Stocks
ETFs
Options
Commodities
Crypto
Currency
Pro Newsletters
Research Tools
Daily Feeds
Calendars
Economic Indicators
Class Actions
Calculators
Education
About Us
Working with TipRanks
Follow Us
Grupo Supervielle SA (SUPV)
NYSE:SUPV
RESEARCH TOOLSreports
Holding SUPV?
Track your performance easily
Risk Overview Q4, 2021
Risk Distribution
43% Finance & Corporate
30% Macro & Political
15% Legal & Regulatory
4% Tech & Innovation
4% Production
4% Ability to Sell
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.
Risk Change Over Time
S&P500 Average
Sector Average
Risks removed
Risks added
Risks changed
Grupo Supervielle SA Risk Factors
New Risk (0)
Risk Changed (0)
Risk Removed (0)
No changes from previous report
The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
Risk Highlights Q4, 2021
Main Risk Category
Finance & Corporate
With 20 Risks
Finance & Corporate
With 20 Risks
Number of Disclosed Risks
47
No changes from last report
S&P 500 Average: 31
47
No changes from last report
S&P 500 Average: 31
Recent Changes
2Risks added
2Risks removed
13Risks changed
Since Dec 2021
2Risks added
2Risks removed
13Risks changed
Since Dec 2021
Number of Risk Changed
13
-1
From last reportS&P 500 Average: 3
13
-1
From last reportS&P 500 Average: 3
See the risk highlights of Grupo Supervielle SA in the last period.
Risk Word Cloud
The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.
Risk Factors Full Breakdown - Total Risks 47
Finance & Corporate
Total Risks: 20/47 (43%)Below Sector Average
Share Price & Shareholder Rights9 | 19.1%
Share Price & Shareholder Rights - Risk 1
Enforcement of creditors' rights in Argentina may be limited, costly and lengthy.Share Price & Shareholder Rights - Risk 2
Our controlling shareholder has the ability to direct our business, and potential conflicts of interest could arise.Our controlling shareholder, Julio Patricio Supervielle, directly or beneficially owned as of April 28, 2022, 61,738,188 Class A shares and 98,684,713 Class B shares. Virtually all decisions made by shareholders will continue to be directed by our controlling shareholder. He may, without the concurrence of the remaining shareholders, elect a majority of our directors, effect or prevent a merger, sale of assets or other business acquisition or disposition, cause us to issue additional equity securities, effect a redemption of shares, effect a related party transaction and determine the timing and amounts of dividends, if any. According to our bylaws, a two-thirds vote by our Class A shares is required, regardless of the percentage of our total capital they represent, in order for us to duly resolve a merger with another company, a voluntary dissolution, our relocation abroad, and the fundamental change in our corporate purpose. Mr. Supervielle's interests may conflict with your interests as a holder of Class B shares or ADSs, and he may take actions that might be desirable to him but not to other shareholders.
Share Price & Shareholder Rights - Risk 3
We are traded on more than one market and this may result in price variations; in addition, investors may not be able to easily move shares for trading between such markets.In addition to the trading of our ADSs in the United States and countries other than Argentina, our Class B shares are traded in Argentina. Trading in the ADSs or our Class B shares on these markets will take place in different currencies (U.S. dollars on the New York Stock Exchange ("NYSE") and Pesos on ByMA), and at different times (resulting from different time zones, different trading days and different public holidays in the United States and Argentina). The trading prices of these securities on these two markets may differ due to these and other factors. Any decrease in the price of our Class B shares on the ByMA could cause a decrease in the trading price of the ADSs on the NYSE. Investors could seek to sell or buy our shares to take advantage of any price differences between the markets through a practice referred to as arbitrage. Any arbitrage activity could create unexpected volatility in both our share prices on one exchange, and the ADSs available for trading on the other exchange. In addition, holders of ADSs will not be immediately able to surrender their ADSs and withdraw the underlying Class B shares for trading on the other market without effecting necessary procedures with the Depositary. This could result in time delays and additional cost for holders of ADSs.
Share Price & Shareholder Rights - Risk 4
Under Argentine Corporate Law, shareholder rights may be fewer or less well defined than in other jurisdictions.Our corporate affairs are governed by our bylaws and by the Argentine General Corporations Law, which differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States (such as Delaware or New York), or in other jurisdictions outside Argentina. Thus, your rights or the rights of holders of our Class B shares under the Argentine General Corporations Lawto protect your or their interests relative to actions by our Board of Directors may be fewer and less well defined than under the laws of those other jurisdictions. Although insider trading and price manipulation are illegal under Argentine law, the Argentine securities markets may not be as highly regulated or supervised as the U.S. securities markets or markets in some of the other jurisdictions. In addition, rules and policies against self-dealing and regarding the preservation of shareholder interests may be less well defined and enforced in Argentina than in the United States, or other jurisdictions outside Argentina, putting holders of our Class B shares and the ADSs at a potential disadvantage.
Share Price & Shareholder Rights - Risk 5
Holders of our Class B shares and the ADSs located in the United States may not be able to exercise preemptive rights.Under the Argentine General Corporations Law, if we issue new shares as part of a capital increase, our shareholders may have the right to subscribe to a proportional number of shares to maintain their existing ownership percentage. Rights to subscribe for shares in these circumstances are known as preemptive rights, pursuant to the Argentine General Corporations Law. In addition, shareholders are entitled to the right to subscribe for the unsubscribed shares remaining at the end of a preemptive rights offering on a pro rata basis, which are known as accretion rights. Upon the occurrence of any future increase in our capital stock, United States holders of Class B shares or ADSs will not be able to exercise the preemptive and related accretion rights for such Class B shares or ADSs unless a registration statement under the Securities Act is effective with respect to such Class B shares or ADSs or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to those Class B shares or ADSs. We may not file such a registration statement, or an exemption from registration may not be available. Unless those Class B shares or ADSs are registered or an exemption from registration applies, a U.S. holder of our Class B shares or ADSs may receive only the net proceeds from those preemptive rights and accretion rights if those rights can be sold by the Depositary; if they cannot be sold, they will be allowed to lapse. Furthermore, the equity interest of holders of Class B shares or ADSs located in the United States may be diluted proportionately upon future capital increases.
