Good morning, everyone, and welcome to the LUKO Supervielle Second Quarter 2021 Earnings Call. This is Ana Bartesaille, 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, GrupoSupervielle.com. 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. If you want to ask a question, you need to be connected to a Zoom platform from any device. We will not be able to take your questions if you are connected from a phone line. Also, please make sure your name and last name appear in the TOR platform you are using. To ask a question by voice, please press the raise your hand button located in the TOR platform.
To withdraw your questions, press raise your hand again. You can also send your questions in written form via the Q and A box in the Zoom platform anytime during the call. We will ask you to limit yourself Also joining us are Alejandro Stenkel, 2nd Vice Chairman of the Board and Panzio and Jorge Ramirez, 1st Vice Chairman of the Board. Alejandra Noton, Board Member of several Frutco Superviel subsidiaries will also be joining us for today's call. All will be available for the Q and A session.
Note that starting 1st Q 2020 as per Central Bank Regulation, we began reporting the child's applying hyperinflation accounting in accordance with IFRS rule IAS 29. Therefore, all results in this presentation are adjusted for inflation as of June 30, 2021, unless otherwise noted. In addition, following the retrospective application of the Central Bank Communication A721 effective January 1, 2021, figures for all quarters of 2020 have been restated. For your convenience, our earnings report filed yesterday after market closed also includes managerial results in nominal terms. Before we proceed, I would like to make the following Safe Harbor statement.
Today's call will contain forward looking statements, which are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties, including as a result of the COVID-nineteen 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 current events or circumstances. Today, Maria Norilla, our CFO, will start the call discussing our performance for the quarter and our near term outlook. Francisco Corriere, our Chairman and CEO, will follow with an update on our mid term strategic initiatives.
Thank you, Ana. Good morning, everyone. Thank you for joining us today. Please turn to Slide 4 of our earnings presentation. We are navigating recessionary environment, the activity in the quarter, further penalized by the second wave of COVID-nineteen, resulting in season loan demand growing below inflation and remaining at historical lows.
Central bank regulations for volumes and prices of financing assets and liabilities have also been putting significant pressure in NIM in past quarters. This, together with higher turnover taxes, along with increased loan loss provisions after the deferral program finalized last March, resulted in a net loss of ARS 318,000,000 and negative ROE of 2.8 percent this quarter. For the first half of the year and excluding non recurring severance charges, we will have reported a net income of ARS 6 ARS 643,000,000 and ROE in real terms of approximately 2.8%. In terms of efficiency, our comparable efficiency ratio, excluding nonrecurring severance payments and earlier retirement charges, deteriorated to 72% from 66% in the prior quarter. This mainly reflects a yearly mid single digit decline in revenue while comparable total expenses were relatively flat.
Looking at the last 6 months of the year, when excluding non recurring charges, comparable expenses were now 6%, while personnel expenses dropped 9% year on year. Finally, we maintained a strong liquidity and a solid capital base during the quarter with a Tier 1 ratio of 14.3 percent, up 50 basis points sequentially. Now turning to our strategic initiatives. Given our commitment to long term value creation, Mauricio will discuss shortly how we are advancing on our digital transformation agenda. Moving on to our loan performance on Slide 5.
Argo posted a slide sequential contraction reflects in overall weak credit demand. The peso loan portfolio remains relatively stable sequentially as a decline in the retail loan portfolio was partially offset by financing corporate and mandatory SME lines. Consumer finance loans increased mid single digits sequentially, although we maintained tight credit scoring standards in underwriting policies. Finally, U. S.
Dollar loans in original currency were up 5% sequentially. Note that government mandatory case lines accounted for 10% of our loan portfolio, up 100 basis points sequentially and includes close to COP 14,000,000 in SME loans and preferential rates. Turning to funding on Slide 6. Liquidity remains solid. The loan to deposit ratio continued to be contracted quarter reaching a record low of 50 3.9.
Peso deposits growth in the low single digit sequentially is €790,000,000 by seasonal increase in core retail deposits following a 50% payment of the 13th salary in June. Note that average balance of peso deposits posted increases of nearly 12% year over year and over 5% sequentially. Total deposits in original currency were up 4% sequentially, accounting for slightly over 12% of total deposits compared to 13% in the prior quarter. Now moving on to the P and L on Slide 7. Peso NIM stabilized at 18.7% after contracting several consecutive quarters pressured by regulatory controls and the recessionary background.
