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: Nine months ended September 30, 2017 (Unaudited)
Filing Date: December 26, 2017
Business Overview: A commercial bank authorized by the Central Bank of Argentina, operating primarily in regional areas outside Buenos Aires. The bank offers traditional banking products to companies and individuals and operates through subsidiaries including Banco del Tucumán S.A. and Macro Bank Limited.
Key Financial Metrics
All figures in thousands of Argentine Pesos (ARS) unless otherwise noted.
| Metric | Sept 30, 2017 | Dec 31, 2016 |
|---|---|---|
| Total Assets | 192,065,285 | 144,421,205 |
| Total Liabilities | 151,946,388 | 122,315,307 |
| Shareholders' Equity | 40,118,897 | 22,105,898 |
| Loans (Net) | 109,663,464 | 81,043,677 |
| Deposits | 123,434,567 | 102,496,946 |
| Cash and Cash Equivalents | 35,921,353 | 34,815,058 |
Income Statement Highlights (Nine Months Ended Sept 30)
| Metric | 2017 | 2016 |
|---|---|---|
| Financial Income | 23,017,472 | 19,279,934 |
| Financial Expense | 8,844,154 | 9,206,279 |
| Gross Intermediation Margin | 14,173,318 | 10,073,655 |
| Service-Charge Income | 6,931,314 | 5,138,216 |
| Provision for Loan Losses | 1,028,420 | 644,633 |
| Net Income Before Tax | 10,076,122 | 7,180,579 |
| Net Income for the Period | 6,377,122 | 4,845,579 |
Cash Flow Summary (Nine Months Ended Sept 30)
- Operating Activities: Net cash used of (12,319,522) in 2017 vs. generated 12,893,940 in 2016.
- Investing Activities: Net cash used of (827,713) in 2017 vs. (756,775) in 2016.
- Financing Activities: Net cash generated of 10,702,747 in 2017 (driven by capital contributions) vs. used (1,173,657) in 2016.
- Net Increase in Cash: 1,106,295 in 2017 vs. 12,792,057 in 2016.
Material Changes vs. Prior Period
- Balance Sheet Growth: Total assets increased by approximately 33% (from 144.4B to 192.1B ARS), driven primarily by a 35% increase in loans and a 71% increase in instruments issued by the Central Bank of Argentina.
- Equity Expansion: Shareholders' equity grew by 81% (from 22.1B to 40.1B ARS). This was significantly impacted by a capital stock increase approved in April 2017, raising 12.4B ARS through the issuance of new shares.
- Profitability: Net income increased by 32% year-over-year. Gross Intermediation Margin improved by 41%, aided by higher financial income and lower financial expenses.
- Loan Portfolio: Loans to the non-financial private sector expanded significantly, with personal loans rising from 24.8B to 34.8B ARS and credit card loans from 17.5B to 19.9B ARS.
- Provisions: The provision for loan losses increased by 59% (from 644M to 1.03B ARS), reflecting a more conservative approach or higher risk assessment in the portfolio.
Guidance, Outlook, Risks, and Contingencies
Management Commentary & Outlook: The filing does not contain forward-looking guidance or specific financial projections for future periods. Management notes that the international and local macroeconomic context generates uncertainty regarding future progress due to political matters and economic growth levels. However, volatility in government securities, interest rates, and exchange rates has decreased locally, while prices for salary costs and raw materials have increased.
Risks and Contingencies:
- Regulatory Proceedings: The bank is subject to several summary judgments and penalties from the Central Bank of Argentina and the Financial Information Unit (UIF) regarding foreign exchange transactions, anti-money laundering procedures, and financing to the non-financial public sector. Most penalties are under appeal or have been resolved in the bank's favor, with total pending monetary penalties recorded as immaterial (718 thousand ARS).
- Tax Disputes: Ongoing claims exist with the AFIP (Federal Public Revenue Agency) and City of Buenos Aires tax authorities regarding income tax deductions and turnover tax differences. Management believes no significant additional effects beyond recognized amounts are expected.
- Legal Claims: A lawsuit filed by the consumers' association "ADECUA" regarding life insurance charges is pending resolution at the Supreme Court (CSJN).
- Macroeconomic Environment: The bank monitors changes in the Argentine macroeconomic environment, including inflation (accumulated rate of approx. 74% for the three-year period ended June 2017) and exchange rate fluctuations.
Unusual Items:
- Capital Increase: A significant capital increase of 12.4B ARS occurred in the first half of 2017 via the issuance of 74 million new shares plus an oversubscription of 11 million shares.
- IFRS Convergence: The bank is in the process of converging to International Financial Reporting Standards (IFRS) with a transition date of January 1, 2017. Reconciliation tables show adjustments to assets, liabilities, and equity, though the primary financial statements presented follow Central Bank rules.
Investor Verification Checklist
- Currency Impact: Verify the impact of Argentine Peso inflation and exchange rate volatility on the reported figures, as the filing notes significant changes in economic variables.
- Capital Adequacy: Confirm the bank's compliance with minimum capital requirements (Computable capital of 43.9B ARS vs. Minimum requirement of 13.1B ARS as of Sept 2017).
- Regulatory Status: Monitor the status of pending regulatory summaries with the Central Bank and CNV, specifically regarding foreign exchange and anti-money laundering compliance.
- Loan Quality: Review the increase in provisions for loan losses (up 59%) and the classification of loans by situation (Normal, Observation, Troubled, Irrecoverable) to assess credit risk trends.
- IFRS Transition: Note that the financial statements are prepared under Central Bank rules; investors should review the reconciliation to IFRS amounts provided in Note 6 for a different valuation perspective.