expanding on our current re-reporting. Sustaining for our commitment to long-term value creation, Atilio will discuss shortly how we are advancing on our valuation strategy to drive ROE improvement and related goals for 2022.
Now please turn to Slide 5. In terms of lending, we recover market share year-over-year, even while our loan book posted the low-single-digit contraction remaining at historical low, currently loan were up just over 2% year-on-year, compensating the decline in US dollar denominated loans.
Now moving on to funding on Slide 6. Liquidity level remained strong both in pesos and dollars with a loan-to-deposit ratio at nearly 56%. Purpose of deposits increased 5% sequentially as we continue to expand our sharing inside deposits for both retail and corporate customers. Total peso deposits however, were down 5% as we exercise liquidity management a lower institutional funding.
Turning to slide 7. Total [indiscernible] expanded 140 basis points sequentially to just over 18%. This was driven mainly by a 100 basis points reduction in cost of funds, resulting from a better funding mix. During the quarter, we continue to attract low and no interest bearing personal deposits by reducing institutional funding.
Inflation also drove higher personal need in turn personal loan portfolio NIM declined 30 basis points. The decrease in cost of funds could not upset 120 basis points sequential decline in the average yield of personal loans, as lower interest rates as lower interest earned on mandatory grade lines rented to SMEs at preferential rates, higher credit card volumes drove the lower yields.
We now move asset quality on Slide 8. Our total NPL ratio improved 100 basis points sequentially to 4.3% decline across business segments. The bank NPL ratio brought 2.6% reaching pre-pandemic our re-rotation level. In turn, we do posted a 100 basis point sequential drop in the NPL ratio, mainly as we started to write-off delinquency on customers. We’ve not received payments up to the expiration of the 12 month grace period ruled by the Central Bank.
Process during the quarter, we reassessed exposure to the public works construction sector, a steal from the IMF agreement became public, flooding the extent of expected external tightening and the ability of public spending.
Basics contact decided to write-off a portion of the portfolio reducing our exposure to the sector impacting cost of risks and coverage, the total coverage value at year stood at 110%.
Turning to capitalization on Slide 9. [indiscernible] with a Tier 1 capital ratio of 12.7% contracting 140 basis points sequentially, mainly explained by the following factors. First, our bottom line was impacted by accelerating medical efficiencies, which increased severance costs.
Second, in 4Q 2021, we also increased investments in digital transformation initiatives, which are deducted from Tier 1 capital. These investments were in line with our investment plan of approximately AR$3 billion pesos for the full year disclosed in previous quarters.
Third, certain rate drops in the quarter mainly related to the public construction sector reduced expected loss regulatory easing negatively impacting capital, part of its effect approximately 40 basis points will be recovered during 2022.
Finally, the increasing risk weighted assets was more than offset by inflation adjustment of capital. Expense at year end 2022, another way Tier 1 capital in the range of 12% to 13%.
Slide 10. Our guidance remains suspended due to continued immediate visibility ahead. On slide 10, we share our views on the main drivers of our business for this year. Peso-denominated consumer and commercial loans are expected to grow slightly above inflation as we continue to pursue our goal of gain in market share versus 2020, where we took a more conservative approach in the pandemic.
Growth in real terms would be lower however, if annual inflation were to accelerate above 55%. At the same time while deposit growth remains fostered by foreign exchange restrictions and interest rate flows on time deposits, deposits to grow slightly above inflation.
In terms of asset quality, as anticipated NPLs ratios declined in the fourth quarter and are expected to remain stable or declined slightly in the year. Also anticipate provisions to grow about 2021 levels in loan growth overall, cost of rate is expected to remain at similar levels of last year.
With respect to margins, we expect NIM to increase slightly in 2021 above 2021 levels, this is mainly driven by sustaining programs, funding mix, a key pillar of our strategic plan. Together with anticipated growth in higher margin personal loans.
Our team is also expected to benefit from the impact of inflation, an inflation on certain assets including government bonds and mortgages, along with a net positive effect from the central bank regulations enacted last January. Details on these regulations can be found in our earnings report.
At the same time, we expect fee income from individuals increase in line with inflation while insurance income is likely to grow in real terms, as premiums recover from the lower levels of service in the last two years in turn personnel interest expenses are anticipated to increase slightly above inflation driven by additional costs related to the execution of our transformation strategy.