Share Price & Shareholder Rights - Risk 6
Your voting rights with respect to the ADSs are limited by the terms of the deposit agreement.Holders may exercise voting rights with respect to the Class B shares underlying ADSs only in accordance with the provisions of the deposit agreement. There are no provisions under Argentine law or under our bylaws that limit ADS holders' ability to exercise their voting rights through the depositary with respect to the underlying Class B shares, except if the depositary is a foreign entity and it is not registered with the Inspección General de Justicia ("IGJ"), and in this case, the depositary is registered with the IGJ. However, there are practical limitations upon the ability of ADS holders to exercise their voting rights due to the additional procedural steps involved in communicating with such holders. For example, Argentine Capital Markets Law requires us to notify our shareholders by publications in certain official and private newspapers of at least 20 and no more than 45 days in advance of any shareholders' meeting. ADS holders will not receive any notice of a shareholders' meeting directly from us. In accordance with the deposit agreement, we will provide the notice to the Depositary, which will in turn, if we so request, as soon as practicable thereafter provide to each ADS holder:
othe notice of such meeting;ovoting instruction forms; and oa statement as to the manner in which instructions may be given by holders.
To exercise their voting rights, ADS holders must then provide instructions to the Depositary on how to vote the shares underlying ADSs. Because of the additional procedural step involves the Depositary, the process for exercising voting rights will take longer for ADS holders than for holders of Class B shares.
Except as described in this annual report, holders will not be able to exercise voting rights attaching to the ADSs.
Share Price & Shareholder Rights - Risk 7
The relative volatility and illiquidity of the Argentine securities markets may substantially limit your ability to sell Class B shares underlying the ADSs at the price and time you desire.Investing in securities that trade in emerging markets, such as Argentina, often involves greater risk than investing in securities of issuers in the United States. The Argentine securities market is substantially smaller, less liquid, more concentrated and can be more volatile than major securities markets in the United States, and is not as highly regulated or supervised as some of these other markets. There is also significantly greater concentration in the Argentine securities market than in major securities markets in the United States. As of December 31, 2021, the ten largest companies in terms of market capitalization represented approximately 63% of the aggregate market capitalization of ByMA. Accordingly, although you are entitled to withdraw the Class B shares underlying the ADSs from the Depositary at any time, your ability to sell such shares at a price and time at which you wish to do so may be substantially limited. Furthermore, exchange controls imposed by the Central Bank could have the effect of further impairing the liquidity of the ByMA by making it unattractive for non-Argentines to buy shares in the secondary market in Argentina. See "Item 10.D. Exchange Controls."
Share Price & Shareholder Rights - Risk 8
Substantial sales of our Class B shares or the ADSs could cause the price of the Class B shares or of the ADSs to decrease.We have shareholders that own a substantial amount of our Class B shares or ADSs. If such shareholders decide to sell a substantial amount of our Class B shares or the ADSs, or if the market perceives they intend to sell a substantial amount of our Class B shares or the ADSs, the market price of our Class B shares or the ADSs could drop significantly.
Share Price & Shareholder Rights - Risk 9
Our shareholders may be subject to liability for certain votes of their securities.Our shareholders are not liable for our obligations. Instead, shareholders are generally liable only for the payment of the shares they subscribe. However, shareholders who have a conflict of interest with us and who do not abstain from voting may be held liable for damages to us, but only if the transaction would not have been approved without such shareholders' votes. Furthermore, shareholders who willfully or negligently vote in favor of a resolution that is subsequently declared void by a court as contrary to the Argentine General Corporations Lawor our bylaws may be held jointly and severally liable for damages to us or to other third parties, including other shareholders.
Accounting & Financial Operations3 | 6.4%
Accounting & Financial Operations - Risk 1
Holders of our Class B shares and the ADSs may not receive any dividends.Accounting & Financial Operations - Risk 2
Our estimates and established reserves for credit risk and potential credit losses may prove to be insufficient, which may materially and adversely affect our asset quality and our financial condition and results of operations.Pursuant to the implementation of IFRS 9, our subsidiaries, particularly the Bank, establish reserves for potential credit risk and losses related to changes in the levels of income of debtors/borrowers, increased rates of inflation, increased levels of non-performing loans or an increase in interest rates. In this process, our subsidiaries rely on several models that estimate the distribution of possible losses arising out of the loan portfolio to calculate expected losses. The Bank's models estimate distribution of possible loan portfolio losses, which depend on counterparties' probability of default ("PD"), as well as the exposure at the time of default ("EAD") and the proportion of each unfulfilled loan that the entity is able to recover (i.e., loss in the event of default or "LGD"). Based on these parameters, we estimate our expected loss ("PE") and economic capital. At the same time, we assess expected credit losses on a forward-looking basis, incorporating the impact of updated macroeconomic scenarios in the variables which we consider affect credit risk.
During 2020, the Central Bank established several measures in favor of debtors, including an automatic rescheduling program on unpaid loans installments maturing between the months of April 2020 and March 2021. Although these measures are no longer in force, they had a negative impact our consumer finance business.
If we are unable to effectively control the level of non-performing or poor credit quality loans in the future, or if our loan loss reserves are insufficient to cover future loan losses, our asset quality and our financial condition and results of operations may be materially and adversely affected.
Accounting & Financial Operations - Risk 3
We are a holding company and, as a result, we depend on our subsidiaries' ability to pay dividends to us.Changed
As a holding company, we conduct our operations through our subsidiaries, the largest of which is the Bank. Consequently, we do not operate or hold substantial assets, except for equity investments in our subsidiaries and temporary liquidity. Except for such assets, our ability to invest in our business developments and to repay obligations is subject to the funds generated by our subsidiaries and their ability to pay cash dividends. In the absence of such funds, we may have to resort to financing options at unappealing prices, rates and conditions. Additionally, such financing could be unavailable when we may need it.
Each of our subsidiaries is a separate legal entity and due to legal or contractual restrictions, as well as to their financial condition and operating requirements, they may not be able to distribute dividends to us. Our ability to develop our business, meet our payment obligations and pay dividends to our shareholders could be limited by restrictions preventing our subsidiaries from paying us dividends. Investors should take such restrictions into account when analyzing our investment developments and our ability to cancel our obligations.
Debt & Financing6 | 12.8%
Debt & Financing - Risk 1
Argentine financial institutions, including us, continue to have exposure to public sector debt, including securities issued by the Argentine Central Bank, and its repayment capacity, which in periods of economic recession may negatively affect their results of operations.Changed
Debt & Financing - Risk 2
Reduced spreads between interest rates on loans and those on deposits could adversely affect the Bank's and IUDÚ's profitability.Changed
Historically, the Argentine financial system witnessed a decrease in spreads between the interest rates on loans and deposits as a result of increased competition in the banking sector and the Argentine government's tightening of monetary policy in response to inflation concerns. Frequent regulatory changes, high inflation and frequent currency devaluations have also led to fluctuations in interest rates which could also impact spreads. Moreover, amid the COVID-19 outbreak, the Central Bank imposed minimum interest rates paid on time deposits, imposed maximum interest rates on credit cards financing, and established some credit lines to be granted to SMEs at preferential interest rates, pressuring margins downwards.
