BMA

Business Context and Reporting Period

Company: Macro Bansud Bank Inc. (Banco Macro Bansud S.A.)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Six months ended June 30, 2006
Filing Date: August 18, 2006
Business Overview: A commercial bank authorized by the Central Bank of Argentina (BCRA), focusing on small- and medium-sized enterprises and regional economies. The bank operates through a network of subsidiaries including Nuevo Banco Suquia S.A. and Banco del Tucuman S.A. (acquired May 2006). The bank's stock is listed on the New York Stock Exchange.

Key Financial Metrics (Consolidated)

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

Material Changes vs. Prior Period

• Profitability Surge: Net income increased by approximately 41% year-over-year, driven by a 76% increase in Net Income from Financial Intermediation (from 55,397 to 162,088).
• Asset Growth: Total assets grew by 21% (2,007,931 increase), primarily due to a 37% expansion in the loan portfolio and a 51% increase in cash and cash equivalents.
• Deposit Expansion: Total deposits rose by 18% (1,189,927 increase), with significant growth in time deposits and checking accounts.
• Equity Increase: Shareholders' equity grew by 38% (572,635 increase), largely attributable to a capital increase of 469,500 approved in September 2005 and fully subscribed by the reporting period, plus retained earnings.
• Acquisition Impact: The consolidation of Banco del Tucuman S.A. (acquired May 5, 2006) contributed to asset and loan growth, adding 700,612 in assets and 660,547 in liabilities at acquisition.

Guidance, Outlook, Risks, and Unusual Items

• Accounting Standards: Financial statements are prepared under BCRA standards, which differ from professional accounting standards (FACPCE) and US GAAP. Notable differences include the valuation of government securities, treatment of negative goodwill, and income tax recognition (no deferred tax method used). Management estimates these differences are significant.
• Legal Contingencies (Amparos): The bank faces ongoing legal actions regarding the constitutionality of the 2002 currency conversion (pesification). While management believes the final resolution will not have a significant additional effect on equity, uncertainty remains regarding potential foreign currency reimbursement claims.
• Goodwill: The acquisition of Banco del Tucuman S.A. resulted in positive goodwill of 17,574. Conversely, the bank continues to reverse negative goodwill from the 2002 acquisition of Banco Bansud, recognizing 36,556 as income in the current period.
• Subsequent Events: On August 1, 2006, the Board authorized a program to issue corporate bonds up to USD 400 million.
• Dividend Restrictions: Dividend distributions are subject to Central Bank authorization and restrictions related to subordinated bond redemption and liquid realized income limits.

Investor Verification Checklist

• Accounting Reconciliation: Verify the magnitude of adjustments required to reconcile BCRA accounting standards to US GAAP, specifically regarding deferred taxes and government security valuations.
• Loan Quality: Review the "Statement of Debtors by Situation" (Exhibit B and Consolidated Statement) to assess the ratio of "Irrecoverable" and "Troubled" loans relative to the total portfolio expansion.
• Legal Exposure: Monitor the status of "recursos de amparo" (constitutional rights protection actions) regarding deposit pesification and potential foreign currency liabilities.
• Capital Adequacy: Confirm the bank's compliance with BCRA capital requirements following the recent capital increase and acquisitions.
• Subsidiary Integration: Assess the financial performance and integration progress of the newly acquired Banco del Tucuman S.A. and the pending acquisition of Nuevo Banco Bisel S.A.