The plan was also for continued implementation of headcount efficiencies as we move ahead with our branch and channel resizing connection with our network and digital transformation initiatives we plan to invest approximately AR$5.1 billion and AR$1.2 respectively during 2022.
Lastly, capital and liquidity are expected to remain at adequate levels, with a Tier 1 ratio anticipated to range between 12% and 14% as I noted earlier. We also recall that 100% of our capital remains hedge against inflation.
Now let me turn the call to Patricio Supervielle, who will provide an update for our strategic initiatives. Patricio, please go ahead.
Thank you. Thank you, Mariano. And good day, everyone. While work is being done to stabilize the economy, the financial sector in Argentina will continue to face macroeconomic and regulatory challenges that we expect we’ll go beyond this year. Concurrently the pandemic has changed — Business lives, through accelerated digital adoption and remote work. And along with these changes, we too have accelerated our initiatives to anticipate our client’s needs and the changing environment in which we operate.
This context we reaffirm our focus long term value creation and are advancing on our six strategic pillars to improve return on equity — rate during acquisition expand digital adoption, continue to capture operating efficiencies, lower cost of funding and maintain healthy asset quality. We are executing our strategy on three key fronts. First, accelerating the digital and operational transformation of Banco Supervielle, scaling customer acquisition and executing on our omnichannel and branch transformation strategy.
Second as you know, we are transforming the business model from a consumer finance business into a full digital banking platform to drive profitability. The third at Cordial and invertir beyond invertironline we aim to diversify revenue origination beyond of Argentina. So next slide. So we’ll discuss how leading indicators of our transformation confirm by the right track of these initiatives and elaborate on our key goals for this year.
Now please turn to Slide 12. Starting with Banco Supervielle retail customer base we added 53,000 new retail customers in 2021 of which were 80% are digital. Digitized clients in turn increase over 30% year-on-year. We also expanded the share of digital and automatic personal loan consumers over a retail customers by five percentage point — to 40% at year end
Asset management was — up 80% year-on-year with assets under management more than doubling as we increased share of wallet. Our key goals for this year on the terms include further accelerating digital customer acquisition, continue cross selling digital products including launching and expanding personal finance management products as part of our initiatives to increase share of wallet. We’ll also continue to leverage our core — our car loan alliances including our recent alliances with Kavak to expand our share as leader in the pre-owned car loans market.
Moving on Slide 12, let me share some example of the successes we are having in boosting share of wallet as the bank along driving transactions among SMEs and corporate customers. We reached the top five ranking in brand awareness among private banks in the country, while increasing our customer base and share of wallet.
To show on the left chart, for the year, we expanded SME and mid-market customers by nearly 4%. Moreover, 20% of our sales to SME customers were digital following launch of digital onboarding early last year. Also increase our share of total system customers by over 40 basis points in the year to 5%, regaining our leading market positioning in leasing and posted share increases across rural services, site deposits, and assets among others.
Looking ahead, we expect to continue accelerating digital customer acquisition while also launching new features and services including digital lending to drive — to further drive share of wallet.
Please turn to page 14 to see the traction we are making on enhancing the customer experience. The share of total digitized retail customer increased consistently during the year, up nearly seven percentage points. We also saw significant advances in corporate clients as we more than doubled the number of monthly collections and payments reductions.
In turn the share of online on automatic voluntary transactions continued to increase, nearly 90% of total transaction by year end, we saw sustained growth in e-checks volumes and customers, ranking number six segments above our natural market chart. We expect to continue advancing on driving digital adoption at the bank while scaling digital onboarding and sales throughout the year.
Please turn to slide 15. As we show in 2021, we also advanced on improving funding quality, another key pillar of our strategic plan. The share of corporate customer side deposits increased 80 basis points year-on-year. At the same time, the share of retail customer side deposits was up five basis points against year-end 2020 and recovered sequentially by 30 basis points contributing to improve our funding mix.
For the year we aim to continue expanding corporate site audits, keeping our focus on driving growth in transactional products, managing reciprocity with corporate customers, and increasing share of wallet to become the primary bank for more of our customers.
Please turn to slide 16 for an update on our initiative to scale our branches formation and innovation. Starting with our hybrid model last year, we began to scale our visual hubs expanding our footprint and enabling banking anywhere and anytime. The only challenge model combines efficiencies of our digital hub with a strength of face-to-face interaction and a correspondent strategy.
