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, 2020 (2Q20)
Accounting Framework: IFRS with Hyperinflation Accounting (IAS 29) applied since 1Q20. All figures are in Argentine Pesos (Ps.) restated to the measuring unit current at the end of the period.
Key Financial Metrics
- Net Income: Ps. 6.4 billion (14% lower QoQ; 111% higher YoY).
- Earnings Per Share (EPS): Ps. 10.01 (14% lower QoQ; 111% higher YoY).
- Profitability Ratios (Accumulated Annualized): Return on Average Equity (ROAE) of 23%; Return on Average Assets (ROAA) of 5.2%.
- Net Interest Income: Ps. 20.0 billion (11% lower QoQ; 19% lower YoY).
- Net Fee Income: Ps. 4.6 billion (flat QoQ; 7% lower YoY).
- Net Interest Margin (NIM): 22.3% (accumulated, including FX); 21.6% (excluding FX).
- Efficiency Ratio: 41.6% (accumulated); 43.3% (quarterly).
- Asset Quality: Non-performing financing ratio of 1.52%; Coverage ratio improved to 210%.
- Liquidity: Liquid assets totaled Ps. 220.6 billion, representing 54% of total deposits.
- Solvency: Regulatory capital ratio of 32.1% (Basel III); Tier 1 Ratio of 25%. Excess capital of Ps. 101.8 billion.
Material Changes vs. Prior Period
- Loan Loss Provisions: Increased 158% QoQ to Ps. 2.3 billion. This was driven by additional provisions for the macroeconomic impact of the Covid-19 pandemic, specifically targeting deferred installments, credit card refinancing, and SME loans in troubled sectors.
- Financing to Private Sector: Decreased 5% QoQ to Ps. 219.4 billion. Commercial loans saw a 58% increase in the "Others" category (driven by 24% interest rate SME loans), while overdrafts decreased 40%.
- Deposits: Total deposits increased 24% QoQ to Ps. 406 billion. Private sector deposits rose 16%, led by time deposits (+18%) and demand deposits (+13%).
- Public Sector Assets: Increased significantly, with Leliqs (Central Bank notes) rising 40% QoQ and other government securities up 134%.
- Expenses: Personnel and administrative expenses increased 11% QoQ, primarily due to a 15% rise in employee benefits following a 26% salary increase agreement with the Union.
Guidance, Outlook, Risks, and Unusual Items
- Covid-19 Impact: Management estimates the pandemic could impact operations and financial results depending on the duration of the health emergency. The bank has implemented remote work and contingency procedures.
- Regulatory Environment:
- Dividend distribution is suspended until December 31, 2020, per Central Bank rules.
- ATM fees are prohibited until December 31, 2020.
- Central Bank mandated automatic refinancing of unpaid credit card balances and subsidized loan rates for specific sectors.
- Forward-Looking Statements: The filing includes standard disclaimers regarding inflation, interest rate changes, government regulation, and exchange rate fluctuations as key risks.
- Strategic Investment: The bank made an irrevocable capital contribution to "Play Digital S.A.," a joint venture with other major Argentine banks to develop a payment solution.
Investor Verification Checklist
- Verify the impact of the 158% increase in loan loss provisions on future earnings stability.
- Monitor the sustainability of the 24% growth in deposits against the 5% contraction in private sector lending.
- Assess the effect of the suspended dividend policy on shareholder returns until the end of 2020.
- Review the exposure to public sector assets (Leliqs and government bonds), which saw significant growth in 2Q20.
- Confirm the trajectory of the efficiency ratio, which deteriorated to 43.3% in the quarter due to salary increases.