Business Context and Reporting Period
Company: Banco Macro S.A. (Macro Bank Inc.)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2009
Jurisdiction: Argentina (Incorporated); Listed on NYSE (ADSs)
Accounting Basis: Central Bank Rules (with U.S. GAAP reconciliations provided)
Banco Macro is a leading private-sector bank in Argentina, focusing on low- and middle-income individuals and small-to-medium-sized businesses, primarily outside the City of Buenos Aires. The bank operates the largest private-sector branch network in the country (408 branches). In August 2009, the bank completed the merger of Nuevo Banco Bisel into Banco Macro. The bank reported profitability for 32 consecutive quarters as of December 31, 2009.
Key Financial Metrics (Year Ended Dec 31, 2009)
| Metric | 2009 (Central Bank Rules) | 2009 (U.S. GAAP) | 2008 (Central Bank Rules) |
|---|---|---|---|
| Net Income | Ps. 751.9 million | Ps. 986.3 million | Ps. 660.1 million |
| Net Income Per Share | Ps. 1.26 | Ps. 1.66 | Ps. 1.00 |
| Total Assets | Ps. 26,859.2 million | N/A | Ps. 22,430.3 million |
| Total Deposits | Ps. 18,592.9 million | N/A | Ps. 15,868.4 million |
| Loans to Private Sector | Ps. 11,247.5 million | N/A | Ps. 10,893.4 million |
| Shareholders' Equity | Ps. 3,358.8 million | Ps. 3,292.9 million | Ps. 2,821.9 million |
| Return on Average Equity | 24.61% | N/A | 23.76% |
| Return on Average Assets | 3.14% | N/A | 3.02% |
| Non-Performing Loans (NPL) Ratio | 3.25% | N/A | 2.64% |
| Allowance Coverage Ratio | 119.45% | N/A | 141.81% |
| Liquidity Ratio | 53.70% | N/A | 48.80% |
Note: All figures in thousands of pesos unless otherwise noted. Exchange rate reference: Ps. 3.7967 = US$1.00 (Dec 31, 2009).
Material Changes vs. Prior Period
- Profitability Growth: Net income increased 14% year-over-year (Central Bank Rules) and 58% under U.S. GAAP. This was driven by a 27% increase in financial income, primarily due to higher income from government and private securities (up 114%) and increased interest rates on loans.
- Loan Portfolio: Private sector loans grew only 3% to Ps. 11.2 billion, reflecting a slowdown in credit demand due to the global financial crisis. Conversely, the bank reduced exposure to the public sector by pre-canceling Ps. 216.9 million of guaranteed loans.
- Asset Quality: The non-performing loan ratio increased from 2.64% in 2008 to 3.25% in 2009. However, the bank maintained a conservative provisioning strategy, keeping the coverage ratio above 119% despite regulatory minimums.
- Deposits: Total deposits grew 17% to Ps. 18.6 billion, driven largely by private sector time deposits. The bank maintained a high liquidity ratio of 53.7%.
- Share Repurchases: The bank completed a share buyback program, repurchasing approximately 90.6 million Class B shares for Ps. 437 million, subsequently reducing capital stock.
Guidance, Outlook, and Risks
Outlook and Strategy: Management anticipates a GDP growth of approximately 4.0% for Argentina in 2010. The bank plans to leverage its excess capital and liquidity to expand lending to the private sector, focusing on consumer loans and credit cards. Strategic growth will continue through organic expansion and potential acquisitions, such as the pending acquisition of Banco Privado de Inversiones (announced March 2010).
Key Risks and Contingencies:
- Macroeconomic Instability: Argentina faces risks related to inflation (officially 7.7% in 2009, though private estimates are higher), exchange rate volatility, and the sustainability of public spending.
- Sovereign Debt: The Argentine government's ability to restructure sovereign debt and access international capital markets remains uncertain. The bank holds exposure to public sector debt, though it has been reducing this exposure.
- Regulatory Environment: Dividend distributions require prior authorization from the Central Bank. Exchange controls could restrict the transfer of funds abroad for debt service or dividends.
- Credit Quality: While asset quality is improving, the bank notes that the recovery of the private sector credit portfolio is slow, and further deterioration is possible if the economic recovery stalls.
Investor Verification Checklist
- Accounting Reconciliation: Verify the significant differences between Central Bank Rules and U.S. GAAP, particularly regarding the valuation of government securities (marked-to-market under U.S. GAAP) and the treatment of intangible assets related to court rulings on foreign currency deposits.
- Public Sector Exposure: Confirm the current level of exposure to Argentine government bonds and provincial debt, and the impact of potential sovereign restructuring on the bank's asset quality.
- Dividend Authorization: Monitor Central Bank communications regarding the authorization of dividends for the 2009 fiscal year, as distribution is not automatic.
- Acquisition Integration: Assess the integration progress and financial impact of the Nuevo Banco Bisel merger and the pending acquisition of Banco Privado de Inversiones.
- Inflation and Exchange Rates: Evaluate the sensitivity of the bank's net interest margin and foreign currency-denominated assets/liabilities to fluctuations in the Argentine peso and inflation rates.