To-date we have implemented three digital hubs, offering a superior customer experience with our internal customer satisfaction score at 4.5 over 5 and we are working towards extending this model to other regions and segments.
We also made significant progress on our branch transformation front implementing a new service modern and modernizing our network. By year end we modernized and expanded services SMEs and multi-segment businesses in 16 branches that until then were exclusively dedicated to senior citizen.
In addition, we increase our 25 lobby servers to 40% of the total branch area enabling extended banking hours and higher efficiencies. This year, we will continue working to expand towards expanding our digital footprint, while boosting customer acquisition on the back virtual hubs to inform branches.
As we show on slide 17, we are advancing on right sizing of branch network and accelerating efficiencies. We are enhancing customer service and productivity introducing best-in-class technologies which allow us to extend service hours and facilitate self service banking in some branches. We also convert in some branches to a full service — self service format.
We closed one branch last year and plan to close another 16 this year subject to central bank authorization. This includes seven branches that were expected to be closed last year, but are still subject to central bank approval. These initiatives have allowed us to reduce headcount by nearly 6% year-on-year and 11% during December — since December 2018. During this year, we expect to obtain additional headcount efficiencies and remain vigilant to opportunities to extract further value generation.
Please turn to slide 18 to review our strategic pillar related to maintaining healthy asset quality at the bank. As Ana explained earlier, NPL declined to low 2.6% levels observed in first Q 2019, while net cost of risk contracted significantly to low single-digit as we implemented portfolio limits further optimized economic sector whereas our exposure to our top 10 customers. Looking ahead, we’d spend to maintain low levels of [indiscernible] deals.
Finally, our strategy to transform — please, slide number 19. Finally, a strategy to transform consumer finance business to a new bank via our fully digital bank IUDU is picking up speed. We are well-positioned to continue to attract new customers with a wide range of offerings, including savings accounts, personal loans, credit cards, insurance, wellness offerings, and many others that will be launched in the current year to increase customer engagement with the aim of making IUDU its clients primary bank.
As I noted in our last call, we launched a retail digital savings account to the fourth quarter with the aim of attracting lower cost funding from — for this business. Between December and February, we opened nearly 70,000 new deposits accounts and while we have almost 300,000 downloads in the – of app in 2021. In January and February alone of this year, we saw over 100,000 additional downloads.
The year end registered 20,000 digital customers that number tripled in the first two months of 2022 to close in February, with nearly 100,000 digital customers. Strategy to convert this business online includes reducing IUDU physical presence. In 2021, we were able to reduce headcount by 7%, and expect an additional 25% reduction by the end of the first quarter 2022, along with branch closures in the coming months.
In summary, while the financial services industry pay significant macro and regulatory challenges ahead that go beyond this year. We remain focused on executing on our six strategic pillars to improve return on it. Leading indicators demonstrate, we are on track to further accelerate digital customer acquisition, and capture additional operating efficiencies when long-term demand resume. All while, lowering cost of funding and maintaining healthy asset quality.
Now, we are ready to open the floor to questions. Ana, please go ahead.
A – Ana Bartesaghi
Thank you, Patricio. At this time, we will be conducting question-and-answer session. [Operator Instructions] The first question comes from Ernesto Gabilondo with Bank of America. Please go ahead, Ernesto.
Thank you, Ana. Hi. Good morning, Patricio and Mariano, and all your team. Thanks for your presentation and for the opportunity. I have three questions, but I will make one question and then I will raise my hand again. So my question is on IUDÚ. We continue to see a high level of NPLs and cost of risk, of around 19% and 16% respectively. And also, we’re looking to the reserve coverage ratio at IUDÚ it seems to be low at 60% for this type of segment. So it would be interesting to know, what would be IUDÚ’s targets for asset quality? And when do you expect to start like with some key performance indicators for IUDÚ? And when do you expect IUDÚ to become profitable? Also, related to the same question, it will be interesting to understand, the IUDÚ’s strategy in the short term? Would it be more focused on client growth over profitability? Or do you expect both to be aligned in the short term? Thank you.
Hey, Mariano, would you like to answer the question on asset quality?