In addition, a change in the composition of the source of funding, which is currently heavily weighted by non-interest-bearing deposits, could also put downward pressure on margins. A change in the composition of the source of funding could result from lower interest rates, higher demand of credit and therefore a need to increase the amount of time deposits or other types of bearing interest liabilities. Further reduction in spreads could have a material adverse effect on our business, results of operation and financial condition. We cannot guarantee that interest rate spreads will remain attractive.
Debt & Financing - Risk 3
The Bank's revenues from its business with senior citizens could decrease or cease to grow if the agreement with ANSES is terminated or not renewed.Since 1996, the Bank has acted as one of the paying agents of social security payments to senior citizens on behalf of the government pursuant to an agreement with ANSES. In December 2021, the Bank made payments on behalf of ANSES to approximately 978,000 senior citizens and beneficiaries. Offering this service to senior citizens allows the Bank ready access to a pool of potential consumers of financial services. The Bank derives an important part of its revenues (19% as of December 31, 2021) from the sale of financial services to senior citizens. The agreement with ANSES is an agreement that must be signed by any bank that intends to pay pensions or benefits on behalf of ANSES. The current agreement with ANSES expires on June 30, 2022 and negotiations between the banks and ANSES to renew the agreement have already started. In addition, ANSES has the right to terminate the agreement with a 90 day prior notice.
The termination of the agreement with ANSES or ANSES's failure to add new senior citizens to the payment service could have a negative effect on our business and results of operations.
Debt & Financing - Risk 4
The Argentine government's ability to obtain financing from the international loan and capital markets may be limited or costly, which may impair its ability to implement reforms and foster economic growth.During recent years the Argentine government has faced difficulties in the payment of its sovereign debt. As a result, the Argentine government may not have access to international financing, or its access may be costly, which would limit its ability to make investments and foster economic growth. Additionally, Argentine companies may also have difficulty accessing international financing, at reasonable costs or at all.
During March 2020, the Argentine government initiated discussions with various groups of creditors to discuss a path for Argentina's debt sustainability. With respect to Argentina's international bonds, the Argentine executive branch approved the restructuring of certain eligible global bonds issued under foreign laws for up to U.S.$65 billion. In August 2020, the Argentine government announced that it had obtained the consents required to exchange 99% of the aggregate principal amount outstanding of all series of eligible bonds.
On March 13, 2020, the Minister of Economy addressed a letter to the Paris Club members expressing Argentina's decision to postpone until May 5, 2021 the U.S.$2.1 billion payment originally due on May 5, 2020, in accordance with the terms of the settlement agreement Argentina had reached with the Paris Club members on May 29, 2014 (the "Paris Club 2014 Settlement Agreement"). In addition, on April 7, 2020, the Minister of Economy sent the Paris Club members a proposal to modify the existing terms of the Paris Club 2014 Settlement Agreement, seeking mainly an extension of the maturity dates and a significant reduction in the interest rate. In June 2021, the parties agreed that Argentina would pay U.S.$430 million to the group before the end of July and the rest during the following year to avert default in July 2021. On March 22, 2022, the Argentine government reached an agreement with the Paris Club for a new extension of the agreement reached in June 2021.
In June 2018, the Argentine government and the IMF signed a three-year, U.S.$50 billion loan agreement, as further amended to U.S.$57.1 billion through 2021 (the "IMF 2018 Agreement"). Following an IMF report in February 2020 stating that Argentina's debt may not be sustainable, the Argentine government requested to begin discussions with the IMF in order to renegotiate the principal maturities of the U.S.$44.1 billion disbursed between 2018 and 2019 under a stand-by arrangement. The IMF and the Argentine authorities reached an understanding on key policies as part of their ongoing discussions on an IMF-supported program. On March 25, 2022, the IMF approved the execution of the IMF Agreement with Argentina for a total amount of U.S.$44 billion, which includes a disbursement of U.S.$9.6 billion. The IMF will monitor Argentina's compliance with such agreement at the end of each quarter. By means of the IMF Agreement, the Argentine government seeks to decrease the high inflation in Argentina improving public finances and strengthening Argentina's balance of payments. We cannot assure that the conditions of the IMF Agreement will not affect Argentina's ability to implement reforms and public policies and boost economic growth, nor the impact that the IMF Agreement may have in Argentina's ability to access international capital markets (and indirectly in our ability to access those markets).
In June 2021, Morgan Stanley Capital Index ("MSCI"), in its market classification report, reclassified the Argentine market from the "Emerging Markets" category to the "Standalone" or "Independent Markets" category, classification that is reserved for those countries that have accessibility barriers to foreign investors, political tensions, small capital markets and poor economies or that lack adequate regulations. In the case of Argentina, the classification as a "Standalone" market was due to the prolonged severity of capital controls in the Argentine stock market which is not in line with the accessibility criteria of the MSCI Emerging Markets index. As a result of the reclassification, several Argentine companies suffered a negative impact on the price of their shares, and may face greater difficulties in obtaining financing in the future.
Due to past or future defaults on its indebtedness, we cannot assure you that Argentina will have access to international financing in the future, on favorable terms or at all. If Argentina is not able to access financing, it may not be able to foster economic growth and invest in the country. As a result, we cannot assure you that private companies in Argentina will have access to financing on favorable terms or at all, which could adversely affect our business, financial condition and results of operations.
Debt & Financing - Risk 5
The growth and profitability of Argentina's financial system partially depend on the development of medium and long-term funding sources.Since most term deposits (more than 95%) are short-term deposits with a maturity of less than three months, a substantial portion of the loans have very short maturity, and there is a small portion of medium- and/or long-term credit lines. The uncertainty about the ability to reduce inflation in the future has had, and may continue to have, a significant impact on both the supply of, and demand for, long-term loans as borrowers try to hedge against inflation risk by borrowing at fixed rates while lenders hedge against inflation risk by offering loans at floating rates.
If longer-term financial intermediation activity does not grow, the ability of financial institutions, including us, to generate profits will be negatively affected.
Debt & Financing - Risk 6
Our policies and procedures may not be able to detect money laundering and other illegal or improper activities fully or on a timely basis, which could expose us to fines and other liabilities.We are required to comply with applicable anti-money laundering laws, anti-terrorism financing laws and other regulations. These laws and regulations require us, among other things, to adopt and enforce "know your customer" policies and procedures and to report suspicious or large transactions to the applicable regulatory authorities. While we have adopted policies and procedures aimed at detecting and preventing the use of banking networks for money laundering activities and by terrorists and terrorist-related organizations and individuals generally, such policies and procedures may not completely eliminate instances where they may be used by other parties to engage in money laundering and other illegal or improper activities. If we fail to fully comply with applicable laws and regulations, the relevant government authorities to which they report have the power and authority to impose fines and other penalties. In addition, our businesses and reputation could suffer if customers use our financial institutions for money laundering or illegal or improper purposes. As of the date of this annual report, we have not been subject to material fines or other penalties, and we have not suffered business or reputational harm, as a result of any money laundering activities in the past.
