Macro Bank Inc. (Banco Macro S.A.) - 4Q19 Earnings Summary
Business Context and Reporting Period
This Form 6-K filing reports the financial results for Banco Macro S.A. (NYSE: BMA) for the fourth quarter ended December 31, 2019 (4Q19), and the full fiscal year 2019. The results are presented in Argentine Pesos (Ps.) and prepared in accordance with the Central Bank of Argentina (BCRA) framework, which temporarily excludes IFRS 9 expected losses and IAS 29 hyperinflation adjustments. The filing was released on February 19, 2020.
Key Financial Metrics
- Net Income: Ps.13.3 billion for 4Q19 (up 1% QoQ, up 153% YoY). Full Year 2019 Net Income totaled Ps.40.8 billion (up 159% YoY).
- Earnings Per Share (EPS): Ps.20.76 for 4Q19 (up 155% YoY). Full Year 2019 EPS was Ps.63.85.
- Profitability Ratios: Accumulated annualized Return on Average Equity (ROAE) was 59%; Return on Average Assets (ROAA) was 10.4%.
- Revenue: Net Interest Income was Ps.22.7 billion (up 85% YoY). Net Fee Income was Ps.4.1 billion (up 32% YoY).
- Asset Quality: Non-performing financing ratio was 2.07% with a coverage ratio of 123.08%.
- Capital & Liquidity: Regulatory capital ratio was 27.3% (Tier 1: 20%). Liquid assets represented 59% of total deposits.
- Efficiency: Accumulated efficiency ratio improved to 32.3% (down from 37.9% in 4Q18).
Material Changes vs. Prior Period
- Lending Growth: Financing to the private sector grew 10% QoQ to Ps.211.6 billion, driven by a 32% increase in overdrafts and a 27% increase in credit card loans.
- Deposit Base: Total deposits increased 1% QoQ to Ps.262.9 billion. Private sector deposits grew 3% QoQ, while public sector deposits declined 14%.
- Interest Margins: Net Interest Margin (including FX) expanded to 21.1% in 4Q19 from 19.1% in 3Q19. Interest expense decreased 35% QoQ due to lower rates on time deposits.
- Asset Quality Divergence: While the consumer portfolio non-performing ratio improved by 32 basis points, the commercial portfolio ratio worsened by 87 basis points, attributed to specific clients including Vicentin S.A.
- Public Sector Exposure: The bank reduced its Leliq (Central Bank Notes) exposure by 18% QoQ, reallocating liquidity to loans and other instruments.
Outlook, Risks, and Unusual Items
- Regulatory Changes: The BCRA mandated the application of IAS 29 (Hyperinflation) starting January 1, 2020. The bank estimates this would reduce FY2019 equity to approximately Ps.104.7 billion and net income to ~Ps.18.8 billion under full IFRS/IAS 29 application.
- Forward-Looking Risks: Management highlighted risks including inflation, interest rate volatility, government regulation, credit risk (defaults), and exchange rate fluctuations.
- Unusual Items: Net income from financial assets at fair value through P&L increased 292% QoQ, driven by a Ps.2.4 billion gain on the mark-to-market of TC21 Government Bonds. Other operating expenses decreased 31% QoQ as no loss was registered from the reprofiling of short-term debt (unlike 3Q19).
- Corporate Actions: The bank was included in the BYMA Corporate Governance Panel in December 2019. It also repurchased and cancelled portions of its Class B and Class C peso-denominated notes.
Investor Verification Checklist
- Verify the impact of the upcoming IAS 29 (Hyperinflation) and IFRS 9 adoption on reported equity and net income, as current figures exclude these adjustments.
- Monitor the commercial portfolio non-performing ratio, specifically the exposure to Vicentin S.A., which drove a significant deterioration in that segment.
- Assess the sustainability of the Net Interest Margin expansion given the volatility of the Argentine Peso and Central Bank interest rates (BADLAR/LELIQ).
- Review the liquidity position relative to the 59% liquid assets-to-deposits ratio in the context of potential deposit outflows or regulatory reserve requirement changes.
- Confirm the details of the share buyback program and its effect on the average number of shares outstanding and EPS calculations.