Business Context and Reporting Period
Company: Macro Bank Inc. (Banco Macro S.A.)
Filing Type: Form 6-K (Foreign Private Issuer)
Reporting Period: Fourth Quarter ended December 31, 2020 (4Q20) and Full Year 2020 (FY2020)
Accounting Framework: IFRS with Hyperinflation Accounting (IAS 29) applied since 1Q20. All figures are in Argentine Pesos (Ps.) restated to the measuring unit current at the end of the reporting period.
Key Financial Metrics
| Metric | 4Q20 | FY2020 | 4Q19 (YoY) | FY2019 (YoY) |
|---|---|---|---|---|
| Net Income | Ps. 6.1 billion | Ps. 30.3 billion | Ps. 6.9 billion | Ps. 26.5 billion |
| Earnings Per Share (Ps.) | 10.80 | 47.34 | 12.11 | 41.41 |
| Net Interest Income | Ps. 21.8 billion | Ps. 96.2 billion | Ps. 32.2 billion | Ps. 119.0 billion |
| Net Fee Income | Ps. 5.7 billion | Ps. 22.7 billion | Ps. 5.8 billion | Ps. 24.3 billion |
| Return on Average Equity (ROAE) | 20.9% (Accumulated) | 20.9% (Accumulated) | 21.8% (Quarterly) | 19.3% (Accumulated) |
| Return on Average Assets (ROAA) | 4.3% (Accumulated) | 4.3% (Accumulated) | 5.2% (Quarterly) | 4.2% (Accumulated) |
| Non-Performing Loans (NPL) Ratio | 0.78% | 0.78% | 2.07% | 2.07% |
| Coverage Ratio | 479.2% | 479.2% | 106.0% | 106.0% |
| Regulatory Capital Ratio | 34.2% | 34.2% | 27.3% | 27.3% |
| Total Deposits | Ps. 488.7 billion | Ps. 488.7 billion | Ps. 357.9 billion | Ps. 357.9 billion |
| Liquid Assets / Deposits | 90% | 90% | 67% | 67% |
Material Changes vs. Prior Period
- Profitability: 4Q20 Net Income increased 2% quarter-over-quarter (QoQ) but decreased 11% year-over-year (YoY). Full Year 2020 Net Income rose 14% YoY to Ps. 30.3 billion.
- Revenue Drivers: Net Interest Income (NII) declined 32% YoY in 4Q20 due to regulatory caps on lending rates and floors on deposit rates. Net Fee Income decreased 3% YoY.
- Asset Quality: Significant improvement in asset quality. The NPL ratio dropped to 0.78% in 4Q20 from 2.07% in 4Q19. The coverage ratio improved to 479.2% from 106.0%.
- Balance Sheet: Financing to the private sector decreased 13% YoY to Ps. 252.5 billion. Total deposits increased 37% YoY but decreased 11% QoQ.
- Monetary Position: The bank recorded a Ps. 7.1 billion gain from the net monetary position in 4Q20, driven by inflation adjustments (CPI rose to 11.33% in the quarter).
Guidance, Outlook, and Risks
- Outlook: Management emphasizes strict cost control and maintaining high solvency levels. The bank aims to utilize its excess capital (Ps. 132.1 billion) effectively.
- Regulatory Environment: The Central Bank of Argentina (BCRA) extended regulations regarding debtor classification (60-day grace period before NPL classification) and suspended punitive interest charges until March 31, 2021. New rules regarding inflation adjustments for items in Other Comprehensive Income (OCI) were introduced for FY2021.
- Risks:
- Hyperinflation: Continued high inflation impacts real returns and requires constant restatement of financials.
- Regulatory Caps: Interest rate caps on loans and floors on deposits compress Net Interest Margins (NIM was 16.3% in 4Q20 vs 33.6% in 4Q19).
- Credit Risk: Potential deterioration in borrower ability to pay due to the economic recession and pandemic effects, though currently mitigated by regulatory forbearance measures.
- FX Volatility: The Argentine Peso depreciated 40% YoY (84.1450 Ps/USD at 4Q20 end), impacting USD-denominated assets and liabilities.
- Unusual Items: A Ps. 10.7 billion loss was recorded in 4Q20 from financial assets at fair value through profit or loss, primarily due to inflation adjustments on Leliq holdings.
Investor Verification Checklist
- Hyperinflation Adjustments: Verify the impact of IAS 29 restatements on comparability with prior periods and the specific treatment of OCI items under new BCRA Communication "A" 7221.
- Regulatory Capital: Confirm the sustainability of the 34.2% regulatory capital ratio given the high inflation environment and potential future capital requirements.
- NPL Quality: Assess the quality of the 0.78% NPL ratio, noting it is supported by regulatory forbearance measures (60-day grace periods) that may mask underlying credit deterioration.
- Deposit Stability: Monitor the 11% QoQ decline in total deposits and the shift in composition between time and demand deposits.
- FX Exposure: Review the net FX position (Ps. 11.4 billion long) and the impact of continued peso depreciation on the balance sheet.