The bottom right chart shows how the share of average peso loans over total average peso inter term in assets has compressed since the highs of 85% in the Q1 of 2018 to levels of 46% this quarter, negative impact in total NIM. Net financial income increased sequentially in the low single digits to MXN 11,000,000,000, mainly reflecting increased volumes of Central Bank Elite together with higher yields and volumes of peso government bonds. Non repricing, including the new government mandatory credit type granted to SMEs at preferential interest rates, also contributed to offset overall weak load demand. Moving on to asset quality on Slide 8. Load of provisions net were MXN 1,700,000,000, up from MXN 1,000,000,000 in the prior quarter.
With cost of risk net rising to 5.7%, although below 20.11. Higher delinquency in retail loans observed since the lifting of automatic deferral in March, resulting in higher provisions this quarter. Taking a conservative sense, we did not apply the COVID-nineteen anticipatory provisions related in 2020 to this zone. At quarter end, COVID-nineteen anticipatory provision amounted to MXN2.4 billion versus MXN2.8 billion as of March 31. The top right chart of this page depicts our total provisioning ratio, which increased to 7.2% in June from 6.9% in March.
The NPL ratio increased quarter on quarter by 40 basis points to 4.4%, driven by credit cards after the end of the grace period and the mandatory reclassification of customers performing with SuperPL but non performing with other banks. By contrast, we observed an improvement in corporate NPLs. On Slide 9, we provide an update on our loan performance and asset quality for July. Keep in mind, this is management information. In terms of asset quality, NPLs for July increased to 5.5% from 4.4% in the 2nd quarter, mainly driven by retail customers and to a much lesser extent by corporate, which was a single fully collateralized loan that was classified as a period following the transaction regulation.
Importantly, 80% of our non performing commercial loans are collateralized. Now on Slide 10. Our guidance remains suspended due to the continued limited visibility ahead, on Slide 10, we share our views on the main drivers of the business for the remainder of the year. Pesach denominated loans, which are today at historical lows, are expected to grow below inflation, both commercial and consumer loans. At the same time, we see deposits growing above inflation, but down by FX restrictions and interest rate frozen and deposits.
The mix has been changing with non remunerated side deposits growing below inflation, but remunerated deposits were above, thus impacting cost of funds as has been the case in the last 4 quarters. In terms of asset quality, we expect NPL to peak in the 3rd quarter, reflecting the expiration of the loan deferral programs and grace periods in March. We continue monitoring asset quality and we remain comfortable with the current level of provisions. In addition, we expect cost of risk to be below 20.20 pesos, that's about the historical average in line with our expected loss models. With respect to margins, short term NIMs remained pressured by several factors: weak credit demand, the impact of both of us from the forward interest rate and time deposits and subsidized rates on loans.
Personnel and administrative expenses are likely to grow above inflation impacted by restructuring costs and the deployment of digital transformation. However, excluding member foreign items, these expenses are anticipated to decline in real terms. In addition, higher turnover taxes rates are anticipated to continue impacting expenses. These in turn are expected to grow in line with inflation. Finally, we expect capital and liquidity to remain at corporate level supporting long term sustainability.
As I mentioned earlier, note that 100% of our capital is hedged against inflation. Now let me turn the call to Francisco Escobar, who will provide an update on our strategic initiatives. Patricio, please go ahead. Thank you, Mariano. You heard Mariano address our financial results and expectations for the remainder of the year as we navigate a challenging backdrop characterized by fears of economic recession, further deepened by the pandemic, which drove industry loan demand to historical lows.
Albanian also discussed increasing Central Bank regulations on barges and prices of banking assets and liabilities since 2018, has continued to put significant pressure on me. At the same time, the pandemic accelerated digital adoption and remote working. In this context, we decided to accelerate our transformation program and increase efficiencies, prioritizing long term value creation. We are working on 3 key fronts: 1st, accelerating the digital and operational transformation at Bancorp Supervielle second, U2, our consumer finance subsidiary, is building a full digital banking service 3rd, diversifying revenue with generation beyond Argentina. On the next few slides, I will provide greater visibility on this transformation.
