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: Three months ended March 31, 2012
Filing Date: May 29, 2012
Business Overview: Macro Bank is an Argentine commercial bank authorized by the Central Bank of Argentina (BCRA). It operates a broad network of branches and offers traditional banking products to individuals and companies. The bank acts as the exclusive financial agent for several provincial governments (Misiones, Salta, Jujuy, and Tucumán). The financial statements are prepared in accordance with BCRA regulations, which differ in certain valuation and disclosure aspects from Argentine professional accounting standards and US GAAP.

Key Financial Metrics

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

Material Changes vs. Prior Period

• Profitability Growth: Net income increased by approximately 25.7% year-over-year, rising from 257.7 million ARS in Q1 2011 to 323.8 million ARS in Q1 2012. Net income before tax grew by 34.3%.
• Asset Expansion: Consolidated total assets increased by 9.4% from December 31, 2011, to March 31, 2012, driven by growth in loans and securities.
• Loan Portfolio: Net loans to the non-financial private sector and foreign residents grew significantly. Total net loans increased by roughly 4% quarter-over-quarter.
• Provisioning Increase: The provision for loan losses surged to 130.2 million ARS in Q1 2012, compared to 44.6 million ARS in Q1 2011, reflecting a more conservative approach or changes in portfolio risk assessment.
• Deposit Growth: Total deposits increased by 12.3% quarter-over-quarter, with significant growth in time deposits and checking accounts.
• Cash Position: Cash and cash equivalents increased substantially by 53.5% from the beginning of the fiscal year, reaching 9.47 billion ARS.

Guidance, Outlook, Risks, and Contingencies

• Accounting Standards Discrepancy: The filing highlights significant differences between BCRA accounting rules and Argentine professional accounting standards. If professional standards were applied, shareholders' equity as of March 31, 2012, would have decreased by approximately 199 million ARS, and net income for the period would have increased by 61 million ARS.
• Legal and Regulatory Risks: The bank faces ongoing legal actions related to the 2001-2002 Argentine economic crisis, specifically regarding the reimbursement of foreign currency deposits ("recursos de amparo"). The bank has recorded provisions for these court orders but management believes no additional significant effects are expected beyond those recognized.
• Tax Claims: There are ongoing reviews by the Federal Public Revenue Agency (AFIP) and provincial authorities regarding income tax and turnover tax for prior years. Management believes the outcome will not result in significant effects beyond amounts already recognized.
• Macroeconomic Environment: Management notes uncertainty in the international macroeconomic context, including volatility in financial assets and exchange markets, though local indicators have shown sustained growth. The bank actively monitors these conditions.
• Derivatives: The bank maintains significant positions in derivative financial instruments, including repurchase agreements, forward transactions, and interest rate swaps, primarily to manage liquidity and interest rate risk.

Investor Verification Checklist

• Accounting Basis: Verify the impact of the differences between BCRA rules and professional accounting standards on equity and income (Note 5).
• Provision Adequacy: Review the sharp increase in the provision for loan losses (from 44.6M to 130.2M ARS) and the classification of the loan portfolio (Exhibits B and C) to assess credit risk trends.
• Legal Contingencies: Assess the sufficiency of provisions related to the "court deposits dollarization" and other legal actions stemming from the 2001 crisis (Note 21).
• Related Party Transactions: Examine the volume of transactions with subsidiaries and related parties (Note 8 and Exhibit N), particularly loans and investments.
• Derivative Exposure: Analyze the notional values and net positions of derivative instruments (Note 11 and Exhibit O) to understand market and liquidity risk exposure.
• Capital Structure: Review the details of subordinated and non-subordinated corporate bonds (Note 10) and their impact on capital adequacy.