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: Third Quarter ended September 30, 2013 (3Q13)
Reporting Date: November 8, 2013
Currency: Argentine Pesos (Ps.)
Accounting Standard: Argentine GAAP
Key Financial Metrics
| Metric | 3Q13 Value | 2Q13 Value | 3Q12 Value |
|---|---|---|---|
| Net Income | Ps. 571.9 million | Ps. 460.4 million | Ps. 411.9 million |
| Earnings Per Share (Outstanding) | Ps. 0.98 | Ps. 0.79 | Ps. 0.70 |
| Operating Result | Ps. 987.8 million | Ps. 720.9 million | Ps. 685.4 million |
| Net Financial Income | Ps. 1,550.0 million | Ps. 1,197.1 million | Ps. 1,059.7 million |
| Net Fee Income | Ps. 606.4 million | Ps. 640.2 million | Ps. 496.3 million |
| Administrative Expenses | Ps. 1,029.5 million | Ps. 1,002.5 million | Ps. 767.6 million |
| Total Assets | Ps. 56.7 billion | Ps. 53.7 billion | Ps. 48.1 billion |
| Total Deposits | Ps. 41.8 billion | Ps. 39.5 billion | Ps. 34.7 billion |
| Private Sector Financing | Ps. 37.1 billion | Ps. 34.5 billion | Ps. 29.2 billion |
| Return on Average Equity (Accumulated) | 28.3% | 27.3% | 26.8% |
| Return on Average Assets (Accumulated) | 3.8% | 3.6% | 3.2% |
| Net Interest Margin (Accumulated) | 13.3% | 12.6% | 11.7% |
| Efficiency Ratio (Accumulated) | 50.9% | 52.8% | 50.4% |
| Capitalization Ratio | 23.1% | 21.7% | 18.5% |
| Non-Performing Loans (NPL) Ratio | 1.76% | 1.88% | 1.60% |
| Coverage Ratio | 147.45% | 143.94% | 161.35% |
| Liquid Assets to Deposits | 30.2% | 29.5% | 35.2% |
Material Changes vs. Prior Periods
- Profitability Surge: Net income increased 24% quarter-over-quarter (QoQ) and 39% year-over-year (YoY). The operating result rose 37% QoQ and 44% YoY.
- Loan Growth: Financing to the private sector grew 8% QoQ (Ps. 2.6 billion). Commercial overdrafts grew 26% QoQ, while credit card loans grew 8% QoQ.
- Deposit Expansion: Total deposits grew 6% QoQ to Ps. 41.8 billion. Private sector deposits increased 9% QoQ, driven by a 15% rise in time deposits.
- Income Composition: Net financial income rose 22% QoQ, driven by higher interest on loans (up 12% QoQ) and income from government/private securities (up Ps. 148.7 million QoQ). Conversely, net fee income declined 5% QoQ due to a 33% increase in fee expenses related to credit card campaigns.
- Expense Management: Administrative expenses increased 3% QoQ, primarily due to advertising and other operating costs, though personnel expenses decreased 6% QoQ due to bonus provisions in the prior quarter.
- Asset Quality: The NPL ratio improved to 1.76% from 1.88% in 2Q13. The coverage ratio increased to 147.45%.
Guidance, Outlook, and Risks
Management Commentary: The Bank reported strong solvency with excess capital of Ps. 3.5 billion (23.1% capitalization ratio). Management noted that the efficiency ratio improved to 50.9% (accumulated) as expense growth lagged behind income growth. The Bank aims to utilize its excess capital effectively.
Risks and Contingencies: The filing includes a standard disclaimer regarding forward-looking statements. Key risks identified include:
- High inflation and fluctuations in the Argentine Peso exchange rate.
- Changes in interest rates and the cost of deposits (BADLAR rate increased 189 basis points QoQ).
- Government regulation and valuation adjustment limits on Guaranteed Loans and CER adjustments.
- Fluctuations in the value of Argentine public debt.
- Credit risks and potential increases in borrower defaults.
Unusual Items: Income from Guaranteed Loans and CER Adjustment decreased 62% QoQ due to valuation adjustment limits determined by the Central Bank of Argentina (BCRA). Net other income decreased 70% QoQ due to the absence of recovered income taxes posted in the previous quarter.
Investor Verification Checklist
- Currency Impact: Verify the impact of Argentine Peso depreciation on USD-denominated earnings (EPS in USD was $1.69 vs $1.47 in 2Q13).
- Regulatory Capital: Confirm the application of BCRA Communication "A" 5369 regarding the exclusion of interest rate risk requirements from total capital calculations effective February 2013.
- Fee Expense Volatility: Investigate the sustainability of the 33% QoQ increase in fee expenses driven by credit card positioning campaigns.
- Public Sector Exposure: Review the net exposure to the public sector (4.4% of total assets), noting it remains below the system average but is subject to government debt fluctuations.
- Interest Rate Sensitivity: Assess the impact of the rising BADLAR rate (17.7% in 3Q13) on future net interest margins and deposit costs.