In the exhibit at the back of our earnings call presentation, you can find additional information on the progress of our digital KPIs and as well as a more detailed description of the initiatives and timeline. Moving to Slide 12. Let's start with our strategy of accelerating the digital and operational transformation of the group. Our goals are twofold. On the one hand, we seek to expand our client base while retaining loyalty and primary banking relationship to remain in a solid position when demand resumes.
At the same time, we expect to accelerate cost efficiencies while preserving an 11% Tier 1 ratio by 2024. This calls for investments of approximately MXN20 1,000,000,000 in real terms, of which close to MXN8 1,000,000,000 are anticipated to be deployed this year, starting to over MXN7 1,000,000,000 next year and MXN4.5 billion in 2023. Note this does not include investments in the regionalization initiatives, which I will discuss briefly, starting with the transformation of Banco SuperVO. 1st, we are executing our IT strategy, adding APIs to accelerate digital development and time to market, Adaptagate to become a data driven enterprise and migrating to a hybrid multi cloud to provide us with the required flexibility to grow efficiently. We are advancing at full speed to transform the journeys of our customers into a supernative experience.
2nd, our branch network is being informed using BEST in class technologies to facilitate self-service banking and expand SMEs reach in the vision of everywhere and anytime banking. 3rd, we are rightsizing our branch network and accelerating headcount efficiencies. 4th, we are moving towards a hybrid workplace model optimizing our real estate infrastructure and providing for more flexibility among our colleagues. In this sense, we are gradually reducing rental space in our corporate headquarters with the resulting cost savings of $5,000,000 over the next 3 years. We expect that these efficiency measures will be repaid in 24 to 30 months through cost savings and revenue growth while when demand resumes.
These trends are key. In terms of the transformation of you do our consumer finance divisions, our goals are to offer the best digital banking mobile platform for retail customers while stepping up revenue fee revenue growth and lowering cost of funds by attracting digital deposits. The launch on August 15 of Lindo's mobile first digital savings account, the first step in the construction of the best digital banking services for individuals. We have an attractive pipeline for the next 6 months with the planned addition of payment, wallet, insurance, investment products, U. S.
Denominated accounts and well-being services. This move also allows us to target higher income customers looking for digital only banking services. Importantly, we recently renewed the financial services agreement with the Dardena Rice Group, which acquired government operations in Argentina under more flexible conditions. Now, please move to Slide 14. In terms of diversifying revenue origination beyond Argentina, we plan to approach this through 2 businesses.
Starting with our broker, Yol, in Argentina Online, the goal is to offer U. S. Investment products to select countries in LatAm, excluding Brazil, through mobile apps and online applications. Our subsidiary in Uruguay has recently submitted a request for approval from the Central Bank to operate as a digital securities broker. In the next 12 months, we expect to launch a more balanced first investment marketplace and to further expand in key countries of the region where access to online trading in U.
S. Market is limited to high end customers. This initiative will be fully financed by France as a subsidiary. In addition, this month, our Board of Directors also approved the crypto strategy we plan to deploy in the region to gain tapping and satisfy market needs. The order in particular line aims to offer the possibility of buying and selling cryptocurrencies to customers through our orders, concentrating stock and crypto asset investments in the same platform.
This service will be offered to individuals in Argentina, which are the core of current YOLO business and will be powered by a third party. Now please turn to Page 15. The other business that will spur ahead our geographical diversification of these new services, which we will adopt well-being and health services under the B2C or B2B2C format in certain countries in Latin excluding Brazil. We aim to leverage over 15 years of successful experience as the leading service aggregator and marketeer of non financial services and banking industry in Argentina. These services provided by third parties seek to tap unmet demands in health, dentistry, ophthalmology among other areas that contribute to the well-being of our customers in their everyday lives.
