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: Third Quarter ended September 30, 2016 (3Q16)
Reporting Date: November 9, 2016
Currency: Argentine Pesos (Ps.) prepared under Argentine GAAP
Key Financial Metrics
| Metric | 3Q16 Value | 3Q15 Value | YoY Change |
|---|---|---|---|
| Net Income | Ps. 1.63 billion | Ps. 1.10 billion | +48% |
| Earnings Per Share (Ps.) | Ps. 2.79 | Ps. 1.89 | +48% |
| Return on Average Equity (ROAE) | 35.2% (Accumulated Annualized) | 31.5% (Accumulated Annualized) | N/A |
| Return on Average Assets (ROAA) | 5.4% (Accumulated Annualized) | 4.9% (Accumulated Annualized) | N/A |
| Net Interest Margin | 18.5% (Accumulated Annualized) | 17.3% (Accumulated Annualized) | +120 bps |
| Total Deposits | Ps. 101.9 billion | Ps. 69.5 billion | +47% |
| Private Sector Financing | Ps. 76.5 billion | Ps. 56.8 billion | +35% |
| Non-Performing Loans (NPL) Ratio | 1.46% | 1.77% | -31 bps |
| Coverage Ratio | 155.15% | 129.92% | +25.23% |
| Regulatory Capital Ratio (Basel III) | 17.3% | 15.2% | +210 bps |
| Liquid Assets to Deposits | 44.7% | 38.2% | +650 bps |
Material Changes vs. Prior Period
- Profitability: Net income increased 48% year-over-year (YoY) to Ps. 1.63 billion, though it decreased 10% quarter-over-quarter (QoQ) from 2Q16. The operating result grew 39% YoY but declined 6% QoQ.
- Loan Portfolio: Financing to the private sector grew 35% YoY. Commercial lines (Documents and Overdrafts) saw significant growth of 26% and 16% QoQ, respectively. Consumer loans were driven by personal loans (+6% QoQ) and credit cards (+2% QoQ).
- Deposits: Total deposits rose 12% QoQ and 47% YoY. Private sector deposits increased 9% QoQ, with time deposits leading the growth (+12% QoQ).
- Asset Quality: The non-performing loan ratio improved to 1.46%, down from 1.52% in 2Q16 and 1.77% in 3Q15. The coverage ratio strengthened to 155.15%.
- Capitalization: The bank maintained strong solvency with an excess capital of Ps. 10.5 billion. The regulatory capital ratio (Basel III) increased to 17.3%.
Guidance, Outlook, and Risks
Recent Events and Capital Actions:
- Senior Notes Issuance: On November 4, 2016, the bank issued USD 400 million in Subordinated Resettable Class A Notes due 2026. This issuance is expected to raise the estimated regulatory capital ratio to 22.6%.
- Regulatory Changes: The Central Bank of Argentina (BCRA) modified the calculation of UVAs (Acquiring Value Units) to be based on the CER (Coeficiente de Estabilizacion de Referencia) rather than the construction index.
- Productive Financing: The bank continues to support the "Credit Line for Productive Financing and Financial Inclusion," having granted Ps. 3.7 billion in loans under this program as of 3Q16.
Risks and Contingencies:
- Macroeconomic Factors: Forward-looking statements are subject to risks including inflation, changes in interest rates, government regulation, and fluctuations in the Argentine peso exchange rate.
- Credit Risk: Potential increases in borrower defaults and deterioration in regional economic conditions.
- Regulatory Environment: Adverse legal or regulatory disputes and changes in deposit guarantee fund contributions.
Investor Verification Checklist
- Currency Impact: Verify the impact of Argentine peso inflation and exchange rate fluctuations on the reported Ps. figures and USD-denominated earnings per ADS.
- Government Securities: Review the composition of the government securities portfolio, noting the 20% QoQ decrease in net income from these assets due to a reduction in "Other Government bond portfolio income."
- Capital Structure: Confirm the integration of the new USD 400 million subordinated notes into the Tier 2 capital and its effect on the regulatory capital ratio.
- Asset Quality Trends: Monitor the stability of the non-performing loan ratio (1.46%) and the adequacy of the coverage ratio (155.15%) in the context of the local economic environment.
- Regulatory Compliance: Assess the implications of the BCRA's new UVA calculation method (CER-based) on the bank's loan portfolio and deposit liabilities.