Corporate Activity and Growth2 | 4.3%
Corporate Activity and Growth - Risk 1
We may continue to seek potential acquisitions or expand our business, but we may not be able to complete such acquisitions or expansion, or successfully integrate businesses that we acquire.Changed
Corporate Activity and Growth - Risk 2
Early termination of IUDÚ's commercial agreement with Grupo De Narváez, the current owners of Chango Más (formerly, Walmart Argentina) could have an adverse effect on our revenue.Changed
In April 2000, IUDÚ and Walmart entered into a commercial agreement pursuant to which IUDÚ became the exclusive provider of financial and credit products and services for customers at Chango Más (formerly, Walmart Argentina) stores in Argentina. The agreement was renewed on several occassions and most recently in August 2021. As a result, the commercial agreement expires on August 24, 2026.
On November 6, 2020, Walmart Inc. agreed to sell its business in Argentina to Dorinka S.R.L. ("Grupo de Narva´ez"), a well-known name in Argentina conducting several retail businesses in the country. Although Grupo De Narváez has not participated in the retail business in Argentina in recent years, they have built retail capabilities in other countries in Latin America.
If the commercial agreement with Grupo de Narva´ez is early terminated, our expected benefit from this partnership could be adversely affected which, in turn, could have a materially negative impact on our business, financial condition and results of operations.
Macro & Political
Total Risks: 14/47 (30%)Above Sector Average
Economy & Political Environment12 | 25.5%
Economy & Political Environment - Risk 1
Our business is largely dependent upon macroeconomic, political, regulatory and social conditions in Argentina.Economy & Political Environment - Risk 2
Government intervention in the Argentine economy could undermine business and investor confidence.The Argentine government exercises substantial control over the economy and may increase its level of intervention in certain areas of the economy, including through the regulation of market conditions and prices.
In the past, the Argentine government has increased state intervention in the economy, including through expropriation and nationalization measures, price controls and exchange controls and restrictions on capital flows. For example, in 2008, the administration absorbed and replaced the former private pension system for a public "pay-as-you-go" pension system. As a result, all resources administered by the private pension funds, including significant equity interests in a wide range of listed companies, have since been administered by the Argentine Social Security Administration (Administración Nacional de la Seguridad Social or "ANSES"). In 2014, the Argentine government enacted law No. 26,991, which enables the Argentine government to intervene in certain markets when it considers that any party to the market is trying to impose prices or supply restrictions in the market. This law applies to all economic processes linked to goods, facilities and services which, either directly or indirectly, satisfy basic needs of the population (so-called "basic needs goods"), and grants broad powers to the relevant enforcing agency (Secretariat of Commerce) to become involved in such processes. In June 2020, the Argentine government ordered the 60-day temporary intervention of the cereal producer group Vicentín S.A.I.C. to ensure the continuance of the company's operations and to preserve jobs and assets. In addition, as a result of the public health emergency declared by the Argentine government due to the ongoing COVID-19 pandemic, several measures have been adopted to limit the impact on the Argentine economy, including freezing rent prices and public services tariffs, and the prohibition of work dismissals, among others.
In the future, the level of intervention in the economy by the Argentine government may continue or increase, including in response to social unrest, through expropriation, nationalization, intervention, forced renegotiation or modification of existing contracts, new taxation policies, establishment of price controls, changes in laws, regulations and policies affecting foreign trade and investment. These measures may adversely affect Argentina's economy and, in turn, our business, results of operations and financial condition.
Economy & Political Environment - Risk 3
The stability of the Argentine financial system depends upon the ability of financial institutions, including Banco Supervielle, the main subsidiary of Grupo Supervielle, to retain the confidence of depositors.The measures implemented by the Argentine government in late 2001 and early 2002, in particular the restrictions imposed on depositors to withdraw money freely from banks and the pesification and restructuring of their deposits, resulted in losses for many depositors and undermined their confidence in the Argentine financial system.
Although liquidity levels are currently reasonable, no assurances can be given that these levels will not be reduced in the future due to adverse economic conditions that could negatively affect the Bank's business.
If, in the future, depositor confidence further weakens and the deposit base contracts, such loss of confidence and contraction of deposits will have a substantial negative impact on the ability of financial institutions, including the Bank, to operate as financial intermediaries. If the Bank is not able to act as a financial intermediary and otherwise conduct its business as usual, the results of its operations could be adversely affected or limited, which in turn could affect our results of operations and financial condition.
Economy & Political Environment - Risk 4
Fluctuations in the value of the Argentine Peso could adversely affect the Argentine economy.Fluctuations in the value of the Peso continue to affect the Argentine economy. Since January 2002, the Peso has fluctuated significantly in value. Persistent high inflation, together with formal and de facto exchange controls, have resulted in the past in an overvalued official exchange rate. Compounded by the effects of exchange controls and restrictions on foreign trade, highly distorted relative prices have resulted in the loss of competitiveness of Argentine production, impeded investment and caused economic stagnation. In 2019, 2020 and 2021, the Peso depreciated 36.6%, 29% and 22%, respectively, with respect to the U.S. dollar. As of April 26, 2022, the exchange rate was Ps.114.84 per U.S. dollar.
The depreciation of the Peso may have a negative impact on the ability of certain Argentine businesses to service their foreign currency denominated debt, lead to inflation, significantly reduce real wages and jeopardize the stability of businesses whose success depends on domestic market demand, and also adversely affect the Argentine government's ability to honor its foreign debt obligations. In turn, a significant appreciation of the Peso against the U.S. dollar also presents risks for the Argentine economy, including the possibility of a reduction in exports as a consequence of the loss of external competitiveness. Any such appreciation could also have a negative effect on economic growth and employment and reduce tax revenues in real terms.
Economy & Political Environment - Risk 5
The asset quality of financial institutions, including ourselves, may deteriorate if the Argentine private sector continues to be affected by adverse macroecononic conditions in Argentina.Changed
As a result of Argentina's macroeconomic environment, the capacity of many Argentine private sector debtors to repay their loans has deteriorated significantly, affecting the asset quality of financial institutions, including the Bank and IUDÚ. According to data published by the INDEC, while Argentina's GDP decreased by 9.9% in 2020 due to the impact of the COVID-19 pandemic and the measures taken by the Argentine government to contain the spread of the virus, Argentina's GDP grew by 10.3% in 2021, mainly due to the mitigation of the impact of the COVID-19 as a result of the implementation of vaccination programs, as well as to the increase in commodity prices, which resulted in an increase in U.S. dollar exports. However, although Argentina's GDP has surpassed pre-pandemic levels, the country's economy remains fragile and volatile.
