Business Context and Reporting Period
Company: Macro Bank Inc. (Banco Macro S.A.)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Six months ended June 30, 2015
Filing Date: August 19, 2015
Business Overview: A commercial bank authorized by the Central Bank of Argentina (BCRA), operating primarily in regional areas outside Buenos Aires. The bank offers traditional banking products to companies and individuals and operates through subsidiaries including Banco del Tucumán SA and Macro Bank Limited.
Key Financial Metrics
Figures in thousands of Argentine Pesos (ARS), unless otherwise noted.
| Metric | Six Months Ended June 30, 2015 | Six Months Ended June 30, 2014 |
|---|---|---|
| Financial Income | 7,907,829 | 6,722,918 |
| Financial Expense | 3,607,227 | 2,972,978 |
| Gross Intermediation Margin | 4,300,602 | 3,749,940 |
| Net Income (Gain) | 1,936,918 | 1,918,940 |
| Total Assets (Balance Sheet) | 79,295,556 | 68,239,038 (Dec 31, 2014) |
| Total Deposits | 56,672,619 | 48,214,423 (Dec 31, 2014) |
| Shareholders' Equity | 12,804,579 | 11,491,817 (Dec 31, 2014) |
| Cash and Cash Equivalents | 10,854,863 | 14,690,022 (Dec 31, 2014) |
Consolidated Figures: Consolidated Net Income for the period was 1,936,918 (identical to stand-alone due to elimination of intercompany transactions). Consolidated Total Assets were 88,012,843.
Material Changes vs. Prior Period
- Revenue Growth: Financial income increased by approximately 17.6% year-over-year, driven largely by higher interest on credit card loans (up 45.8%) and net income from government and private securities (up 90%).
- Expense Increases: Financial expenses rose by 21.3%, primarily due to higher interest on time deposits and increased contributions to the Deposit Guarantee Fund.
- Asset Expansion: Total assets grew by 16.2% from December 31, 2014, to June 30, 2015. Loans to the non-financial private sector increased significantly, particularly in personal loans and credit cards.
- Provisions: The provision for loan losses increased to 386,188 from 274,225 in the prior year period, reflecting a 40.8% increase in credit risk provisioning.
- Cash Flow: Net cash used in operating activities was 3,461,541, compared to 2,633,450 in the prior year period. Net cash decreased by 3,835,159 during the period.
Guidance, Outlook, Risks, and Contingencies
Management Commentary & Outlook: Management notes a macroeconomic environment characterized by uncertainty, volatility in financial assets and foreign exchange markets, and contractions in growth levels. The bank is monitoring these conditions to determine potential impacts on future financial statements. The bank is currently implementing a plan to convert its financial reporting to International Financial Reporting Standards (IFRS) by January 1, 2018.
Risks and Contingencies:
- Regulatory Sanctions: The bank faces several summary judgments and sanctions from the Central Bank (BCRA) and the Financial Information Unit (UIF) related to foreign exchange regime infractions and anti-money laundering compliance. As of June 30, 2015, monetary sanctions pending payment or appeal totaled 11,752. Management believes no further significant accounting effects will arise.
- Legal Claims: Ongoing tax claims exist with the AFIP and City of Buenos Aires authorities regarding income tax and turnover tax for prior fiscal years. A consumer association lawsuit regarding "life insurance" charges was settled in 2010, but a court later ordered the agreement nullified; the bank is appealing this resolution.
- Accounting Differences: Significant valuation differences exist between BCRA accounting rules and Argentine professional accounting standards, particularly regarding government securities, business combinations, and deferred taxes. These differences could impact equity and income if standards were aligned.
- Dividend Restrictions: Distribution of earnings is subject to Central Bank authorization and must comply with minimum capital and cash requirements. Cash dividends of 596,254 were approved by shareholders but pending Central Bank approval.
Investor Verification Checklist
- Currency Risk: Verify the impact of Argentine Peso volatility and foreign exchange restrictions on the bank's reported earnings and asset valuations.
- Regulatory Status: Confirm the final status of pending sanctions from the BCRA and UIF, and any potential fines or operational restrictions.
- Asset Quality: Review the increase in loan loss provisions (up 40.8%) and the classification of loans in "high risk" or "irrecoverable" categories in Exhibit B.
- Accounting Standards: Understand the material differences between BCRA reporting and IFRS/US GAAP, specifically regarding the valuation of government securities and deferred taxes.
- Dividend Approval: Monitor the Central Bank's approval of the proposed cash dividend distribution of 596,254.