Business Context and Reporting Period
Company: Macro Bank Inc. (Banco Macro S.A.)
Filing Type: Form 6-K (Foreign Private Issuer)
Reporting Period: First Quarter ended March 31, 2021 (1Q21)
Reporting Date: May 27, 2021
Accounting Framework: IFRS with Hyperinflation Accounting (IAS 29) applied since 1Q20. All figures are in Argentine Pesos (Ps.) restated to the measuring unit current at the end of the period.
Key Financial Metrics
- Net Income: Ps. 2.2 billion (Parent Company).
- Earnings Per Share (EPS): Ps. 3.41 (Ps. 0.37 in USD).
- Operating Income: Ps. 18.9 billion (after G&A and personnel expenses).
- Net Interest Income: Ps. 23.8 billion.
- Net Fee Income: Ps. 5.9 billion.
- Return on Average Equity (ROAE): 5.4% (annualized).
- Return on Average Assets (ROAA): 1.1% (annualized).
- Efficiency Ratio: 35.7%.
- Net Interest Margin (NIM): 17.4% (including FX); 16.5% (excluding FX).
- Non-Performing Financing Ratio: 0.92%.
- Coverage Ratio: 387.82%.
- Regulatory Capital Ratio (Basel III): 37.7% (Tier 1: 30.3%).
- Liquidity: Liquid assets represented 94% of total deposits.
- Total Deposits: Ps. 457.3 billion.
- Private Sector Financing: Ps. 259.4 billion.
Material Changes vs. Prior Period
- Profitability Decline: Net income decreased 39% quarter-over-quarter (QoQ) and 77% year-over-year (YoY). This was driven by a Ps. 14.4 billion loss from the net monetary position (inflation adjustment), which increased 75% YoY.
- Operating Performance: Operating income (after expenses) increased 16% QoQ but decreased 19% YoY. Net operating income (before expenses) increased 5% QoQ but decreased 10% YoY.
- Loan Loss Provisions: Provisions dropped to Ps. 2 million in 1Q21, a 100% decrease from 4Q20, as no additional provisions were deemed necessary compared to previous pandemic-related estimates.
- Balance Sheet Contraction:
- Private sector financing decreased 9% QoQ and 17% YoY.
- Total deposits decreased 17% QoQ and 3% YoY.
- Public sector assets (excluding Leliqs) decreased 15% QoQ.
- Expense Management: Administrative expenses decreased 22% QoQ, primarily due to lower directors' fees and advertising costs. Employee benefits decreased 6% QoQ.
- FX Impact: The Argentine Peso depreciated 9% QoQ (91.9850 Ps./USD at period end), contributing to FX income gains but negatively impacting the net monetary position result.
Guidance, Outlook, Risks, and Unusual Items
- Dividend Declaration: Shareholders approved a dividend of up to Ps. 10 billion (Ps. 15.64 per share) on April 30, 2021. Distribution is subject to Central Bank (BCRA) authorization and a 7% withholding tax. Note: Dividend distribution by financial entities was suspended by BCRA until June 30, 2021.
- Regulatory Changes:
- Inflation Adjustment: New BCRA rules (Communication "A" 7221) require monetary results on fair value items to be recorded in the period's result rather than OCI, impacting comparability.
- Debtor Classification: Gradual transition in classification criteria for debtors with delayed payments, returning to general non-performing criteria by June 1, 2021.
- Risks:
- Macroeconomic: High inflation (12.95% in 1Q21), exchange rate volatility, and economic recession in Argentina.
- Regulatory: Caps on lending rates and floors on deposit rates continue to compress net interest income.
- Credit Risk: Potential impact of the expiration of pandemic-related debtor relief measures.
- Unusual Items: The "Result from net monetary position" (Ps. 14.4 billion loss) is a significant non-cash item reflecting inflation adjustments on monetary assets and liabilities, heavily influenced by the holding of government securities (Leliqs).
Investor Verification Checklist
- Verify the impact of the new BCRA Communication "A" 7221 on the classification of inflation adjustments in future quarters.
- Confirm the status of the Ps. 10 billion dividend distribution given the BCRA suspension deadline of June 30, 2021.
- Monitor the trend of the "Result from net monetary position" as inflation rates fluctuate.
- Assess the sustainability of the 0.92% non-performing loan ratio as pandemic-related debtor classification extensions expire in June 2021.
- Review the composition of liquid assets (94% of deposits) to ensure adequate coverage for potential deposit outflows.