If customers are not able to repay their loans the quality of the Bank's and IUDÚ's assets may further deteriorate and loan loss provisions may increase, which could, in turn, adversely affect our results of operations and financial condition.
Economy & Political Environment - Risk 6
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine.Added
Global markets are experiencing volatility and disruption following the start of the military conflict between Russia and Ukraine in February 2022. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices (in particular oil and gas), credit and capital markets. Additionally, Russia's military interventions in Ukraine have led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia and certain other regions, including agreement to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication payment system. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets.
Argentina could be adversely affected by negative economic or financial developments in other countries. We cannot assure you that developments in other markets will not affect macroeconomic, political or social conditions in Argentina and, consequently, our business, results of operations and financial condition.
Economy & Political Environment - Risk 7
If the current levels of inflation continue or increase, the Argentine economy and our business and financial condition could be adversely affected.Changed
In the past, inflation has materially undermined the Argentine economy and Argentina's ability to create conditions that would permit growth. High inflation may also undermine Argentina's competitiveness abroad and lead to a decline in private consumption which, in turn, could also affect employment levels, salaries and interest rates. Moreover, a high inflation rate could undermine confidence in the Argentine financial system, reducing the Peso deposit base and negatively affecting long-term credit markets.
In recent years, Argentina has confronted high inflationary pressures, evidenced by significantly higher fuel, energy and food prices, among other factors, and continues to do so. In 2019, the INDEC registered an increase in CPI of 53.8% and an increase in WPI of 58.5%. In 2020, the INDEC registered an increase in CPI of 36.1% and in increase in WPI of 35.4%. In 2021, the INDEC registered an increase in CPI of 50.9% and an increase in WPI of 51.3%. In March 2022, the INDEC registered a CPI of 6.7%, which represents the highest monthly inflation in the last 20 years.
In June 2018, the International Practices Task Force categorized Argentina as a country with a projected three-year cumulative inflation rate greater than 100%. Pursuant to IAS 29 (Financial Reporting in Hyperinflationary Economies), the financial statements of entities whose functional currency is that of a hyperinflationary economy must be restated in a suitable general price index to control the effects of changes. Argentine companies applying IFRS are required to apply IAS 29 to their financial statements for periods ending on and after July 1, 2018. In addition, certain regulatory authorities, such as the CNV, have required that financial statements submitted to the CNV for the periods ended on and after December 31, 2018 be restated for inflation in accordance with IAS 29.
Monetary policies carried out by the Central Bank to provide financial assistance to the Argentine government in order to fund measures adopted in relation to the ongoing COVID-19 pandemic could trigger further inflationary pressures in 2022. On April 8, 2022, the Argentine Central Bank announced that the new inflation estimates for years 2022, 2023 and 2024 are 59.2%, 47.5% and 40.9%, respectively, pursuant to its survey of consumer expectations (Relevamiento de Expectativas de Mercado) carried out between March 29 and March 31, 2021.
There can be no assurances that inflation rates will not continue to escalate in the future or that the measures adopted or that may be adopted by the administration to control inflation will be effective or successful. If inflation levels remain high or continue to rise in the future, the development of the Argentine economy could be negatively impacted and, in particular, our costs of operation could increase, which may negatively affect our business, financial condition and results of operations.
Economy & Political Environment - Risk 8
Failure to adequately address actual and perceived risks of institutional deterioration and corruption may adversely affect Argentina's economy, which in turn could adversely affect our business, financial condition and results of operations.Changed
A lack of a solid institutional framework and corruption have been identified as, and continue to be a significant problem for Argentina. In Transparency International's 2020 Corruption Perceptions Index survey of 180 countries, Argentina was ranked 78, down from 66 in the index for 2019. In Transparency International's 2021 Corruption Perceptions Index survey of 180 countries, Argentina was ranked 96, down from 78 in the index for 2020.
Recognizing that the failure to address these issues could increase the risk of political instability, distort decision-making processes and adversely affect Argentina's international reputation and ability to attract foreign investment, the former Macri administration announced several measures aimed at strengthening Argentina's institutions and reducing corruption. These measures included the reduction of criminal sentences in exchange for cooperation with the government in corruption investigations, increased access to public information, the seizing of assets from corrupt officials, increasing the powers of the Anticorruption Office (Oficina Anticorrupción) and the passing of a new public ethics law, among others. The current Argentine administration's ability and determination to implement these initiatives taken by the former administration is still uncertain, as it would require, among other things, the involvement of the judicial branch, which is independent, as well as legislative support from opposing parties. We cannot assure whether the implementation of these measures will be successful.
The Argentine government's inability to accurately address actual and perceived risks of institutional deterioration and corruption might adversely affect the Argentine economy which, in turn, could adversely affect our business, financial condition, and results of operations.
Economy & Political Environment - Risk 9
High fiscal deficit could result in long lasting adverse consequences for the Argentine economy, which in turn could adversely affect our business, financial condition and results of operations.Changed
During the last years, the Argentine government has sustained high levels of fiscal deficit, and has resorted regularly to the Central Bank to source part of its funding requirements. In 2019, 2020, and 2021, public sector expenditure increased approximately 37.2%, 63.5% and 49.6%, respectively, and the government achieved a primary fiscal deficit of 0.4%, 6.5% and 2.2% of Argentina's GDP, respectively, according to the Argentine Ministry of Treasury. The decrease in the fiscal deficit in 2021 was mainly due to certain extraordinary revenues. If the Argentine government would not have generated such extraordinary revenues, the fiscal deficit would have represented 3.8% of the Argentina's GDP in 2021.
Following the agreement with the IMF, Argentina is committed to gradually reduce its primary fiscal deficit to 2.5% of GDP in 2022, 1.9% of GDP in 2023 and 0.9% of GDP in 2024, together with a gradual reduction of the monetary assistance to the Argentine government of 1% of GDP in 2022, 0.6% of GDP in 2023 and 0% in 2024.
We cannot assure you that the Argentine government will not seek to finance its deficit by gaining access to the liquidity available in the local financial institutions. In that case, government initiatives that increase the exposure of local financial institutions to the public sector could affect our liquidity and assets quality and have a negative effect on clients' confidence in the financial system.
