BMA

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: Six months ended June 30, 2008
Filing Date: August 15, 2008
Business Overview: A commercial bank authorized by the Central Bank of Argentina (BCRA), operating primarily in regional areas outside Buenos Aires. The bank offers traditional banking products to companies and individuals, and operates through subsidiaries including Nuevo Banco Bisel S.A. and Banco del Tucumán S.A.

Key Financial Metrics (Consolidated)

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

Material Changes vs. Prior Period

• Profitability Growth: Net income increased by approximately 31% year-over-year, driven by a 53% increase in the Gross Intermediation Margin.
• Asset Expansion: Total assets grew by 7% to over 21 billion ARS. Loans to the non-financial private sector increased significantly, particularly in overdrafts and personal loans.
• Increased Provisions: The provision for loan losses more than doubled to 72,011 (from 31,939), reflecting a more conservative approach to credit risk or changes in the portfolio quality.
• Deposit Growth: Total deposits rose by nearly 1.3 billion ARS, with time deposits showing the most significant increase.
• Share Repurchase: The bank executed a share repurchase program, acquiring approximately 31.3 million shares (including ADSs) for a total of 185,326 ARS during the period.

Guidance, Outlook, Risks, and Contingencies

• Accounting Standards: Financial statements are prepared in accordance with BCRA rules, which differ from Argentine professional accounting standards and US GAAP. Notable differences include the valuation of unlisted government securities and the treatment of intangible assets related to court orders regarding deposit dollarization.
• Legal Contingencies (Amparo Lawsuits): The bank faces ongoing litigation regarding the conversion of foreign currency deposits into pesos following the 2001-2002 economic crisis. The bank has capitalized differences related to court orders in "Intangible Assets" and recorded provisions for potential additional liabilities. Management believes no significant effects beyond those recognized are expected.
• Derivatives: The bank maintains significant positions in derivative financial instruments, including forward foreign currency transactions, options on government bonds, and interest rate swaps, primarily for intermediation and hedging purposes.
• Dividend Restrictions: Dividend distributions are subject to Central Bank authorization and restrictions related to subordinated corporate bond agreements and liquid realized income limits.

Investor Verification Checklist

• Currency Risk: Verify the impact of Argentine Peso volatility on the bank's foreign currency-denominated assets and liabilities, particularly given the historical context of the "Amparo" lawsuits.
• Asset Quality: Review the detailed breakdown of loan classifications (Exhibit B) to assess the concentration of "Troubled" or "High Risk" loans, especially given the doubling of loan loss provisions.
• Government Exposure: Confirm the valuation and recoverability of significant holdings in unlisted government securities and loans to the non-financial government sector, which are valued differently under BCRA rules versus market standards.
• Intangible Assets: Scrutinize the "Intangible Assets" line item (approx. 247 million ARS), which includes capitalized costs related to court orders and goodwill, to understand the potential for future write-downs.
• Related Party Transactions: Review transactions with subsidiaries (Nuevo Banco Bisel, Banco del Tucumán) and related parties to ensure arm's-length terms and proper consolidation.