BMA

Business Context and Reporting Period

This Form 6-K filing by Macro Bank Inc. (Grupo Macro) covers the 43rd fiscal year ended December 31, 2008, submitted on March 19, 2009. The report details the performance of Banco Macro S.A. and its controlled entities (Nuevo Banco Bisel S.A. and Banco del Tucumán S.A.) against a backdrop of severe global financial crisis and domestic volatility in Argentina. Key macroeconomic factors included a deceleration in GDP growth to 6.9%, a private dollarization process equivalent to 2% of GDP, and a managed devaluation of the Argentine peso by 14% in the second half of the year.

Key Financial Metrics

Profitability and Income:

• Net Income: AR $660 million (up 33% from AR $495 million in 2007).
• Return on Equity (ROE): 23.8% (up from 20.2% in 2007).
• Return on Assets (ROA): 3.0% (up from 2.8% in 2007).
• Financial Income: AR $3,030 million (up 60% year-over-year).
• Gross Intermediation Spread: AR $1,688 million (up 56% year-over-year).

Balance Sheet and Liquidity:

• Total Assets: AR $22,425 million (up 13.4% from 2007).
• Total Deposits: AR $15,828 million (up 16.5% from 2007). Public sector deposits surged 122% due to the nationalization of private pension funds (AFJPs), while private sector deposits remained relatively stable.
• Total Loans (Private Sector + Leasing): AR $11,254 million (up 16% from 2007).
• Liquidity: AR $8,136 million, representing 51.4% of total deposits (down from 53.1% in 2007 but exceeding the system average by 10 percentage points).
• Shareholders' Equity: AR $2,817 million (up 4% from 2007, net of share repurchases and dividends).

Asset Quality:

• Irregular Portfolio: 3.0% of total private loans (down from 3.2% in 2007).
• Bad Debt Charge-Offs: AR $298 million (up 214% from 2007).
• Capital Surplus: 135% excess over regulatory requirements (RPC).

Material Changes vs. Prior Period

• Profit Growth: Net income increased significantly despite a challenging economic environment, driven by a 60% rise in financial income and a 56% increase in the gross intermediation spread.
• Deposit Composition Shift: The share of non-financial private sector deposits in total deposits dropped from 86% to 75% due to the transfer of AFJP funds to the public sector.
• Share Repurchase Program: The bank repurchased 75.4 million shares (11% of capital stock) for AR $380.2 million during 2008 to support minority investors during market volatility.
• Cost of Risk: Bad debt charge-offs tripled (214% increase), reflecting a more conservative provisioning strategy and the deteriorating economic outlook.
• Operational Consolidation: Completed the technological integration of Nuevo Banco Bisel into Banco Macro's platform, unifying operations and risk management.

Outlook, Risks, and Management Commentary

Guidance and Outlook: Management anticipates a strong deceleration in economic growth for 2009 due to the global crisis and falling commodity prices. The bank expects to maintain a primary surplus above 2.5% of GDP to meet debt obligations. The strategy for 2009 focuses on intensifying the efficiency of the existing structure and extending the brand to new customers.

Risks and Contingencies:

• Macroeconomic Risk: Continued capital outflows, currency devaluation, and a contraction in external demand (particularly from Brazil) pose risks to loan performance.
• Credit Risk Mitigation: In a display of strict prudence, the bank created an optional provision of AR $153.7 million in 2008 to pre-finance 50% of the regulatory provisions expected for the 2009 portfolio.
• Rating Adjustments: The bank's long-term international rating was lowered from "B+" to "B" by Fitch Ratings, following a downgrade of Argentina's sovereign rating.

Unusual Items:

• AFJP Nationalization: The government's takeover of private pension funds significantly altered the deposit base, shifting large volumes from private to public sector accounts.
• Debt Settlement: The bank settled AR $300.2 million in advances from the Central Bank (BCRA) using secured loans from its portfolio in early 2009.

Investor Verification Checklist

• Deposit Stability: Verify the sustainability of the deposit base given the structural shift from private to public sector funds and the potential for future capital outflows.
• Asset Quality Trends: Monitor the irregular portfolio ratio and bad debt charge-offs closely, as the optional provision taken in 2008 suggests management anticipates further deterioration in 2009.
• Share Repurchase Impact: Assess the long-term capital implications of the 12.7% capital reduction via share buybacks and the subsequent dividend distribution proposal (AR $0.25 per share).
• Regulatory Capital: Confirm that the 135% capital surplus remains robust against potential future provisioning requirements driven by the economic slowdown.
• Interest Rate Sensitivity: Evaluate the impact of the widening spread between lending and deposit rates in a high-inflation, high-volatility environment.