Economy & Political Environment - Risk 10
If financial intermediation activity volumes relative to GDP continues at low levels, the capacity of financial institutions, including the Bank, our main subsidiary, to generate profits may be negatively affected.Changed
As a result of the 1999-2002 financial crisis, as a result of which the Argentine economy fell 18.4%, the volume of financial intermediation activity dropped dramatically: private sector credit plummeted from 24% of GDP in December 2000 to 7.7% in June 2004 and total deposits as a percentage of GDP fell from 31% to 23.2% during the same period. The depth of that crisis and the effect it had on depositors' confidence in the financial system created uncertainty regarding its ability to act as an intermediary between savings and credit. Although private credit relative to GDP grew after the 1999-2002 financial crisis, since 2018 credit contracted in real terms as a result of the negative economic growth. Furthermore, the ratio of the total financial system's private-sector deposits and loans to GDP remains low when compared to international levels and continues to be lower than the periods prior to the 1999-2002 crisis and also from prior years, especially in the case of private-sector deposits and loans, which amounted to 14.8% and 8.3% of GDP, respectively, as of December 31, 2021.
There is no assurance that financial intermediation activities will continue in a manner sufficient to reach the necessary volumes and businesses to provide financial institutions, including the Bank and IUDÚ, with sufficient capacity to generate income, which may, in turn, impact our results of operations.
Economy & Political Environment - Risk 11
The Argentine economy could be adversely affected by economic events in other global markets.Changed
Argentina's economy remains vulnerable to external shocks that could be caused by adverse regional or global developments. A significant decline in the economic growth of any of Argentina's major trading partners (including Brazil, the European Union, China and the United States) could have a material adverse impact on Argentina's balance of trade and adversely affect Argentina's economy. In addition, Argentina may be affected by economic and market conditions in markets worldwide, as was the case in 2008, when the global economic crisis led to a sudden economic decline in Argentina in 2009. The ongoing COVID-19 pandemic has disrupted global and Argentine economies, the full impact of which cannot be accurately predicted at this time.
In the past, emerging market economies have been affected by changes in U.S. monetary policy, at times resulting in the unwinding of investments and increased volatility in the value of their currencies. During 2018, the interest rate curve in the United States shifted upward, generating a generalized devaluation in emerging markets, with the Turkish Lira and the Peso being the most affected currencies against the U.S. dollar. However, in July 2019, the U.S. Federal Reserve cut rates for the first time since 2008, indicating an expectation of lower growth in the future, with long-term rates remaining low during 2020 and 2021. On March 16, 2022, the U.S. Federal Reserve approved an increase of 0.25% in interest rates, the first increase since December 2018, and interest rates are expected to continue to rise during 2022. If interest rates rise significantly in developed economies, including the United States, emerging market economies, including Argentina, could find it more difficult and expensive to borrow capital and refinance existing debt, which would negatively affect their economic growth.
Economy & Political Environment - Risk 12
Due to our exposure to middle and lower-middle-income individuals and SMEs, the quality of our consolidated loan portfolio is more susceptible to economic downturns and recessions.Our consolidated loan portfolio is exposed to the segments of SMEs and middle and lower-middle-income individuals, which are more vulnerable to economic recessions than large corporations and higher income individuals. The quality of our portfolio of loans to SMEs and to individuals is therefore dependent to a large extent on domestic and international economic conditions. Consequently, we may experience higher levels of past due amounts, which could result in higher provisions for loan losses.
The loan portfolio of the Personal & Business Banking segment, which includes individuals and small business with annual sales of up to Ps.300 million and SMEs with annual sales over Ps.300 million and below Ps.1.5 billion, represented approximately 50% of the consolidated loan portfolio (net of provisions) as of December 31, 2021, while the loan portfolio of the Consumer Finance Segment represented approximately 9% of the consolidated loan portfolio. Within the 50% share of the Personal & Business Banking Segment, 43% corresponds to individuals, while 7% corresponds to Small Businesses & SMEs. Morover, loans to lower-risk payroll and pension clients accounted for 67% of our total loans to individuals at the bank level. If the economy in Argentina experiences a significant downturn, this could materially and adversely affect the liquidity, businesses and financial condition of our customers, which may in turn cause us to experience higher levels of past due loans, thereby resulting in higher provisions for loan losses and subsequent write-offs. This may materially and adversely affect the credit quality of our loan portfolio, our asset quality, our results of operations and our financial condition.
Natural and Human Disruptions1 | 2.1%
Natural and Human Disruptions - Risk 1
The ongoing COVID-19 pandemic and government measures to limit the spread of the virus have disrupted the global and Argentine economies, and affected, and could continue to affect, our business and results of operations.Changed
Capital Markets1 | 2.1%
Capital Markets - Risk 1
Changes in market conditions and any associated risks, including interest rate and currency exchange volatility, could materially and adversely affect our consolidated financial condition and results of operations.Legal & Regulatory
Total Risks: 7/47 (15%)Below Sector Average
Regulation6 | 12.8%
Regulation - Risk 1
The Consumer Protection Law and the Credit Card Law may limit some of the rights afforded to us and our subsidiaries.Regulation - Risk 2
We operate in a highly regulated environment, and our operations are subject to regulations adopted, and measures taken, by several regulatory agencies.Financial institutions are subject to significant regulation relating to functions that historically have been determined by the Central Bank, the Financial Information Unit (Unidad de Información Financiera or "UIF") and the CNV. The number of these regulations have increased in connection with the ongoing COVID-19 pandemic. See "Item 4.B. Business Overview-Government Measures in Response to the Ongoing COVID-19 Pandemic." These regulations include: (i) minimum capital requirements; (ii) mandatory reserve requirements; (iii) requirements for investments in fixed rate assets; (iv) lending limits and other credit restrictions, including mandatory allocations; (v) limits and other restrictions on fees; (vi) reduction of the period for the financial institutions to deposit the amount of sales made with credit cards in the corresponding accounts of the sellers; (vii) limits on the amount of interest banks can charge or pay, or on the period for capitalizing interest; (viii) accounting and statistical requirements; (ix) limits on dividends; (x) limits on market share; (xi) reporting or controlling regimes as agents or legally bound reporting parties; and (xii) changes in the deposit insurance regime.
We have no control over governmental regulations or the rules governing all aspects of our operations. The Central Bank may penalize our main subsidiary, the Bank, as well as our subsidiary IUDÚ, in case of any breach of applicable regulations. Similarly, the CNV, which authorizes our securities offerings and regulates the public markets in Argentina, has the authority to impose sanctions on us and our Board of Directors for breaches of corporate governance.
The absence of a stable regulatory framework in Argentina for financial institutions and the imposition of measures that affect the profitability of financial institutions and limit the possibility of covering their positions against currency fluctuations result may limit the decisions that financial institutions, including the Bank and IUDÚ, can make on asset allocation, which may adversely affect future financial activities and our result of operations. There can be no assurances that new and tighter regulations will not be implemented in the future, which could cause uncertainty and could negatively affect our future financial activities and results of operations. In addition, existing or future legislation and regulation may require us to make material expenditures to avoid any material adverse effect on our consolidated operations.
