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: Second Quarter ended June 30, 2017 (2Q17)
Reporting Date: August 9, 2017
Currency: Argentine Pesos (Ps.) prepared under Argentine GAAP
Banco Macro is a major financial institution in Argentina. The filing details financial results for 2Q17, highlighting strong profitability, significant loan growth, and a substantial capital raise via a Primary Follow-On Equity Offering.
Key Financial Metrics
| Metric | 2Q17 Value | 1Q17 Value | 2Q16 Value |
|---|---|---|---|
| Net Income | Ps. 2.02 billion | Ps. 1.76 billion | Ps. 1.81 billion |
| Earnings Per Share (Ps.) | Ps. 3.40 | Ps. 3.02 | Ps. 3.09 |
| Operating Result | Ps. 3.53 billion | Ps. 2.98 billion | Ps. 2.69 billion |
| Net Financial Income | Ps. 5.24 billion | Ps. 4.64 billion | Ps. 4.15 billion |
| Net Fee Income | Ps. 1.80 billion | Ps. 1.67 billion | Ps. 1.27 billion |
| Administrative Expenses | Ps. 3.04 billion | Ps. 2.96 billion | Ps. 2.44 billion |
| Private Sector Financing | Ps. 105.2 billion | Ps. 93.9 billion | Ps. 70.7 billion |
| Total Deposits | Ps. 123.7 billion | Ps. 115.2 billion | Ps. 90.9 billion |
| Shareholders' Equity | Ps. 35.8 billion | Ps. 23.9 billion | Ps. 18.8 billion |
| Liquid Assets | Ps. 65.8 billion | Ps. 51.5 billion | Ps. 37.3 billion |
Profitability and Efficiency Ratios (Accumulated Annualized)
- Return on Average Equity (ROAE): 30.7% (vs. 30.5% in 1Q17)
- Return on Average Assets (ROAA): 4.7% (vs. 4.6% in 1Q17)
- Net Interest Margin (NIM): 17.8% (vs. 18.3% in 1Q17)
- Efficiency Ratio: 45.0% (vs. 47.0% in 1Q17)
- Regulatory Capital Ratio (Basel III): 26.3%
Material Changes vs. Prior Period
- Profit Growth: Net income increased 14% quarter-over-quarter (QoQ) and 12% year-over-year (YoY). Operating result surged 18% QoQ and 31% YoY.
- Loan Portfolio Expansion: Financing to the private sector grew 12% QoQ and 49% YoY. Growth was driven by commercial loans (Documents +15%, Others +30%) and consumer loans (Personal +12%, Credit Cards +5%).
- Deposit Growth: Total deposits rose 7% QoQ, with private sector deposits increasing 10% QoQ. Sight deposits led the growth with an 18% QoQ increase.
- Capital Structure: Shareholders' equity jumped 50% QoQ to Ps. 35.8 billion, primarily due to a Primary Follow-On Equity Offering of 74 million Class B shares (approx. US$ 666 million) and the exercise of the greenshoe option.
- Asset Quality: The non-performing loan (NPL) ratio improved to 1.27% (down from 1.35% in 1Q17). The coverage ratio increased to 168.08%.
- Income Composition: Net income from government securities increased 57% QoQ due to higher LEBACs volume, though it decreased 32% YoY. Income from foreign currency positions increased 166% QoQ.
Guidance, Outlook, and Risks
Management Commentary: The Bank emphasized its strong solvency, with excess capital of Ps. 28.8 billion post-offering. Management noted a focus on improving efficiency, evidenced by the declining efficiency ratio despite revenue growth. The Bank successfully fulfilled its quota for the "Credit Line for Productive Financing and Financial Inclusion" for the first half of 2017.
Risks and Contingencies: The filing includes standard forward-looking statement disclaimers citing significant risks, including:
- High inflation and fluctuations in the Argentine peso exchange rate.
- Changes in interest rates and the cost of deposits.
- Government regulation and potential adverse legal or regulatory disputes.
- Credit risks, including increases in borrower defaults.
- Fluctuations in the value of Argentine public debt.
- Deterioration in regional and national economic conditions.
Unusual Items: Net other income resulted in a Ps. 189 million loss, primarily due to Ps. 255 million in expenses related to the Primary Follow-On Equity Offering and Ps. 28 million for Class B Notes Offering expenses.
Investor Verification Checklist
- Currency Impact: Verify the impact of Argentine peso devaluation on USD-denominated earnings and the translation of financial statements.
- Government Exposure: Confirm the composition of the Ps. 27.5 billion in government securities (LEBACs) and the associated liquidity and credit risks.
- Capital Utilization: Assess management's strategy for deploying the Ps. 28.8 billion in excess capital generated by the recent equity offering.
- Asset Quality Trends: Monitor the stability of the 1.27% NPL ratio and the 168% coverage ratio amidst potential economic volatility.
- Regulatory Compliance: Review adherence to the Central Bank of Argentina's (BCRA) new guidelines for the "Credit Line for Productive Financing" for the second half of 2017.
- IFRS Adjustments: Note the Ps. 3.9 billion adjustment to equity under IFRS standards compared to local GAAP rules.