Business Context and Reporting Period
Company: Macro Bank Inc. (Banco Macro S.A.)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Third Quarter ended September 30, 2019 (3Q19)
Release Date: November 8, 2019
Currency: Argentine Pesos (Ps.) unless otherwise noted. Figures are unaudited and prepared under BCRA regulations, excluding IFRS 9 and IAS 29 impacts.
Key Financial Metrics
- Net Income: Ps. 13.2 billion (87% increase QoQ; 243% increase YoY).
- Recurring Net Income: Ps. 15.5 billion (99% increase QoQ).
- Earnings Per Share (EPS): Ps. 20.59 (87% increase QoQ; 256% increase YoY).
- Return on Average Equity (ROAE): 57.3% (accumulated annualized).
- Return on Average Assets (ROAA): 9.4% (accumulated annualized).
- Net Interest Margin (NIM): 19.1% (including FX); 18.5% (excluding FX).
- Efficiency Ratio: 32.5% (accumulated), improved from 37.6% in 3Q18.
- Regulatory Capital Ratio: 26.5% (Basel III); Tier 1 Ratio: 18.9%.
- Liquidity: Liquid assets totaled Ps. 158.8 billion, representing 61% of total deposits.
- Asset Quality: Non-performing financing ratio was 1.9%; Coverage ratio reached 124.16%.
Material Changes vs. Prior Period
- Revenue Growth: Net Interest Income rose 19% QoQ to Ps. 20.1 billion, driven by higher interest rates and loan growth. Net Fee Income increased 11% QoQ to Ps. 3.8 billion.
- Loan Portfolio: Financing to the private sector grew 10% QoQ to Ps. 192.8 billion. Growth was led by overdrafts (+78% QoQ) and credit card loans (+12% QoQ).
- Deposits: Total deposits decreased 9% QoQ to Ps. 259.2 billion. Private sector deposits fell 8% QoQ, primarily due to a 19% drop in time deposits as the bank reduced its peso deposit base to lower Leliq exposure.
- FX Gains: Differences in quoted prices of gold and foreign currency resulted in a Ps. 1.5 billion gain, attributed to a 36% depreciation of the Argentine peso against the USD and the bank's long spot dollar position.
- Expenses: Other operating expenses surged 68% QoQ to Ps. 6.6 billion. This was primarily due to a Ps. 2.6 billion loss from the government-mandated reprofiling of short-term debt (Lecaps, Lelinks, Letes, Lecer notes).
- Tax Impact: Income tax resulted in a Ps. 1.3 billion gain due to inflation adjustments under applicable tax laws.
Outlook, Risks, and Unusual Items
- Government Debt Reprofiling: The bank recognized a Ps. 2.6 billion loss in 3Q19 due to the Argentine government's decree extending maturities of short-term debt notes. As of September 30, 2019, the book value of these reprofiled assets was Ps. 6 billion.
- Currency Controls: New regulations tightened USD purchase limits for individuals (reduced to USD 200/month) and restricted corporate USD purchases for savings. Global Net FX position limits were lowered to 4% of integrated capital.
- Accounting Changes: The Central Bank of Argentina mandated the application of IAS 29 (Hyperinflationary Economies) starting January 1, 2020. The bank estimates that applying IFRS 9 and IAS 29 would result in equity of approximately Ps. 88.7 billion as of September 30, 2019.
- Rating Downgrades: Following the downgrade of Argentina's sovereign debt, Fitch and Moody's downgraded Banco Macro's senior unsecured debt ratings to CCC/RR4 and Caa2, respectively.
- Merger Completion: The bank completed its merger with Banco del Tucumán on October 11, 2019.
- Dividend Restrictions: Financial institutions require Central Bank approval before paying dividends, effective August 30, 2019.
Investor Verification Checklist
- Verify the impact of the upcoming IAS 29 (hyperinflation) and IFRS 9 (expected credit losses) accounting standards on future reported equity and net income.
- Monitor the bank's exposure to Argentine government debt and the potential for further reprofiling or default events.
- Assess the sustainability of the high Net Interest Margin (19.1%) in the context of ongoing currency devaluation and interest rate volatility.
- Review the liquidity position given the 9% QoQ decline in deposits and the shift away from Leliq securities.
- Confirm the status of the merger integration with Banco del Tucumán and any associated synergies or costs.