Regulation - Risk 3
We are exposed to compliance risks.Due to the nature of our activities, we are exposed to certain compliance risks. We must comply with regulations regarding customer conduct, market conduct, the prevention of money laundering and the financing of terrorist activities, the protection of personal data, the restrictions established by national or international sanctions programs and anti-corruption laws (including the U.S. Foreign Corrupt Practices Act of 1977 and the UK Bribery Act of 2010), the violations of which could lead to very significant penalties. As part of our business, we directly or indirectly, through third parties deal with entities whose employees are considered to be government officials. Our activities are also subject to complex customer protection and market integrity regulations.
Although we have adopted multiple policies, procedures, internal control systems and other measures to manage compliance risk, it is dependent on its employees and external suppliers for the implementation of these policies, procedures, systems and other measures, and it cannot guarantee that these are sufficient or that our employees or other persons related to us or our business partners, agents and/or other third parties with a business or professional relationship do not circumvent or violate current regulations or our ethics and compliance regulations, acts for which such persons could be held ultimately responsible and/or that could damage our reputation. In particular, acts of misconduct by any employee, and particularly by senior management, could erode trust and confidence and damage our reputation among existing and potential clients and other stakeholders. Actual or alleged misconduct by the us in any number of activities or circumstances, including operations, employment-related offenses such as sexual harassment and discrimination, regulatory compliance, the use and protection of data and systems, and the satisfaction of client expectations, and actions taken by regulators or others in response to such misconduct, could lead to, among other things, sanctions, fines and reputational damage, any of which could have a material adverse effect on our business, financial condition and results of operations.
We may not be able to prevent third parties from using the banking network in order to launder money or carry out illegal or inappropriate activities. Moreover, financial crimes continually evolve and emerging technologies, such as cryptocurrencies and blockchain, could limit our ability to track the movement of funds. Additionally, in adverse economic conditions, it is possible that financial crime attempts will increase significantly.
If there is a breach of the applicable regulations or the Group's ethics and compliance regulations or if the competent authorities consider that the Bank does not perform the necessary due diligence inherent to its activities, such authorities could impose limitations on our activities, the revocation of our authorizations and licenses, and economic penalties, in addition to having significant consequences for our reputation, which could have a significant adverse impact on our business, financial condition and results of operations. Furthermore, we from time to time conduct investigations related to alleged violations of such regulations and ethics and compliance regulations, and any such investigation or any related procedure could be time consuming and costly, and its results difficult to predict.
In 2020 and 2021, the COVID-19 outbreak has led in many countries to new specific regulations, mainly focused on consumer protection measures. The difficulties associated with the need to adapt our subsidiaries' systems to these new regulations quickly along with the fact that the majority of our employees have been working remotely could pose new compliance risks. Likewise, despite the existing controls in place, the increase in remote account opening driven by the pandemic could increase money laundering risks. Additionally, criminals are continuing to exploit the opportunities created by the pandemic across the globe and increased money laundering risks associated with counterfeiting of medical goods, investment fraud, cyber-crime scams and exploitation of economic stimulus measures put in place by governments. Increased strain on our communications surveillance frameworks could in turn raise our market conduct risk.
Regulation - Risk 4
Exposure to multiple federal, provincial and/or municipal legislation and regulations could adversely affect our business or results of operations.The Argentine government has historically exercised significant influence over the economy and financial institutions. In the past, several different bills to amend the Argentine Financial Institutions Law No. 21,526 (the "FIL") have been put forth for review by the Argentine Congress, seeking to amend different aspects of the FIL, including the qualification of financial services as a public service, an increase in governmental regulations affecting the activities of financial entities and initiatives to make financial services more widely available.
Laws and regulations currently governing the economy and the banking sector may continue to change in the future, and any changes may adversely affect our business, financial condition and results of operations. In particular, a thorough amendment of the FIL would have a substantial effect on the banking system as a whole. If such a bill were passed, or any other amendment to the FIL be made, the subsequent changes in banking regulations may have adverse effects on financial institutions in general, and on our business, financial conditions and results of operations.
In addition, Argentina has a federal system of government with 23 provinces and the Autonomous City of Buenos Aires, each of which, under the Argentine national constitution, has full power to enact legislation concerning taxes and other matters. Likewise, within each province, municipal governments have broad powers to regulate such matters. Due to the fact that our branches are located in multiple provinces, we are also subject to multiple provincial and municipal legislation and regulations. Future developments in provincial and municipal legislation concerning taxes, provincial regulations or other matters may adversely affect our business or results of operations.
As an example of the aforementioned, in the second half of 2020 and after the suspension of the 2017 fiscal consensus in late 2019, certain Argentine provinces (Córdoba, San Luis, Buenos Aires and the City of Buenos Aires) raised the tax rate on gross income tax for banks. Additionally, in October 2020, the City of Buenos Aires also eliminated a tax exemption on interest income received from LELIQs (short-term debt instruments issued by the Central Bank as part of its monetary policy).
In January 2021, a legal action was filed against the Autonomous City of Buenos Aires in order to declare Laws No. 6,382 and No. 6,383 unconstitutional, which seek to burden the returns derived from securities, bonds, bills, certificates of participation (equity) and other instruments issued or to be issued in the future by the Argentine Central Bank with turnover tax. Such legal action was filed under File No. CAF 18156/2020 ("ADEBA Asociacio´n Civil de Bancos Argentinos y otros c/GCBA y otro s/Proceso de Conocimiento") by the Association of Banks and most of its members. The Argentine Central Bank has filed a legal action for the same purpose.
Regulation - Risk 5
The maintenance or implementation of additional exchange controls regulations, restrictions on transfers abroad and capital inflow restrictions could limit the availability of international credit and could threaten the financial system, which may adversely affect the Argentine economy.In the past, the Argentine government has increased controls on the sale of foreign currency, limiting transfers of funds abroad. Measures taken by the Argentine government significantly curtailed access to the official foreign exchange market and, as a result, an unofficial U.S. dollar trading market developed in which the Peso-U.S. dollar exchange rate differed substantially from the official Peso-U.S. dollar exchange rate. While the former administration had initially eliminated foreign exchange restrictions in 2016, in September 2019, in response to significant capital flight from the country, the Argentine Central Bank imposed restrictions on foreign exchange transactions, which were effective until December 31, 2019. Following the change in government in December 2019, the Fernández administration has extended the measures indefinitely, and established further restrictions, including a new tax (impuesto solidario) on certain transactions involving the purchase of foreign currency by Argentine residents.
The current exchange controls apply with respect to access to the foreign exchange market by residents for savings and investment purposes abroad, the payment of external financial debts abroad, the payment of dividends in foreign currency abroad, payments of imports and exports of goods and services, and the obligation to repatriate and settle the proceeds from exports of goods and services for Pesos, among others. For further information, see "Item 10.D. Exchange Controls".
