Business Context and Reporting Period
Company: Macro Bank Inc. (Banco Macro S.A.)
Filing Type: Form 6-K (Foreign Private Issuer)
Reporting Period: Nine months ended September 30, 2010
Filing Date: November 17, 2010
Auditor: Pistrelli, Henry Martin y Asociados S.R.L. (Limited Review)
Accounting Basis: Prepared in accordance with Central Bank of Argentina (BCRA) rules, which differ from Argentine professional accounting standards and US GAAP in valuation and disclosure aspects.
Key Financial Metrics (Consolidated)
Figures in thousands of Argentine Pesos (ARS), unless otherwise noted.
| Metric | Sept 30, 2010 | Dec 31, 2009 |
|---|---|---|
| Total Assets | 32,165,812 | 26,859,238 |
| Total Liabilities | 28,287,409 | 23,500,437 |
| Shareholders' Equity | 3,878,403 | 3,358,801 |
| Net Income (9-month) | 735,991 | 510,095 |
| Net Income Before Tax (9-month) | 1,118,187 | 1,124,397 |
| Income Tax Expense (9-month) | 382,196 | 614,302 |
| Provision for Loan Losses (9-month) | 86,166 | 132,916 |
| Net Cash Flow from Operating Activities | 630,484 | 1,007,879 |
Material Changes vs. Prior Period
- Profitability: Net income increased by approximately 44% to 735.99 million ARS, driven primarily by a significant reduction in income tax expense (from 614.3 million to 382.2 million) and a lower provision for loan losses (down 35% to 86.17 million).
- Asset Growth: Total assets grew by 19.7% (5.3 billion ARS), fueled by a 24% increase in loans to the non-financial private sector and a 12% increase in deposits.
- Loan Portfolio: Total loans increased to 13.75 billion ARS. The provision for loan losses decreased significantly, suggesting improved asset quality or changes in provisioning methodology.
- Acquisition: On September 20, 2010, the Bank acquired 100% of Banco Privado de Inversiones S.A. for USD 23.3 million, booking positive goodwill of 56.2 million ARS.
- Government Deposits: Deposits from the non-financial government sector surged to 5.72 billion ARS (up from 3.61 billion), reflecting continued agreements with provincial governments (Misiones, Salta, Jujuy, Tucumán).
Guidance, Outlook, Risks, and Unusual Items
- Accounting Differences: The filing explicitly states that financial statements are prepared under BCRA rules. If Argentine professional accounting standards were applied, shareholders' equity would have decreased by approximately 198.9 million ARS, and net income for the period would have decreased by 202.8 million ARS due to differences in valuation of government securities, goodwill amortization, and deferred taxes.
- Legal and Regulatory Risks:
- Court Orders (Amparos): The Bank continues to capitalize differences related to court orders regarding the dollarization of deposits (intangible assets) and records provisions for additional payables. Management believes no significant effects beyond those recognized will result from final outcomes.
- Tax Claims: The Bank is involved in various tax disputes with AFIP and provincial authorities regarding income tax and turnover tax. Several claims have been regularized under specific government programs (Law No. 26,476 and Law No. 3,461).
- Derivatives: The Bank maintains significant positions in derivative instruments, including repurchase agreements (net liability of 2.0 billion ARS), interest rate swaps, and foreign currency forwards, primarily for hedging and intermediation.
- Macro Environment: Management notes the Argentine financial system is stabilizing after the 2008-2009 volatility, though high volatility levels persist. The government restructured debt in the second quarter of 2010.
Investor Verification Checklist
- Accounting Basis Impact: Verify the impact of the ~202.8 million ARS difference between BCRA rules and professional accounting standards on true economic earnings.
- Government Exposure: Assess the concentration risk associated with the 5.72 billion ARS in deposits from provincial governments and the 278 million ARS in loans to the non-financial government sector.
- Asset Quality: Review the "Troubled" and "High Risk" loan categories (totaling ~195 million ARS) and the adequacy of the reduced loan loss provision.
- Intangible Assets: Scrutinize the 104.5 million ARS in Goodwill and 176.6 million ARS in Organization/Development costs, particularly those capitalized from court order differences.
- Derivative Exposure: Evaluate the net liability position of 2.0 billion ARS in repurchase agreements and the associated liquidity risks.