As of today, we have reached agreements with 2 world class healthcare providers with presence in the region, one of which we have been working with in Argentina for many years, and we plan to continue adding services over the next month. In closing, we expect near term profitability to remain impacted by overall weak demand and pressure on needs, coupled with the required costs and investments of the transformation strategy. We are stepping up our transformation strategy to meet and execute the new banking and wellness demand of our clients, while also attracting new digital clients. We are aggressively pursuing cost saving opportunities, while offering flexibility to our workforce through a hybrid working structure and have set in motion strategies to expand and diversify our revenue streams beyond Argentina. In a comfortable capital position, we expect to achieve our ambitious goals.
Now we are ready to welcome to the most questions. Thank you.
Thank you, Patrizio. At this time, we will be conducting the question and answer session. As a reminder, to ask a question, you need to be connected to a Zoom platform. We will not be able to take your questions if you are connected from a phone line. To ask a question by voice, please press the raise your hand button and press and then you can raise your hand in the right in another round.
One moment while we pause for questions. The first question comes from Ernesto Avedonto.
Hi, good morning. How are you? Thank you, Ana. Hi, good morning, Patricio, Mariano and all your team and thanks for the opportunity. My first question is on asset quality.
You mentioned in your presentation that you're expecting the peak of NPLs in Q3. So just wondering if you have a potential range for that NPL peak. Also, in the presentation, you are already presenting July numbers, and they are showing that the reserve coverage ratio continued to normalize to 128%. So what would be the level of reserve coverage ratio that you're expecting for the rest of the year? And just wondering if it's considering a potential impact from the delta of the 3rd wave of the COVID-nineteen?
Thank you.
Thank you, Ernesto. Just let me state that what basically what happened in this quarter is mainly reflects the results of the restructuring program and which we anticipated. And we are fully comfortable with the coverage position. And this is constantly the case huge with the risk model. Please, I would like to have Mariano give more specific details on answering your question.
Sure, Patrizio. Hello, Ernesto. Yes, let me give you some color regarding NPLs and coverage ratio you asked. As you know, as of June March, in fact, automatic deferral have been ended by Central Baro. That any debtors that didn't resume payments in April and haven't done that so far are being past due more than 90 days and entering the NPL ratio in July.
That's why we showed some NPL information showing July figures regarding NPLs. So what you see in July is an increase of a little bit more of 1 percentage point in NPLs. And this reflects all debtors that haven't been payment maybe for 6 months or maybe for 1 year, and you're seeing them altogether in 1 month. For the end of the Q3 and the end of the year, we think that NPLs may peak in the next quarter as that could be similar to July Peoples or slightly higher. Any new NPLs that have been shown as of July that you're entering in August or September.
And then we have the new portfolio originated after this automatic deferral. So we should be seeing NPLs be slightly higher than July's figures, but the biggest increase is in this month, we are showing. And then regarding coverage, as we mentioned in the presentation, we have public specific provisions we created in 2020, and we haven't released them in the first two quarters. So we have that provisions to be used during the Q3, probably mainly in the Q3. So coverage as of July was 128 percent.
Probably at the end of the year, it will be on that level, probably a little bit up.
Excellent. Thank you very much. And then for my second question is on your digital transformation. We have seen different traditional banks in the region, exploring to create independent digital banks. So considering that you have Yuduo and you have other digital initiatives such as the online investments, the cryptocurrencies, insurance, have you explored the idea to incorporate all those initiatives in an independent digital bank?
I'll give you that answer this question. Yes, thank you, Ernesto. It's a very interesting question. Right now, the first of our strategy is make sure that our traditional bank, Banco Superiel, goes through a successful digital transformation. We are doing this through a series of initiatives, but basically it has to do with boosting our IT capabilities and making sure that we provide excellent experience end to end for our customers.
We are also making great progress in the digital adoption of different segments, notably great progress has been made during the pandemic in the retirees segment, which we thought would be reluctant to adopt automatic channels and even digital channels, and we're making good progress there. There are reasons that have to do with the business model, with our agreement with the group of NOI, which deployed the consumer division on what was the Walmart network to make that unit sustainable, stand alone and to focus on increasing their funding capabilities by taking deposits from the public. We are, however, working on an ecosystem initiative, which will contemplate certain customer journeys to be integrated throughout the different companies and many of the ones you mentioned are included, like journeys that would integrate bank, IOL, the online broker, insurance and other aspects of our division. So this is a long answer to say, yes, we are assessing the possibility of integrating them into an ecosystem. I wouldn't call it 1 independent digital bank, but yes, we are looking forward to integrating this ecosystem, which is a concept close to the one you point out.