In September 2020, the Central Bank issued Communication "A" 7106 restricting the access to the foreign exchange market for the repayment of principal payments under certain external financial indebtedness maturing between October 15, 2020 and March 31, 2021. These restrictions were further amended and currently the restrictions apply to external financial indebtedness maturing between October 15, 2020 and December 31, 2022. We cannot assure you whether the Central Bank will extend these restrictions or adopt similar restrictions in the future.
We cannot anticipate for how long these measures will be in force or if additional restrictions will be imposed. The Argentine government could maintain or impose new exchange controls, restrictions and take other measures in response to capital flight or a significant depreciation of the Peso, which could in turn limit access to the international capital markets and affect the Argentine economy. In addition, such evolving exchange control restrictions and measures may result in Argentine Central Banks's information requests, enforcement actions and penalties due to diverging interpretations of foreign exchange regulatoins.
As a related matter, the international reserves deposited with the Argentine Central Bank have fluctuated significantly. The international reserves of the Argentine government amounted to U.S.$39.7 billion as of December 31, 2021. Future measures taken by the Argentine government could further reduce the level of international reserves deposited with the Argentine Central Bank in the future.
In addition, since the imposition of exchange controls, the difference between the official exchange rate, which is currently used for both commercial and financial operations, and other informal exchange rates that arise implicitly as a result of certain operations commonly carried out in the capital market (dollar "MEP" or "contado con liquidación"), have broadened deeply during 2021 creating a gap of approximately 86% with the official exchange rate as of April 26, 2022.
The Argentine government could maintain a single official exchange rate or create multiple exchange rates for different types of transactions, substantially modifying the applicable exchange rate at which we acquire currency for different purposes. Furthermore, existing or future measures could undermine the Argentine government's public finances, which could adversely affect Argentina's economy, which, in turn, could adversely affect our business, results of operations and financial condition.
Regulation - Risk 6
Restrictions on transfers of foreign exchange and the repatriation of capital from Argentina may impair your ability to receive dividends and distributions on, and the proceeds for any sale of, the Class B shares underlying the ADSs.Exchange controls currently in place could impair or prevent the conversion of anticipated dividends, distributions, or the proceeds from any sale of Class B shares, as the case may be, from Pesos into U.S. dollars and the remittance of the U.S. dollars abroad. In particular, with respect to the dividends and distributions on any sale of Class B shares underlying the ADSs, as of the date of this annual report, the conversion from Pesos into U.S. dollars and the remittance of such U.S. dollars abroad is subject to prior Central Bank approval, which may not be granted. Access to the free foreign exchange market ("MLC," as per its Spanish acronym) to pay dividends to non-resident shareholders is granted subject to the following conditions:
oMaximum amounts: the total amount of transfers made through the MLC for payment of dividends to non-resident shareholders may not exceed the 30% of the total value of the capital contributions made in the relevant local company that entered and settled through the MLC as of January 17, 2020. The total amount paid to non-resident shareholders shall not exceed the corresponding amount denominated in Argentine Pesos determined by the shareholders' meeting to be distributed as dividends.
oMinimum Period: access to the MLC will only be granted after a period of not less than thirty (30) calendar days has elapsed as from the date of the settlement of the last capital contribution that is taken into account for determining the aforementioned 30% cap.
oDocumentation requirements: dividends must be the result of closed and audited balance sheets. When requesting access to the MLC for this purpose, evidence of the definitive capitalization of capital contributions must be provided or, in lack thereof, evidence of filing of the process of registration of the capital contribution before the Public Registry shall be provided. In this case, evidence of the definitive capitalization shall be provided within 365 calendar days from the date of the initial filing with the Public Registry. If applicable, the external assets and liabilities reporting regime set forth by Communication "A" 6401 of the Central Bank (the "External Assets and Liabilities Reporting Regime") shall have been complied with.
If the exchange rate fluctuates significantly during a time when the Depositary (as defined in "Item 12.D. American Depositary Shares") cannot convert or reinvest the foreign currency, you may lose some or all of the value of the dividend distribution. Also, if payments cannot be made in U.S. dollars abroad, the repatriation of any funds collected by foreign investors in Pesos in Argentina may also be subject to restriction. Moreover, available mechanisms to receive dividends in U.S. dollars may involve a significantly higher implicit exchange rate. See "Item 10.D. Exchange Controls."
Litigation & Legal Liabilities1 | 2.1%
Litigation & Legal Liabilities - Risk 1
Class actions against financial institutions for an undetermined amount may adversely affect the profitability of the financial system and of some of our subsidiaries such as the Bank, IUDÚ and InvertirOnline S.A.U.Added
Tech & Innovation
Total Risks: 2/47 (4%)Below Sector Average
Cyber Security1 | 2.1%
Cyber Security - Risk 1
Cybersecurity events could negatively affect our reputation, our financial condition and our results of operations.Technology1 | 2.1%
Technology - Risk 1
Our business is highly dependent on properly functioning IT systems and improvements to such systems.Changed
Production
Total Risks: 2/47 (4%)Below Sector Average
Employment / Personnel1 | 2.1%
Employment / Personnel - Risk 1
Government or labor pressure to grant salary increases and/or additional benefits may affect business conditions in the country.Costs1 | 2.1%
Costs - Risk 1
A decrease in international prices for the main commodities exported by Argentina could negatively affect Argentina's economic condition.Ability to Sell
Total Risks: 2/47 (4%)Below Sector Average
Competition1 | 2.1%
Competition - Risk 1
Increased competition and consolidation in the banking and financial industry could adversely affect our operations.Sales & Marketing1 | 2.1%
Sales & Marketing - Risk 1
We are susceptible to fraud, unauthorized transactions and operational errors.See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
FAQ
What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky.
The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.
They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.
It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.
Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.
Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.
According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.
You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.
Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.
A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.
1. Financial & Corporate
- Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
- Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
- Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
- Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.
2. Legal & Regulatory
- Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
- Regulation – risks related to compliance, GDPR, and new legislation.
- Environmental / Social – risks related to environmental regulation and to data privacy.
- Taxation & Government Incentives – risks related to taxation and changes in government incentives.
3. Production
- Costs – risks related to costs of production including commodity prices, future contracts, inventory.
- Supply Chain – risks related to the company’s suppliers.
- Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
- Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.
4. Technology & Innovation
- Innovation / R&D – risks related to innovation and new product development.
- Technology – risks related to the company’s reliance on technology.
- Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
- Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.
5. Ability to Sell
- Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
- Competition – risks related to the company’s competition including substitutes.
- Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
- Brand & Reputation – risks related to the company’s brand and reputation.
6. Macro & Political
- Economy & Political Environment – risks related to changes in economic and political conditions.
- Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
- International Operations – risks related to the global nature of the company.
- Capital Markets – risks related to exchange rates and trade, cryptocurrency.