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, 2014
Filing Date: November 27, 2014
Business Overview: Macro Bank is an Argentine commercial bank authorized by the Central Bank of Argentina (BCRA). It operates as a multi-services bank offering traditional products to companies and individuals, with a strategic focus on regional areas outside Buenos Aires. The bank operates through subsidiaries including Banco del Tucumán S.A., Macro Bank Limited (Bahamas), and Macro Securities S.A.
Key Financial Metrics (Stand-Alone)
Figures in thousands of Argentine Pesos (ARS), unless otherwise noted.
| Metric | Sept 30, 2014 | Dec 31, 2013 |
|---|---|---|
| Total Assets | 65,362,504 | 53,903,954 |
| Total Liabilities | 54,445,669 | 45,276,523 |
| Shareholders' Equity | 10,916,835 | 8,627,431 |
| Net Income (9-month) | 2,904,549 | 1,490,185 |
| Gross Intermediation Margin | 5,657,672 | 3,507,120 |
| Provision for Loan Losses | 408,936 | 353,561 |
| Cash and Cash Equivalents | 9,959,441 | 11,249,840 |
| Loans (Net) | 37,907,289 | 35,837,417 |
| Deposits | 46,398,793 | 38,647,204 |
Material Changes vs. Prior Period
- Profitability Surge: Net income for the nine-month period increased by approximately 95%, rising from 1.49 billion ARS in 2013 to 2.90 billion ARS in 2014. This was driven by a significant increase in the Gross Intermediation Margin (up 61%) and Service-Charge Income (up 34%).
- Asset Growth: Total assets grew by 21% year-over-year, primarily due to a substantial increase in "Instruments issued by the Central Bank of Argentina" (from 173 million to 8.59 billion ARS) and growth in the loan portfolio.
- Deposit Expansion: Total deposits increased by 20% to 46.4 billion ARS, with significant growth in time deposits and checking accounts from the non-financial private sector.
- Expense Management: While administrative expenses increased by 35% (largely due to personnel expenses), the bank maintained strong profitability margins.
Guidance, Outlook, Risks, and Contingencies
Management Commentary & Outlook: Management notes that the international and local macroeconomic context generates uncertainty due to growth contractions, financial asset volatility, and foreign exchange market fluctuations. Specifically, the bank monitors the Argentine foreign exchange market restrictions and the volatility of government securities. The bank is in the process of registering for new agent categories with the Argentine Securities Commission (CNV).
Risks and Contingencies:
- Legal Proceedings: The bank is involved in various legal actions, including tax disputes with the AFIP (Federal Public Revenue Agency) regarding income tax deductions and turnover tax differences. There are also ongoing consumer association lawsuits regarding "life insurance" charges, though a settlement was previously reached and appealed.
- Regulatory Proceedings: The bank and its directors have been notified of financial and exchange proceedings by the Central Bank and the Financial Information Unit (UIF) related to regulatory breaches by customers. Management believes no additional significant effects beyond those recognized are expected.
- Accounting Differences: The financial statements are prepared under BCRA rules, which differ from Argentine professional accounting standards (FACPCE) regarding valuation of government securities, business combinations, and deferred taxes. A limited review was performed, and no opinion was expressed on the financial statements as a whole.
- Capital Requirements: As of September 30, 2014, the bank's computable capital (9.67 billion ARS) significantly exceeded the minimum capital requirement (4.47 billion ARS), with an excess of 5.20 billion ARS.
Key Facts for Investor Verification
- Revenue Quality: Verify the sustainability of the 95% net income increase, specifically the contribution from "Instruments issued by the Central Bank" which saw a massive balance sheet expansion.
- Loan Portfolio Health: Review the "High risk" and "Irrecoverable" loan categories in Exhibit B. While the majority of the portfolio is in "normal situation," the absolute value of high-risk loans increased.
- Regulatory Compliance: Confirm the status of the ongoing proceedings with the Central Bank and UIF mentioned in Note 18.3, as these could impact future operations or capital.
- Accounting Standards: Note that the financial statements do not conform to US GAAP or IFRS but follow BCRA rules. Investors should review Note 5 for quantified differences between BCRA rules and local professional standards.
- Currency Risk: Assess the impact of Argentine peso volatility and foreign exchange restrictions on the bank's ability to service its USD-denominated subordinated corporate bonds (USD 150 million outstanding).