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: Fourth Quarter ended December 31, 2018 (4Q18) and Full Year 2018 (FY2018)
Release Date: March 8, 2019
Currency: Argentine Pesos (Ps.)
The filing presents the financial results for 4Q18 and FY2018, prepared in accordance with the accounting framework of the Central Bank of Argentina (BCRA) based on IFRS, excluding IFRS 9 and IAS 29.
Key Financial Metrics
| Metric | 4Q18 | FY2018 | 4Q17 (YoY Comparison) |
|---|---|---|---|
| Net Income (Parent) | Ps. 5.24 billion | Ps. 15.73 billion | Ps. 3.10 billion |
| Earnings Per Share (EPS) | Ps. 8.15 | Ps. 23.79 | Ps. 4.63 |
| Net Operating Income | Ps. 16.22 billion | Ps. 50.60 billion | Ps. 10.03 billion |
| Net Interest Income | Ps. 12.29 billion | Ps. 39.65 billion | Ps. 7.41 billion |
| Net Fee Income | Ps. 3.14 billion | Ps. 11.13 billion | Ps. 2.27 billion |
| Total Assets | Ps. 342.88 billion | Ps. 342.88 billion | Ps. 226.34 billion |
| Total Deposits | Ps. 237.95 billion | Ps. 237.95 billion | Ps. 144.13 billion |
| Private Sector Financing | Ps. 171.53 billion | Ps. 171.53 billion | Ps. 127.54 billion |
| Return on Average Equity (ROAE) | 30.7% (Accumulated) | 30.7% (Accumulated) | 31.0% (Accumulated) |
| Return on Average Assets (ROAA) | 5.8% (Accumulated) | 5.8% (Accumulated) | 5.6% (Accumulated) |
| Efficiency Ratio | 35.8% | 37.9% (Accumulated) | 40.2% |
| Regulatory Capital Ratio | 26.5% | 26.5% | 28.1% |
| Non-Performing Financing Ratio | 1.91% | 1.91% | 1.07% |
| Coverage Ratio | 117.74% | 117.74% | 182.21% |
Material Changes vs. Prior Period
- Profitability Surge: 4Q18 Net Income increased 37% quarter-over-quarter (QoQ) and 67% year-over-year (YoY). FY2018 Net Income rose 55% compared to FY2017. EPS increased 76% YoY in 4Q18, aided by a share buyback program.
- Revenue Growth: Net Interest Income grew 66% YoY in 4Q18, driven by a 450 basis point increase in interest rates and a 7% increase in loan volumes. Net Fee Income grew 38% YoY.
- Balance Sheet Expansion: Total Assets grew 51% YoY. Private sector financing increased 34% YoY, with commercial loans (Documents) up 9% QoQ and credit card loans up 7% QoQ. Total deposits grew 65% YoY, with private sector deposits up 67%.
- Cost Management: The efficiency ratio improved to 35.8% in 4Q18 from 40.2% in 4Q17, despite a 46% YoY increase in administrative and personnel expenses.
- Asset Quality Deterioration: The non-performing financing ratio increased to 1.91% in 4Q18 from 1.07% in 4Q17. The coverage ratio declined to 117.74% from 182.21%.
- FX Gains: The bank recorded a Ps. 729 million gain in 4Q18 from differences in quoted prices of gold and foreign currency, attributed to an 8% appreciation of the Argentine peso against the US dollar and a short dollar position.
Guidance, Outlook, Risks, and Unusual Items
- Regulatory Changes: The Central Bank of Argentina (BCRA) modified reserve requirements in December 2018 (Communication "A" 6616). Additionally, the BCRA mandated the restatement of financial statements in accordance with IAS 29 (Hyperinflationary Economies) starting January 1, 2020. The bank has not yet quantified the impact of IAS 29.
- Capital Management: The bank maintains a strong solvency position with excess capital of Ps. 45.7 billion (223% over requirements). A share repurchase program was active, with 2.03 million shares repurchased in December 2018.
- Divestment: The bank completed the transfer of 51% of its stake in Prisma Medios de Pago S.A. to AI ZENITH (Netherlands) B.V. for approximately USD 64.5 million.
- Risks: Forward-looking statements are subject to risks including inflation, changes in interest rates, government regulation, credit risk, fluctuations in Argentine public debt, and exchange rate volatility.
- Unusual Items: Other Operating Income decreased 54% QoQ, largely due to the absence of a Ps. 565 million gain from corporate bond buybacks recorded in 3Q18.
Investor Verification Checklist
- IAS 29 Impact: Verify the potential impact of the mandatory adoption of IAS 29 (Financial Reporting in Hyperinflationary Economies) starting January 1, 2020, on future reported figures.
- Asset Quality Trend: Monitor the trajectory of the non-performing financing ratio (1.91%) and coverage ratio (117.74%) given the recent deterioration.
- FX Exposure: Assess the sustainability of FX gains driven by peso appreciation and the bank's short dollar position.
- Cost of Risk: Review the Cost of Risk metric (1.9% in 4Q18) to ensure provisions remain adequate for the rising non-performing loan levels.
- Regulatory Compliance: Confirm adherence to new BCRA reserve requirements and LELIQ position limits established in early 2019.