BMA

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, 2012
Filing Date: August 21, 2012
Business Overview: Macro Bank is an Argentine private commercial bank authorized by the Central Bank of Argentina (BCRA). It operates through a network of branches and subsidiaries, including Banco del Tucumán S.A. and Macro Bank Limited. The bank focuses on traditional banking products for companies and individuals, with a strategic emphasis on regional areas outside Buenos Aires. The financial statements are prepared in accordance with BCRA rules and Argentine professional accounting standards, though certain valuation differences exist between the two frameworks.

Key Financial Metrics

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

Material Changes vs. Prior Period

• Profitability Growth: Net income increased by approximately 27% to 655.9 million ARS, driven by a 57% increase in Gross Intermediation Margin (1.67 billion ARS vs. 1.16 billion ARS).
• Asset Expansion: Total assets grew by 11.4% to 42.6 billion ARS. This was primarily fueled by a 14.6% increase in deposits (to 30.3 billion ARS) and a 9.5% increase in the loan portfolio to the non-financial private sector.
• Provisioning Increase: The provision for loan losses more than doubled to 275.5 million ARS from 98.4 million ARS in the prior year, reflecting a more conservative approach to credit risk or changes in the portfolio composition.
• Service Charge Income: Service-charge income rose significantly to 1.15 billion ARS (up 40%), largely due to increased commissions related to deposits and debit/credit card activities.
• Administrative Expenses: Operating costs increased by 28% to 1.32 billion ARS, with personnel expenses rising by 27%.

Guidance, Outlook, Risks, and Contingencies

Management Commentary and Outlook:
Management notes that the international macroeconomic context generates uncertainty regarding future growth levels, asset volatility, and exchange markets. Locally, while the economy has shown sustained growth, there has been increased volatility in financial asset prices and complexity in foreign exchange regulations. Management is actively monitoring these conditions to identify potential effects on assets and financial situations.

Key Risks and Contingencies:

• Legal Actions (Amparos): The bank faces ongoing legal actions related to the 2001 economic crisis and the conversion of foreign currency deposits to pesos. The Argentine Supreme Court has ruled on reimbursement terms (pesos at 1.40 exchange rate adjusted by CER). The bank has capitalized differences related to these court orders in intangible assets and recorded provisions for additional payables. Management believes no additional significant effects beyond those recognized are likely.
• Tax Claims: The Federal Public Revenue Agency (AFIP) and provincial authorities have reviewed tax returns for years prior to 2005. Significant claims involve the deductibility of credits with collateral security and the treatment of compensation bonds. Management believes there are no additional significant effects beyond those already recognized.
• Accounting Standards Differences: The financial statements are prepared under BCRA rules, which differ from Argentine professional accounting standards (and potentially IFRS/US GAAP). If professional standards were applied, shareholders' equity as of June 30, 2012, would have decreased by approximately 162.8 million ARS, and net income would have increased by 97.4 million ARS.
• Derivatives: The bank holds significant positions in derivative financial instruments, including repurchase agreements, forward transactions, and interest rate swaps, to manage liquidity and interest rate risk.

Important Facts for Investor Verification

• Accounting Basis: Verify the impact of the differences between BCRA accounting rules and professional accounting standards on equity and income, as detailed in Note 5.
• Provisioning Adequacy: Review the significant increase in loan loss provisions (from 98.4M to 275.5M ARS) and the classification of the loan portfolio (Exhibit B) to assess credit quality trends.
• Legal Exposure: Confirm the status of provisions related to the "Amparo" lawsuits regarding foreign currency deposit conversions and the potential for future liabilities.
• Related Party Transactions: Examine the volume of transactions with subsidiaries and related parties (Note 8 and Exhibit N), which totaled 833.1 million ARS in assets as of June 30, 2012.
• Liquidity Position: Assess the concentration of deposits, noting that the 10 largest customers held 22.58% of total deposits as of June 30, 2012.