Macro Bank Inc. 3Q17 Earnings Summary
Business Context and Reporting Period
This Form 6-K filing reports the financial results for Macro Bank Inc. (Banco Macro S.A.) for the third quarter ended September 30, 2017. All figures are presented in Argentine pesos (Ps.) in accordance with Argentine GAAP. The bank operates primarily in Argentina, focusing on commercial and consumer banking, with a significant presence in the private sector.
Key Financial Metrics
- Net Income: Ps. 2.6 billion (Ps. 2,597.8 million), representing a 29% increase quarter-over-quarter (QoQ) and a 59% increase year-over-year (YoY).
- Earnings Per Share (EPS): Ps. 3.89, up 14% QoQ and 39% YoY.
- Profitability Ratios: Accumulated annualized Return on Average Equity (ROAE) was 28.7%; Return on Average Assets (ROAA) was 4.9%.
- Revenue: Net financial income totaled Ps. 6.0 billion (up 15% QoQ). Net fee income was Ps. 1.9 billion (up 4% QoQ).
- Efficiency: The accumulated efficiency ratio improved to 43.3% (down from 45% in 2Q17).
- Liquidity: Liquid assets totaled Ps. 69.3 billion, representing 50.7% of total deposits.
- Capital: Regulatory capital ratio (Basel III) stood at 25.8%, with excess capital of Ps. 31.5 billion.
- Asset Quality: Non-performing loans (NPL) to total financing ratio was 1.0%, with a coverage ratio of 199.25%.
Material Changes vs. Prior Period
- Loan Growth: Financing to the private sector grew 12% QoQ to Ps. 117.4 billion. Commercial loans (Overdrafts and Documents) drove growth, rising 26% and 17% respectively. Consumer loans (personal and credit cards) grew 13% and 4%.
- Deposit Growth: Total deposits increased 10% QoQ to Ps. 136.6 billion. Private sector deposits grew 6%, while public sector deposits surged 52%.
- Operating Result: Operating income rose 24% QoQ to Ps. 4.4 billion. Excluding specific government securities and CER adjustments, the operating result would have been 18% higher than 2Q17.
- Asset Quality Improvement: The NPL ratio decreased from 1.27% in 2Q17 to 1.0% in 3Q17, driven by a significant reduction in commercial portfolio NPLs (from 0.65% to 0.26%) following a specific client debt cancellation.
- Equity Increase: Shareholders' equity grew 12% QoQ to Ps. 40.1 billion, aided by the exercise of an oversubscription right for Class B ordinary shares (approx. USD 99.9 million).
Outlook, Risks, and Unusual Items
- Forward-Looking Statements: The filing includes standard disclaimers regarding risks such as inflation, interest rate changes, government regulation, and exchange rate fluctuations in Argentina.
- Regulatory Changes: The Central Bank of Argentina (BCRA) established a "Net Stable Funding Ratio" to be fully implemented on January 1, 2018. Additionally, a new quota for the "Credit Line for Productive Financing and Financial Inclusion" was set for 2018, starting at 16.5% and decreasing monthly to 0% by December 2018.
- IFRS Adjustment: As of September 30, 2017, an adjustment to equity under IFRS would result in a total of Ps. 43.5 billion, compared to Ps. 40.1 billion under local rules.
- Unusual Items: A Ps. 216 million gain in "Other Income" was noted, though it was lower than the previous quarter due to a decrease in recovered loans. "Other Expense" decreased significantly (62% QoQ) as prior quarter expenses related to equity and notes offerings were not repeated.
Investor Verification Checklist
- Verify the sustainability of the 12% QoQ loan growth in the private sector amidst Argentina's macroeconomic environment.
- Confirm the impact of the 52% surge in public sector deposits on the bank's overall funding mix and cost of funds.
- Assess the implications of the new Net Stable Funding Ratio regulation effective January 1, 2018, on liquidity management.
- Review the specific details of the commercial client debt cancellation that drove the improvement in the NPL ratio.
- Monitor the execution of the 2018 "Credit Line for Productive Financing" quota requirements.