BMA

Business Context and Reporting Period

Company: Macro Bank Inc. (Banco Macro Bansud S.A.)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Three months ended March 31, 2006
Filing Date: May 23, 2006
Business Overview: A commercial bank authorized by the Central Bank of Argentina (BCRA). The bank focuses on small- and medium-sized enterprises, regional economies, and medium- to low-income individuals. It operates through subsidiaries including Nuevo Banco Suquía S.A. and Macro Securities S.A. The bank's stock is listed on the New York Stock Exchange (since March 24, 2006) and the Buenos Aires Stock Exchange.

Key Financial Metrics

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

Material Changes vs. Prior Period

• Profitability: Net income increased by approximately 20% to ARS 72.9 million compared to ARS 60.6 million in Q1 2005. This was driven by a significant increase in "Other Income" (ARS 83.8 million vs. ARS 69.1 million), largely due to income from long-term investments (ARS 50.7 million) and recovered loans/allowances reversed (ARS 22.8 million).
• Equity Growth: Shareholders' equity rose significantly from ARS 1.49 billion at year-end 2005 to ARS 2.03 billion at March 31, 2006. This increase is primarily attributable to a capital increase of ARS 469.5 million approved in September 2005 and fully subscribed by the reporting date.
• Liquidity: Cash and cash equivalents more than doubled from ARS 684 million (Dec 31, 2005) to ARS 1.26 billion (March 31, 2006), reflecting the capital raise and a net decrease in government securities.
• Loan Portfolio: Net loans increased to ARS 2.36 billion from ARS 2.19 billion at year-end 2005. The provision for loan losses decreased to ARS 4.1 million from ARS 7.2 million in the prior year quarter.
• Deposits: Total deposits decreased to ARS 3.91 billion from ARS 4.35 billion at year-end 2005, with a notable decline in time deposits.

Guidance, Outlook, Risks, and Unusual Items

• Acquisitions and Expansion:
  • Banco del Tucumán: The bank perfected the acquisition of 75% of Banco del Tucumán S.A. on May 5, 2006, for a total purchase price of ARS 45.96 million.
  • Nuevo Banco Bisel: On April 28, 2006, the bank was preliminarily awarded the bid for Nuevo Banco Bisel S.A., requiring a capital contribution of ARS 639.1 million pending regulatory approval.
• Dividends: On April 28, 2006, shareholders approved the distribution of cash dividends totaling ARS 68.39 million.
• Corporate Name Change: Shareholders resolved to change the corporate name to "Banco Macro S.A." pending approval by the Argentine Securities Commission (CNV).
• Accounting Standards: Financial statements are prepared under BCRA standards, which differ from professional accounting standards in Buenos Aires and US GAAP. Key differences include the valuation of government securities (often at book value or regulated present value rather than market value) and the treatment of negative goodwill from past acquisitions.
• Legal and Macroeconomic Risks:
  • Legal Actions: Ongoing litigation regarding the constitutionality of the 2002 "pesification" (conversion of foreign currency deposits to pesos) remains a risk. While the Supreme Court has ruled the process constitutional in some cases, final resolutions on specific claims are pending. Management believes no significant additional equity impact is likely.
  • Tax Disputes: The bank is involved in administrative proceedings with the AFIP regarding the taxability of income from the currency switch and CER adjustments. No provision has been recorded as the bank believes additional charges are unlikely.

Investor Verification Checklist

• Capital Raise Utilization: Verify the deployment of the ARS 469.5 million capital increase approved in late 2005 and its impact on lending capacity.
• Acquisition Integration: Monitor the regulatory approval and financial integration of the newly acquired Banco del Tucumán and the potential Nuevo Banco Bisel.
• Government Securities Valuation: Review Note 5 for the discrepancy between BCRA valuation methods and market value for government securities, which may affect the true economic value of assets.
• Legal Contingencies: Track the status of "amparo" lawsuits regarding deposit conversions and potential future liabilities.
• Dividend Sustainability: Assess the impact of the ARS 68.4 million dividend distribution on future liquidity and capital adequacy ratios.