BMA

Business Context and Reporting Period

Company: Macro Bank Inc. (Banco Macro S.A.)
Filing Type: Form 6-K (Foreign Private Issuer)
Reporting Period: Fiscal year ended December 31, 2008
Filing Date: March 9, 2009
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 S.A. and Nuevo Banco Bisel S.A.

Key Financial Metrics (Consolidated)

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

Material Changes vs. Prior Period

• Profitability: Net income increased by approximately 33% (from 495,200 to 660,050). This was driven by a significant increase in Gross Intermediation Margin (from 1,085,157 to 1,687,798) and Service-Charge Income (from 662,326 to 891,700).
• Asset Growth: Total assets grew by 13.7%. Loans to the non-financial private sector increased significantly, particularly in personal loans and credit cards.
• Provisions: The provision for loan losses increased substantially from 94,717 in 2007 to 297,606 in 2008, reflecting a more cautious approach to credit risk in the changing economic environment.
• Government Deposits: Deposits from the non-financial government sector surged from 1,774,121 to 3,937,961, representing a major shift in funding sources.
• Share Repurchases: The bank engaged in a significant share repurchase program, reacquiring shares totaling 380,164 during the year, reducing outstanding capital.

Guidance, Outlook, Risks, and Unusual Items

• Macroeconomic Environment: Management notes significant volatility in global financial markets and economic deceleration in Argentina. Stock markets saw marked decreases, and interest rates and country risk increased.
• Legal Contingencies (Amparos): The bank faces ongoing legal actions regarding the reimbursement of foreign currency deposits converted to pesos during the 2001 crisis. While the Supreme Court has issued rulings limiting reimbursement to the converted amount plus interest, the bank has capitalized certain differences as intangible assets. Management believes no significant effects beyond those recognized are expected.
• Debt Exchange: In January 2009, the bank exchanged guaranteed loans for new Argentine bonds (Bonar) as part of a government debt exchange program. Management opines this will not have negative effects on 2009 income.
• Accounting Standards: Financial statements are prepared under BCRA rules, which differ from Argentine professional accounting standards and US GAAP. Significant differences exist in the valuation of government securities, goodwill, and deferred taxes. If professional standards were applied, shareholders' equity and income would be materially lower.
• Earnings Distribution: A proposal was made to distribute cash dividends of Ps. 0.25 per share, subject to Central Bank authorization. Restrictions on earnings distribution apply due to capital requirements and specific reserves for subordinated bonds.

Investor Verification Checklist

• Accounting Basis: Verify the impact of BCRA accounting rules versus GAAP/IFRS on asset valuation, specifically regarding government securities and goodwill.
• Credit Quality: Review the sharp increase in loan loss provisions (297,606) and the classification of loans in "high risk" or "irrecoverable" categories in Exhibit B.
• Government Exposure: Assess the concentration risk associated with the large increase in deposits from the non-financial government sector (approx. 25% of total deposits).
• Legal Risks: Monitor the status of "recursos de amparo" lawsuits regarding currency conversion and the potential for future liabilities related to court deposits.
• Liquidity: Confirm the bank's ability to meet minimum cash requirements and manage liquidity given the global credit crunch mentioned in the outlook.