Argentina's Mortgage Market Is Poised to Grow, Supervielle Says

  • Sees potential to grow segment sixfold as inflation rate drops
  • Group snapped Argentina’s two-year IPO drought last year

Financial services company Grupo Supervielle SA expects Argentina’s mortgage-securities market to grow as inflation slows.

The company’s mortgage lending will expand almost six times this year from 78 million pesos ($5 million) in 2016, Chief Financial Officer Alejandra Naughton said in an interview. Supervielle is looking to use a securitization vehicle typically used in Argentina to bundle consumer loans, known as fideicomisos financieros. Those securities grew 38 percent to 42 billion pesos in 2016, according to a report by Argentina’s regulator. 

Bouts of soaring inflation have historically curbed demand for mortgages in South America’s second-biggest economy. The government is promoting mortgages that are linked to inflation because their initial payments tend to be lower and the terms longer, according to the central bank. While the central bank expects the inflation rate to drop to as low as 12 percent by the end of the year, economists surveyed by Bloomberg say it will likely be closer to about 23 percent. 

Banks have lent 4.6 billion pesos in inflation-linked mortgages since April to early March when the program began, the central bank said in a report.

“International experience has shown that mortgage markets start to react when inflation is below 15 percent, but from our experience testing the waters and launching the mortgage product, we see there are lots of inquiries and operations that are starting up,” she said. “The market is starting to move. It’s going to grow faster than we imagine, and we then hope to securitize it so we can get longer terms”.

Bond Sales

Supervielle can finance its mortgage lending thanks to a recent bond sale, but in the future it will seek to securitize the mortgages to fund them in the longer term, Naughton said. The process could start in 2018 at the earliest, she said.

Subsidiary Banco Supervielle sold $300 million of peso-linked debt in January from an approved $800 million shelf. The sale came after Supervielle snapped Argentina’s two-year drought in initial public offerings in June, raising $280 million in New York and Buenos Aires. The company is evaluating whether to sell debt again this year, and if it does it’s likely to do so through its consumer financing subsidiary, Cordial Cia Financiera SA, which is allied with Wal-Mart, according to Naughton.

With over 70 banks, Argentina’s banking industry is seen as atomized and entering a consolidation period. Last year, Citigroup Inc. sold its retail operations to Banco Santander SA and Deutsche Bank AG sold its local subsidiary to Banco Comafi SA. Banco do Brasil has also hired JPMorgan Chase & Co. to sell its stake in Banco Patagonia SA. Supervielle is not currently looking for acquisition targets, but will evaluate any opportunities in the market, Naughton said.

"Ultimately, the bank aims to be among the consolidators, not the consolidated," she said.

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