Perfect. Thank you so much.
Thank you, Ernesto. Our next question comes from Gabriel da Nobrega with Citi. Gabriel da Gualde.
Hi, everyone. Good morning and thank you for the opportunity to ask questions. I'm also
going I think we lost you, Abigail.
Abigail, sorry.
Can you hear me now?
Yes, perfect.
Okay, cool.
So my question is also on this digital transformation. We acknowledge all of the efforts here and we understand the investments as well. But I wanted to understand how you were looking at the competitive landscape even more so as we saw the recent valuation of Wala and we also see increased efforts from Mercado Pago. And so I just really wanted to understand how you were looking at it. I know that they aren't necessarily the same thing, but we are seeing FinTech starting to spur up in Argentina.
And so I just wanted to understand here what you were seeing in terms of the competitive environment. And then I'll ask the second question afterwards. Thank you.
Thank you. I will pass thank you, Gabriel. I will pass this question to Alejandro again. Good morning, Gabriel. It's a great question actually.
First of all, you must remember that the Argentine competitive scenario has been very different and very difficult for FinTechs as compared to other parts of the world and the region. The reason being that the profit pools that you typically found, for example, in the U. S. That have to do with the cost of transfers and the cost of maintenance of accounts in Argentina have long been reduced to 0, and we have immediate transfers available for at least 10 years now. And we also have universal savings accounts free of charge.
These two conditions have made the typical profit pools where fintech start from to cherry pick the value proposition of banks more difficult in Argentina than in other competitive scenarios. Having said that, the fintechs that have sprung up, including the digital banks that have risen, have had a significant difficulty in developing integral relationships. They have been able to create some balances in the accounts, but they have had significant difficulties on the asset side. And when you look at them in detail, what you will find is that they've been basically lending to the Central Bank or to the Argentine States. So integral relationships and principalities developed by the digital banks in Argentina still remains to be proven.
In the case of other players like Voila, they have actually moved into requesting a license through an agreement and a merger with Willow Bank to be operating as a digital bank. And what we've done so far is we're extremely successful in creating a large amount of clients, but we have yet to see the profitability of those operations going forward and the funding of those operations because otherwise, they will be operating in the mode of a narrow bank. And as you know, narrow banks are not very profitable. So we think there is a significant opportunity for banks, traditional banks like us that manage to transform their models into digital. And what we see is acquisition costs and scaling costs marginal acquisition costs and marginal scaling costs actually getting very close to FinTechs.
And this is providing a significant evening of the playing field for traditional banks to be able to expand. In terms of Mercado Paro, if I recall your last point, there is a very good progress done on Mogo, which is a platform, the payments, a clearing payment platform that has been launched by a group of banks. Banco Superviel is a shareholder of Mogo. And the last figure I recall is that Nodal has been able to recruit 4,000,000 merchants to its platform and is continuing to grow very successfully. This, as you might recall, follows the pattern of what banks responded in the U.
S. By the creation of Zelle. Here, we call it mono and it's doing pretty well. I don't know if I've covered your question, Gabriel. I'd like to sorry, Gabriel.
I'd like to further a little bit the answer of Alejandro. Concerning the few digital banks in Argentina, So far, they have seen they have been, let's say, I think we have achieved good customer experience. So this is a plus for the digital banks that are operating in Argentina. Which in our case which in our case, the you do launch, we believe we have a better competitive advantage because we have assets already, which we have built over the last few years. And we have the capability to create assets, personal loans, credit cards.
This is we have a strong capability on that. And we believe that attracting deposits will be an easier task because basically what we will do is we the You Do application that we launched recently will be sort of provided to the 250,000 customers that are operating already with assets at Q2. Concerning also another aspect I'd like to point out is that some of the recent valuations or capital raising of fintechs in the region, they reflect, I think, for instance, the case of Valad, they reflect the revenue generation or revenue expectations that they might get beyond Argentina. And this is also the reason why we believe in our case that we need to move beyond Argentina with certain businesses where we have capabilities. And this is why we are making the moves we're making.