Hi, Ernesto, thank you for your question. Regarding NPL at IUDÚ, we are seeing the NPL ratio between 19% and 20% and what we expect – we were still seeing the effects of the automatic referral securing the pandemic, which ended at the end of March, regarding personal loans end up – at the end of March 2021. And so we still have the NPLs from that loan portfolio which was much more opportunity for these business segments as compared to first half. So we’re still working in the recovery of this portfolio.
And finally, if NPLs will be eventually not recovered will be written off in the last part to April 2022. So we have next two quarter which will might be some write-off which will lower the cost of return, will lower the NPL radio without the distortion that his portfolio bank.
And then, during 2022, we’ll start to see what we expect to become more similar to a medium-term trend which we expect to be — to start five percentage points lower of the write-offs and then keep lowering until the end of the year. Remember, this business segment has a new customer profile.
It’s not only the new customer profile for the Walmart stores, now Changomas it’s becoming a digital bank. So we expect to see a different profile of customers with better credit behavior, but we are still as it is a new development after Walmart.
So upsetting NPL than what we can expect at the bank level. So we expect the NPL to be decreasing, but because of the prototype that I explained a second because of the new portfolio.
Thank you, Mariano. As we thinking and take the part of the strategy, but the straight answer when you ask whether the strategy is focused more on client growth or profitability or is both are aligned, the answer is yes, they are aligned as far as the aligned profitability and the current growth.
Let me take a brief description of what the context we see in Argentina for Neobanks. And if you look at the performance of Neobanks in Argentina, they are not profitable. None of them are. And by the same token, another aspect which is a critical aspect I believe, which is the funding — on the funding side.
Although, let’s say some of the — let’s say the best Neobanks in Argentina in terms of UX, a number of customers if they’ve achieved a certain level of funding is frankly, very low and it’s almost irrelevant.
I would like to show as a comparison, what happened with the funds that are being managed by the biggest company in Argentina with a fantastic UX Mercado Pago, MercadoLibre, they have maybe 2.5 million customers, but the funds they manage it’s — the volume is around 10% of the fund industry. So it’s frankly irrelevant.
And even though it’s a fantastic company with US, which is absolutely fantastic. They have not been able to attract funding. I believe that the new banks to be successful, they need to attract customers that become — that they transform or they choose, IUDÚ, as their principal bank. This is the key factor.
In order to do these, you need to be able to offer certain types of services. We believe that we are doing and we are providing, which are the services that are traded. Let’s say a traditional bank does, which are loans, credit cards and insurances. If you look at the transactional savings in Argentina, they are mainly in the banks or in the fund industry, but not in new banks as I said, so — or in big tax. They are in the traditional bank.
So our target for us to do is to as — with a disruptive move to attract customers from traditional banks and get their principality with our company. This is the way we want to go further and we have in our products, the product suites that we have, we believe will enable us to acquire this principality with clients.
By the same token, as I said, for us, the strategy will be not only we can grow, but also efficiency and profitability. For us this year will be a transformational year in terms of the operating business model and you will see a drastic reduction in cost all along your 2022, and I think then we will become — we expect a company, IUDÚ, to become profitable as of 2023.
This is very, very helpful. Thank you very much.
Thank you, Ernesto. Our next question — and thank you, you said you will be writing your headline later on. So our next question comes from Rodrigo Nistor with AR Partners. Please go ahead, Rodrigo Nistor.
Yes. Hi, good morning. Thank you for the opportunity. This is [Indiscernible] filling in for Rodrigo Nistor. Once again, congratulations on the clarity of the disclosures. They are really helpful. In your presentation you talk about the transformation of the bank embarking, but the banks can control many things, like the macro or central bank regulations. Who do you combined briefly on what you’re doing to address your current weak spots and minimize the negative impacts of the operating environment?
Alejandro, do you like to follow on that question?
Yes. Thank you for your question, Rodrigo, sorry [Indiscernible]. Your comment is actually right on and we are focusing on the things that regardless of the context we can control. One of them is very tight expense controls. This includes every efficiency that we can make, and it extends to right sizing our network. We believe that the transformation we’ve embark on for some time now is allowing us to be able to capture many efficiencies, while at the same time enhancing customer experience and extending our reach through digital — through our digital network.
The other thing we’re focusing on is enhancing our cost of funding is very important in the context that we face. And we are as we presented showing some progress in that regard.
And finally, to continue the digital transformation will allow us to increase our acquisition of digital clients to adopt or get a higher proportion of our customer base to continue to adopt a digital and automatic channels. And also, leverage cross-sell opportunities in our portfolio. These are the key things that we’re focusing on in what you well described is a challenging environment.
