BMA

Business Context and Reporting Period

Company: Macro Bank Inc. (Banco Macro S.A.)
Filing Type: Form 6-K (Foreign Private Issuer)
Reporting Period: Condensed interim financial statements for the six months ended June 30, 2019.
Business Overview: A commercial bank in Argentina offering traditional banking products, trustee services, and stock exchange services. The bank operates primarily in regional areas outside Buenos Aires and holds significant agreements with provincial governments (Misiones, Salta, Jujuy, Tucumán) as their exclusive financial agents.

Key Financial Metrics (Six Months Ended June 30, 2019)

All figures in thousands of Argentine Pesos (ARS), unless otherwise noted.

Material Changes vs. Prior Period

• Profitability Surge: Net income attributable to controlling interest increased by approximately 116% compared to the same period in 2018 (from 6.66B to 14.38B ARS). This was driven by a significant increase in Net Interest Income (74% increase) and Net Commissions Income (33% increase).
• Asset Growth: Total assets grew by 17% year-over-year, primarily due to an increase in "Other Debt Securities" (from 64.6B to 97.4B ARS) and "Equity Instruments at fair value" (from 51.5M to 1.51B ARS).
• Loan Portfolio: Loans and other financing remained relatively stable at approximately 178.85B ARS, with a slight decrease from the prior year-end.
• Dividend Distribution: The bank paid cash dividends of 6.39B ARS during the period, representing 10 ARS per share.

Guidance, Outlook, Risks, and Unusual Items

• Merger Activity: The bank has approved a preliminary merger agreement with Banco del Tucumán SA. The merger is pending regulatory approval. If approved, Banco Macro will incorporate Banco del Tucumán retroactively to January 1, 2019.
• Acquisition: On May 21, 2019, the bank acquired 100% of Argenpay SAU, a company focused on electronic payments and digital wallets, for 100 shares.
• Asset Sale: The bank sold a 51% stake in Prisma Medios de Pago SA in February 2019. The final selling price was determined in July 2019 at USD 63.456 million. Profits from this sale were recorded in "Other operating income."
• Hyperinflationary Environment: The filing notes that Argentina meets the criteria for a hyperinflationary economy under IAS 29. However, the Central Bank of Argentina (BCRA) has temporarily exempted financial institutions from applying IAS 29 restatement until fiscal years beginning January 1, 2020. Management warns that the non-recognition of inflation adjustments may distort accounting information.
• Regulatory Proceedings: The bank is subject to various summary proceedings and penalties from the BCRA, the Financial Information Unit (UIF), and the Securities Commission (CNV) regarding anti-money laundering compliance, deposit guarantees, and reporting obligations. Most penalties are considered immaterial, though some appeals are pending.
• IFRS 16 Adoption: The bank adopted IFRS 16 (Leases) on January 1, 2019, recognizing right-of-use assets and lease liabilities, impacting the balance sheet but not materially affecting the income statement.

Investor Verification Checklist

• Merger Status: Verify the regulatory approval status of the merger with Banco del Tucumán SA and the expected timeline for closing.
• Inflation Impact: Monitor the BCRA's decision on the mandatory application of IAS 29 (hyperinflation accounting) starting in 2020 and its potential impact on reported equity and earnings.
• Prisma Sale Proceeds: Confirm the receipt of deferred payments from the Prisma Medios de Pago SA sale and the valuation of the remaining 49% stake.
• Regulatory Penalties: Review the final outcomes of pending appeals with the UIF and CNV to assess potential future liabilities.
• Deposit Concentration: Analyze the concentration of deposits from provincial governments (Misiones, Salta, Jujuy, Tucumán) and the associated credit risk.