All right. That makes sense. And I completely agree with you. I don't know if you guys saw, but Newbank is in trying a valuation of $100,000,000,000 So I think it's exactly in line with what you just said on the recent capital raises. And if you just allow me a follow-up here, I understand that you are going to see efficiency gains over the coming 12 to 24 months.
But I wanted to understand how are you seeing client engagements? You're doing a lot of great things here, launching really good products, which you say have a really good competitive advantage over the other digital players. But I just wanted to understand how are clients using these products? Are they moving maybe into higher value products as well? Just trying to understand here.
I'll handle that. So another great question, Gabriel. We track customer satisfaction very closely. And you're right, we are seeing a significant increase in our NPS. We do this at different levels.
And the investments are actually panning out in terms of increasing customer satisfaction. Things that have driven this customer satisfaction is the increase of our self-service areas in our lobbies. On average, we are moving from something that used to be around 30 square meters to a new format of 100 square meters, which has been significant increase in what we call a Pacio del Cuatro. And digital and automatic channel adoption has shot up, including in the segments of the retirees and as well as satisfaction in that segment, which has proven very, very successful. We have also introduced several changes in our mobile app.
There has been also a recognition in that this visibility is getting better. We typically see a pattern, which initially when you change the configuration, there is some customers that actually complain about having to change, but then it picks up very quickly and it's proving to be a great booster of satisfaction. So I think client engagement is increasing. We are seeing this also on the small and medium enterprises as we deploy a value proposition on small and medium enterprises in some parts of our network where we did not have them. And we continue to explore this kind of format, including hubs and virtual hubs that will allow for, we believe, a very enhanced customer experience too.
So we are investing and we're starting to see the results. There are some KPIs in the exhibits that can help you track them as we publish them in the quarter. I don't know if I've addressed your question, Mario. Alejandro, let me lead on your answer. There's another aspect which we are working and I think which will be a very powerful in building strong relationship with customers, in this case, individual customers.
As you know, in our bank, we believe that cash management and services and particularly attracting funding is very important for the development of our strategy. And so we started to work on, let's say, on our investment platform that will be integrated with our ecosystem. The bank connected with our asset management company and connected with our investment broker in the TR-nine. This investment platform that we start to begin to have results at the last quarter of each year will provide a superlative experience of, let's say, through automatic, for instance, enrollment of at INGACIO-nine for making transactions in the stock exchange or dollar MEC and so on. So we believe this is very important and I think we are one of the few banks doing this and looking forward, this is going to be a very strong part of our strategy.
And also you do we have the same features connected with the Hand Investment platform.
All right. Alejandra and Patricio, thank you very much. This is really clear and congratulations on these new efforts.
Thank you, Gabriel. Now our next question comes from Yuri Fernandes with JPMorgan. Hello, Yuri. You can proceed with your question.
Thank you, Ana. Hi, Patrice, Alejandro, Mariano. Good morning, everyone. I have to also follow-up regarding the digital strategy, more specifically about the fee and NII mix, right? I guess it's clear that you want to go to a more service oriented model, right, like the investment products, well-being services, potentially a more fee related business.
So I just would like to confirm that that's what you have in mind. I also would like to confirm how do you see regulation in those things, right? I would assume you are more free to charge on those kind of services like a percentage of the transactions maybe. I don't know if the Central Bank in Argentina has powers on that. But I guess what I'm trying to access here is that maybe your ROEs can improve in the long term because of the strategy, not only because of lower capital allocation, right?
You're not required to have basal capital requirements on that, but also because you are more you are less regulated, right? So that's my first question, and I can have I will do another one after this. Thank you.
And, Gabriela, it's back to provide an answer on that. Regarding the new initiatives, as you say, they are basically services which will increase our net fee income. Right now, mainly at the public level, we have a lot of restrictions already set in place. So we don't see that much room to further create more restrictions like commissions on loans to individuals, like commissions on transfers, all those things that have already been restricted, some of them several years ago. So we are already working on with that environment.