Thank you very much.
Mr. Pedero [ph]. So our next question comes from Juan Recalde with Scotiabank. Juan, go ahead.
Hi. Thank you guys. Thank you for taking my question. Can you hear me well?
That’s very clear, Juan.
Okay. Perfect. So I have two questions. One is related to IUDÚ. And the relationship with what was — what used to be Walmart. So how are you leveraging that partnership the partnership with now? It’s call retail, how are you been leveraging that partnership to benefit IUDÚ? Can you elaborate as for example, to create — to cover and to create cards to bring more customers to IUDÚ for example? So that would be the first question.
And the second one would be related to the dividends. We know that there is this new regulation from the Central Bank that limits the percentage of profits that can be distributed it as dividends. So what should we expect in terms of dividend payments for 2022?
Regarding the question of the – to arrangement and transport and with a group of MRIs basically we signed a new contract. This contract is gives us a complete control of our customers before work in the area, in the period or the era of Walmart, you would go to the branches and you would see a Walmart financial services and there below in little letters, the name of our branch.
Now this is called, I mean, all customers that we have, let’s say, we have on an originated in this franchise, they belong to IUDÚ and they know that, so there’s no confusion on that and we are able for us and we don’t have any more the concern what’s happened every time we renegotiate with a supermarket. These times are in our franchise and what we’ve been doing is transforming them to full digital clients working with the IUDÚ app.
Looking forward the opportunities with the Changomas franchise, we believe they are important in the sense that of course there is when you have traffic in a supermarket, there’s opportunities to get new customers and the people from Changomas. they have planned probably in 2023 or not this year, but next year to put in place a loyalty program which they know is extremely effective to data analytics to basically to do data mining and get new customers and we know that for that it’s going to be for us it’s a powerful tool also for attracting customers for let say in IUDÚ. But that’s I would say in a nutshell, we have a very good relation. We talk with them every week — we talk with them all the time how to basically perform better in stores and so on. But they know that we — the way — the operational model will be fully digital, particularly for instance when in the post sales of customers, they have to work through the app, no longer with people in the stores.
Having said that, the main let’s say origination we believe in the next few years will come from let’s say internet from basically from the older plan we have from digital marketing, trying to attract customers from traditional banks and come to us. That’s basically my answer.
Okay. That’s very clear. And in terms of dividends, yeah?
Yes, let me answer in terms of dividends, central bank regulations and dividends for the bank and do we just enjoy the financial company, which are subject to Central Bank relations. The Holding Company, Grupo Supervielle is only affected indirectly because it only emits the dividends by the holding company averaging from the bank and IUDÚ. But in past years where we approved dividends of approximately 10% of our net profit, we funded all 100% of the dividend at the holding company was funded by dividends received from other subsidiaries not subjected to central bank regulation as various rules and as various asset management mainly. So we are we not — we don’t expect to approve events from the bank or IUDÚ as we haven’t done that last few years. Even for this year that we recommended the shareholders to approve, it solely to offset the personal assets tax. So that can be funded with dividends from against real asset management and will not be limited by this regulation. Let me know if that’s helpful.
That’s helpful. Thank you very much.
Our next question comes from Marlon [indiscernible] with JPMorgan. Hi Marlon, you can you can proceed — you confirm your question now.
Hello Ana. Hi Patricio, actually Yuri Fernandes here. No, no worries. I wasn’t using my link. I have a first one on margins, you mentioned you’re expecting a better funding, we saw a decrease on deposits, which is still good loan to cost ratio, good liquidity ratios. So, my question is, what should we see for margins 2022 because we saw some expansion this quarter, but I don’t know how much sustainable it is given I guess we have a new deposit regulation taking place in January, right, so maybe your first few 2022 may be more challenging given now minimal remuneration for a larger chunk offered opposed to base. The first question is margins, what you see, what do you expect for 2022?
I have a second one regarding capital. We saw some decrease, you explained very well in the release, but my question is regarding the RWAs, we saw RWAs growing faster to most, so you can provide more color? And also your general view for capital during the year, like how do you expect to review this capital during the year? What do you see as the outlook for capital? Thanks very much.
Hey Mariano — thank you Yuri for your question. Mariano, can you answer the question on margins?
