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: Nine months ended September 30, 2020 (Interim)
Filing Date: January 19, 2021
Business Overview: A commercial bank operating in Argentina, offering traditional banking products, stock exchange services, and mutual fund management. The bank operates under a hyperinflationary accounting framework (IAS 29) and has recently begun applying IFRS 9 impairment standards (with temporary exclusions for public sector debt).

Key Financial Metrics (Nine Months Ended Sept 30, 2020)

Note: All figures are in thousands of Argentine pesos, restated for purchasing power as of September 30, 2020.

Material Changes vs. Prior Period

• Asset Growth: Total assets increased by approximately 34.7% compared to year-end 2019, driven largely by a significant increase in "Other Debt Securities" (up from 78.9B to 240.2B) and "Repo Transactions" (up from 1.3B to 54.0B).
• Deposit Expansion: Total deposits grew by 53.3% to 492.7B, with a notable surge in deposits from the Non-financial Public Sector (up from 21.5B to 105.6B).
• Profitability: Net income for the nine-month period increased by 24.7% compared to the same period in 2019 (20.99B vs 16.83B), despite a decrease in Net Interest Income. This was supported by a "Gain on net monetary position" of 5.65B due to inflationary adjustments.
• Loan Portfolio: The net loan portfolio decreased by 12.0% to 237.7B, reflecting a strategic shift towards securities and repo transactions.
• Impairment Charges: Allowance for loan losses increased to 5.25B for the nine-month period (vs 3.46B in 2019), reflecting the adoption of IFRS 9 Expected Credit Loss (ECL) models and specific adjustments for COVID-19 impacts.

Guidance, Outlook, Risks, and Unusual Items

• Hyperinflationary Environment: Financial statements are restated for inflation (IAS 29). The cumulative inflation rate for the nine months ended Sept 30, 2020, was 22.29%. This creates significant volatility in reported figures and a "Gain on net monetary position" which is a non-cash accounting adjustment.
• COVID-19 Impact: The bank recognized specific additional credit risk impairment losses totaling 1.75B (531M for commercial loans, 1.05B for consumer loans) due to the pandemic's economic impact.
• Regulatory Restrictions: The Central Bank of Argentina (BCRA) suspended earnings distribution (dividends) for financial entities until December 31, 2020. A supplementary dividend was approved by shareholders but awaits regulatory authorization.
• Government Debt Restructuring: The bank holds significant government securities. The Argentine government has enacted various decrees (DNU 596/2019, Law 27541) extending maturities and restructuring debt, which impacts the bank's asset valuation and liquidity.
• Accounting Transition: The bank is in the process of fully quantifying the effects of IFRS 9 impairment on its holdings, particularly regarding Prisma Medios de Pago SA, which could be material.

Investor Verification Checklist

• Inflation Restatement: Verify the specific price index used for restatement and the impact of the "Gain on net monetary position" on reported net income, as this is a non-operating accounting gain.
• Asset Quality: Review the breakdown of loans by stage (Stage 1, 2, 3) under IFRS 9 to assess the true credit risk exposure, particularly in the consumer and commercial sectors affected by the pandemic.
• Liquidity Position: Analyze the composition of "Other Debt Securities" and "Repo Transactions" to understand the bank's reliance on government bonds and short-term funding in a volatile market.
• Dividend Policy: Confirm the status of the BCRA's suspension on dividend distributions and the likelihood of the approved supplementary dividend being paid.
• Foreign Currency Exposure: Assess the bank's exposure to the widening gap between the official exchange rate and alternative market rates (Blue Dollar), as noted in the macroeconomic environment section.