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: First Quarter ended March 31, 2018 (1Q18)
Reporting Date: May 15, 2018
Accounting Standard: First quarter reported under Communication "A" 6114 of the Central Bank of Argentina, converging to International Financial Reporting Standards (IFRS). Prior period data in tables reflects the previous scheme.
Key Financial Metrics
| Metric | 1Q18 Value | Currency |
|---|---|---|
| Net Income | 3,564.5 million | Ps. |
| Earnings Per Share (EPS) | Ps. 5.32 | Ps. |
| Return on Average Equity (ROAE) | 29.4% | Accumulated Annualized |
| Return on Average Assets (ROAA) | 6.2% | Accumulated Annualized |
| Net Interest Margin | 18.7% | Accumulated Annualized |
| Efficiency Ratio | 38.8% | Accumulated |
| Regulatory Capital Ratio (Basel III) | 27.3% | % |
| Non-Performing Loans (NPL) Ratio | 1.1% | % |
| Coverage Ratio | 178.68% | % |
| Total Deposits | 149.5 billion | Ps. |
| Private Sector Financing | 142.2 billion | Ps. |
Material Changes vs. Prior Period
- Profitability: Net income increased 17% quarter-over-quarter (QoQ) and 77% year-over-year (YoY). Operating result rose 11% QoQ and 65% YoY.
- Lending Growth: Financing to the private sector grew 10% QoQ and 52% YoY. Commercial overdrafts grew 36% QoQ, while mortgage loans grew 27% QoQ.
- Deposits: Total deposits increased 4% QoQ, driven by a 9% QoQ rise in time deposits. Private sector deposits grew 3% QoQ.
- Cost Management: Administrative expenses decreased 4% QoQ, improving the efficiency ratio to 38.8% from 43.3% in 4Q17.
- Asset Quality: The NPL ratio remained stable at 1.1% QoQ. However, consumer portfolio NPLs increased slightly by 9 basis points to 1.54%.
- Capital: Shareholders' equity increased 8% QoQ to Ps. 50.3 billion. Excess capital stood at Ps. 37.6 billion.
Outlook, Commentary, and Risks
Management Commentary:
- The bank highlighted strong solvency with a regulatory capital ratio of 27.3% and aims to optimize the use of excess capital.
- Efficiency improvements were achieved despite inflationary pressures, with net fee income covering 54% of administrative expenses.
- Income from government securities (LEBACs) contributed significantly to financial income, though the LEBAC position decreased 8% QoQ.
Recent Corporate Actions:
- Dividend: Approved a cash dividend of Ps. 5.00 per share (500% of capital stock), payable May 15, 2018.
- Share Repurchase: Authorized a program to repurchase up to 4.5% of total capital stock (max Ps. 4.5 billion) at a price not exceeding Ps. 158.00 per share.
- Debt Issuance: Issued Class C Peso denominated Notes totaling Ps. 3.2 billion.
Risks and Contingencies:
- Macroeconomic: Significant exposure to inflation, interest rate fluctuations, and Argentine peso exchange rate volatility.
- Regulatory: New Central Bank regulations (Communication "A" 6501) limit net global long FX positions to 10% of integrated capital or liquid assets.
- Credit Risk: Potential for increased defaults due to deterioration in regional and national economic conditions.
Investor Verification Checklist
- IFRS Transition Impact: Verify how the convergence to IFRS (Communication "A" 6114) affects comparability of 1Q18 data versus prior periods, as noted in the disclaimer.
- FX Exposure: Review the Net FX Position, which turned negative (short) at Ps. -1.5 billion in 1Q18, and assess sensitivity to peso devaluation.
- Consumer Loan Quality: Monitor the slight deterioration in consumer portfolio NPLs (up to 1.54%) amidst economic uncertainty.
- Dividend Sustainability: Confirm the impact of the Ps. 5.00 per share dividend payout on future liquidity and capital ratios.
- Government Securities: Assess the bank's reliance on income from government securities (LEBACs) and the risk associated with the 8% QoQ reduction in this portfolio.