Yes. Hello, Yuri. Thanks for your questions. First, regarding margins, I think you mentioned the recent regulations from January and February. Although it raised the interest rates on our time deposits and also raised the limit of — to AR10 million of deposits that are at the highest interest rate now at 39%. These regulations also increased the earnings rate and the repo rate that we receive from central banks and also raise the cap on certain interest rates with credit cards going from 34% to 39% and also increasing the interest rates on subsidized loans.
So, following on the increasing interest rates, although impacts of assets and liabilities, we think the net effect will be positive for 2022. Also — and I think more important, we expect during 2022 to increase also our cost of funds. We’ve seen that during the fourth quarter of 2021. And cost of funds also will be very important. The role of [indiscernible] starting to — but customers that are also saving accounts customers are not only the customers as you look at the past.
And last inflation as we are long on inflation because we haven’t hedged our net equity 100% inflation, mainly through inflation adjusted instruments as mortgages and sovereign bonds. Also high inflations will increase margin. So, those will be the main factors playing with the financial margin for 2022.
Then, regarding capital, risk weighted assets, risk weighted assets have three components. The first and more important is the risk weighted assets of credit and that is very linked to the loan growth. Of course, it’s not one to one relationship because there are certain particularities of the regulations, but it tends to go one on one with loan growth. And then we have market risk weighted asset and operational rates. Those are the two components, although less material that can also have an impact in terms of market risk sometimes on the hedge, we have against [indiscernible] can increase market requirements of capital and operational is related mainly to — operational requirement of capital is mainly linked to revenues. So in the long-term, the increase in risk weighted assets will be linked to increase in loans, but in the short term there can be some mismatches.
Lastly for capital in 2022. We expect to remain at a great level, in the range of 12% to 13%. Now we are at 12.7% having decreased in the last quarter from 14.1%. But the write offs in the quarter made an extraordinary decrease were if you look at the technicalities of the regulations that allow us to recover part of the expected loss provisions and other bad capital, we expect to recover 0.4% of Tier 1 ratio to our capital. So adjusting for that we would be in 13%, 13.1% So increase in risk weighted assets would lead to a small degree in the Tier 1 capital ratio, but always we see it above 12%.
That’s pretty clear, Mariano. Thank you very much.
Thank you, Yuri. Our next question comes from Alejandra Aranda with Itau. Please Alejandra, go ahead.
Hi, good morning. Thank you for the opportunity. Most of my questions have been answered. But regarding the right sizing, I mean, how long should we expect this to continue? And what should we expect in terms of additional costs coming from this and the additional investments for this year?
Well, as I said in consumer finance, right sizing with the — particularly, let’s say large this year, it will be very large and this is already we can see this in the first quarter. But in the first quarter of consumer finance, as we said we stated we are reducing 25% of the workforce by first quarter 2022 through the change of operational model, but you might expect to continue to see this around the year. And regarding the bank, the capture efficiencies will continue because the transformation is ongoing and it has a lot to do with new digital processes, automation, digital adoption of clients, branch transformation. I don’t know if you want to add something Alejandro on that, on the capital efficiencies.
Yes. As Patricio was saying, we will continue to capture these efficiencies, which, as you know, have been driven by a combination of digital adoption that was accelerated during the pandemic and also our investments of increasing automated channels and their availability to the public.
In effect, what has happened is that, our clients are going to the bank at different hours, extended hours and even during weekends, deciding when and how to serve or self-serve from our services. And this is creating huge opportunities to rethink and optimize our branch network and also to extend our reach as our investments in digital transformation allow for digital acquisition of digital native clients.
In terms of investments, I recall Mariano mentioned earlier on that the investments planned for 2022 in terms of our network are at approximately AR$ 5.1 billion, just to give you an idea, of second question and digital transformation initiatives are at around AR$1.2 billion.
Let me comment on investment, as what we mentioned in the presentation is AR$5.1 billion. In terms of sales for IT and digital transformation related investments, I’m going to [Indiscernible] for the transformation of the network. And regarding severance, I don’t know, we’re asking also the — some investment on severance during 2022. We got AR$2.6 billion or severance at the tight [ph] level.