But where we see more room to increase net fee income as you mentioned is on services like our brokerage service or the sale of non financial services like medical assistance. So as far as we increase those complementary services to our customers, both in the bank, Q2 or in Q2-nine and further with the deployment of some of these strategies beyond Argentina and that having revenues in other currencies that will for sure be a good impact in our net income. Yes. And then adding to that also, I would like to say to state that we are very satisfied with the prospects of insurance business in Argentina. And particularly now, I mean, it was impacted, of course, the insurance was impacted by the pandemic in terms of part of it was because when we had less people in branches, it was more difficult to connect with customers.
But this is gaining traction. But also, the brokerage business the insurance broker is gaining a strong traction among medium sized enterprises, SMEs and typical clients of Banco Super deal. And this has huge potential going forward for our franchise.
Thank you, guys.
Yuri, I think you are quite right off in terms of looking at what we're trying to do in terms of the fee generating businesses because it definitely has a greater efficiency in terms of cost to income and it's not a low CapEx model for scaling. But a key feature that I would add to that billion is that we are looking to increase the engagement and loyalty and offering some of these products in a high inflation context is very important for that purpose too.
Thank you, guys. Just to make it all happen, right, going to the investment plan you announced, are we seeing the number these already in the 2nd quarter numbers? And also, are you going to capitalize those costs? Like how should we think about the $7,800,000,000 for this year? Like should we see an acceleration in the second half?
Should this be capitalized and then we should see an increase in D and A going ahead? How to think about the impact of those numbers in your P and L, the numbers in 2021, 2022 and 2023? Thank you.
Sorry, Yuri. So unfortunately, we lost you. Could you repeat this question, please?
No, sure. So you announced an investment plan of $7,800,000,000 in real terms in 2021, dollars 7,200,000,000 in 2022 and $4,500,000,000 in 2023. So I'm just asking how you are going to treat those numbers. Are they going to be capitalized? Or you're going to or are we going to see this on directly on expenses?
Like how should we think about the impact for your P and L from the investment plan?
Okay. Again, we lost you again, but both of your questions. Mariano, you want to answer this? Yes. And let me tell you if then that's a lot of part of your question that we couldn't be able to hear.
But you asked of investment and what we see the treatment of that investment. That number includes also several costs, not only investment in the traditional accounting standard. So all everything related to severance will be expensed in the quarter if you incurred and not being capitalized. And then on the other hand, we have between 50% 60% of those investments that are related to new developments. Those are capitalized.
We are more sized valued to the accounting standard in 5 years. And then also the other minor part of we know those investments that relates to improvement in branches where we are changing the service model that Alexandre mentioned. So those investments have to do with typical assets and processes.
Thank you, guys, and good luck with the digital strategy.
Thank you, Rui. Thank you.
We have we received a question in our Q and A from Santiago Petri with Pemf Le Dons. I will read, so the audience hear this and then we answer. What expectations do you have on the upcoming midterm elections? Would the results contribute to more rational economic policies? Do you have any expectation about the potential IMF agreement?
Alejandro will answer his question. Right now, up to today, Santiago, what most polls show and most analysts are saying is that what seems likely is basically an election that will favor the incumbents, the current incumbents. There is some speculation that because of an issue around a legal process conducted against the President that this the way that this pans out into the public will have an impact on his image and therefore impact the elections. But right now, the mainstream thought is that we will be seeing what would be a victory of the incumbents of the official party that would be somewhere around between 5% to 10% difference between those that come from the opposition. Having said this, we think that there will be after the elections, there will be a process in which the government will have to conduct some form of adjustment, and we foresee an agreement with the IMF, probably not a fairly stringent and severe IMF agreement, but something in the lines of allowing a gradual alignment of fiscal policy to the traditional IMS use and obviously some policies addressing the difficulty we have with exchange rates and the multiple exchange rates that we're operating into now.
And we believe that this could come basically in the Q1 of next year. Having said this, there have been some rumors that, that agreement could come before, but we so far have no confirmation that this will happen. I hope I have addressed your questions, Santiago.
Okay. One moment if we have any more questions. So this is the end of the Q and A session, I think. So ladies and gentlemen, we have reached the end of today's question and answer session. Thank you for joining us today.
We appreciate your interest in our company, and we look forward to meeting more of you over the coming months and providing financial and business updates next quarter. In the interim, we remain available to answer any questions that you may have. Thank you, and stay safe and healthy. You may disconnect now.