On top of that AR$500 million, as you do, where we started reductions already in the fourth quarter. And for 2022 we’ll still have headcount efficiencies at the bank and increasing at Q2 level. On a consolidated basis, there’s a AR$3.1 billion of cost in severance, that is, once per year plan. Q2 will be a bit no work in 2022 maybe in real terms [Indiscernible]. And still have high levels due to due to these efficiencies at our company.
Okay. Thank you very much.
Thank you, Alejandra. And now we’re going to go back to Ernesto Gabilondo with Bank of America. Ernesto, please go ahead.
Thank you, Ana. So my last question is on your ROE expectations. I think the ROE of last year was minus 2%. So considering now you’re 2022 perspectives, where do you see the ROE?
Yes. Please go ahead, Mariano.
Yes. So let me comment on — although, we are not giving the ROE or net income guidance. Let me expand on the main factors. We see improvement in 2022 or expect in 2022 results. Although, there are still many moving parts to see the exact level, the precise level of net profit or ROE for the full year. As we saw during the presentation, 2021 net profit or net loss was impacted — negatively impacted by regulations, our taxes are although I explain, some improvements, but most of them will be still in place during 2022.
We will also keep a high level of each growth due to efficiencies are going to be a bit lower than 2021. But on the other hand, we will start to reduce the net loss from the new business segment, which is very, very significant or very significant in 2021 reaching or expecting to reach a breakeven at the end of the year or 2023 earlier. So, reducing loss from – mainly from customers with deposit, which is very important in high inflation environment that affects this company in more than another businesses will be very important in 2022.
Also, although we are keeping costs — additional costs from efficiencies, we’re starting to see lowering costs from the reductions we made in 2020 and particularly, in 2021. So we get 6% less get down at the bank level, we will allow us to have less personnel costs. And also in 2021, we reduced the space that we lease for the corporate business, according to IFRS 16. The savings of that agreement will be in 2022, 2023 not – because of the accounting rule. But in the net – in the length of the contract, that would be a significant savings. And so – those what I explained before that we could expect to allow us to have a higher NIM and producing cost, and trying to maintain cost of risk would be the main factors that will play 2022 ROE.
Thank you, Mariano. And then can you just remind us your macro expectations regarding inflation, interest rates and FX? And also, you were mentioning high inflation will help NIMs on higher inflation in government bonds. But how do you see this could be impacting the net monetary position?
Well, high inflation as we are hedging inflation for real estate assets and digital assessment bonds and mortgages is positive for our margin. But at the end of the day, it’s neutral for the P&L, because we have a higher margin by a higher loss from the monetary position. So, our monetary position is now, and we expect in this environment during the year. It’s lowering inflation to cover 100% of net equity. On top of that, we might have also a loan position in US dollar and that is mainly tactically and we expect to see a higher devaluation on those. So that will be the effect on inflation. Higher inflation impacts only the Euro business segment, but we are covered on a consolidated basis.
And also for long-term deposits, inflation we started to work in 2022 forecast — the 50% inflation then started to work with a 55% inflation projected. If inflation grows beyond that or much higher, let’s say, below 50% [indiscernible] to real terms will be lower because that we at some point affect great demand.
Deposits may still be growing at or slightly above inflation because the — the if that really financed through a central bank at the end of the day plays posters together with the foreign exchange restriction [indiscernible] growth. Finally, did I answer your question.
Yes. Thank you very much, Mariano.
Thank you, Ernesto. Yes, and we have some questions in the panel. It says, could you please provide an update on InvertirOnline its growth and growth prospects?
Thank you. Thank you for an opportunity to talk about InvertirOnline. Last year 2021, we were able to increase our number of clients around 25% in terms of active users. We are above 110,000 active users. This is the metric This is one of the metrics by meaning active users, users that have been using – have been operating, transacting invertironline over the last 60 days.
Invertironline, we believe that for us is important to gain traction in terms of growth in Argentina. For this we are launching in this quarter the new app mobile, which we believe will help us to bring traction as well as we are in the process of connecting digital wallet to provide customers who – and to refer let’s say our customers to a digital wallet that eventually if they want to transact with cryptocurrencies.
We are doing this with – in absolutely – in according to the standards of Argentine Regulation. At the same time, such a number of people Invertironline engineers and software developers, they are working on the international platform. We are working in implementation of a plan in order to launch services in the region and this is process and that’s basically my answer.
Ladies and gentlemen, we have reached the end of today’s Q&A session. 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 will remain available to answer any questions that you may have. Thank you and stay safe.