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Banco Macro S.A. (NYSE:BMA)

Q2 2013 Earnings Call

August 9, 2013, 11:00 a.m. ET

Executives

Ines Lanusse – IR Officer

Jorge Scarinci – Finance and IR Manager

Analysts

Santiago Ruiz – Raymond James

Alonso Aramburo – BTG Pactual

Operator

Good morning ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Banco Macro’s Second Quarter 2013 Earnings Conference Call. We would like to inform you that the second quarter 2013 Press Release is available to download at the Investor Relations website of Banco Macro www.ri-macro.com.ar. Also this event is being recorded and all participants will be in a listen-only mode during the Company’s presentation. After the Company’s remarks are completed, there will be a question-and-answer session. At that time, further instructions will be given. (Operator Instructions)

It is now my pleasure to introduce our speakers. Joining us from Argentina are Mr. Jorge Pablo Brito, member of the Executive Committee; Mr. Guillermo Goldberg, Commercial Deputy General Manager; Mr. Jorge Scarinci, Finance and IR Manager; and other members of the Bank’s management team.

Now, I will turn the conference over to Mrs. Ines Lanusse, IR Officer. You may begin your conference.

Ines Lanusse

Good morning and welcome to Banco Macro’s second quarter 2013 conference call. Any comment we will make today may include forward-looking statements which are subject to various conditions and these are outlined in our 20-F which was filed to the SEC and is available at our website. Second quarter 2013 press release was distributed yesterday and it is also available at our website.

Banco Macro is one of the leading private banks in Argentina, with a strong presence in the interior of the country and a branch network of 428 branches. Even though, we are a universal bank, we focus on low-to-middle income individuals and SMEs. Banco Macro is a financial agent of four provinces in Argentina; Salta, Jujuy, Misiones, and Tucuman.

I will now briefly comment on the Bank’s second quarter 2013 financial results. Banco Macro’s net income for the quarter was Ps.460.4 million, or 39% higher than the Ps.332.1 million earned one year ago. The Bank’s accumulated annualized second quarter 2013 ROE and ROA of 27.3% and 3.6% respectively remains healthy and shows the Bank’s earnings potential.

In the quarter, net financial income totaled Ps.1.2 billion or 20% higher than the Ps.1.7 billion registered one year ago. This performance can be traced to a 29% year-on-year increase in the financial income and 42% year-on-year increase in financial expenses.

Within financial income, interest on loans rose 39% year-on-year due to a 28% growth in the average loan portfolio, and a 141 basis point increase in the average private sector lending interest rates. In the second quarter of 2013, the interest on loans represented 89% of total financing income compared to 82% in the second quarter of 2012.

On the other hand, net income from government and private securities decreased 79% year-on-year, due to less volume of LEBACs and NOBACs and lower market price of other government securities. Meanwhile, within financial expenses interest on deposits grew 42% year-on-year due to a 19% increase in the average volume of interest bearing to process and 239 basis points increase in the average time deposit interest rates.

The former combined effect resulted in an increase of the Bank’s net interest margin from 11.5% as of the second quarter of 2012 to 12.6% as of the second quarter of 2013. And we excluded bond days and warranty loss on the calculation, the Bank’s net interest margin would have widened to further 13.3% from last year’s level of 12%.

The Bank’s net fee income grew 32% year-on-year, based on credit-related fees and debit and credit card fees. Administrative expenses rose 32% year-on-year, mainly due to an increase in personal expenses and higher other operating expenses. The increase in personal expenses can be traced to 24%, annual average salary increase agreed with the Union back in May 2013 and other additional provisions accounted for bonuses. The accumulated efficiency ratio reached 52.8% compared to the 50.9% posted in the second quarter of 2012.

As of June 2013, Banco Macro’s effective income tax rate was 38.9%, compared to 43.1% registered as of June 2012. In terms of loan growth, the Bank’s financing to the private sector grew 3% quarter-on-quarter and 26% year-on-year and on which commercial loans for productive investments have been included. Credit card loans on personal loans also grew during the quarter.

On the funding side, total deposits grew 1% quarter-on-quarter and 18% year-on-year. Private sector deposits grew 4% on a quarterly basis while private sector deposits decreased 7%. As of June 2013, Banco Macro’s transactional accounts represented approximately 47% of total deposits, and therefore the Bank’s average annualized cost of funds was 8.5%.

In terms of asset quality, Banco Macro’s non-performing to total financing ratio reached 1.88% from last year’s level of 1.58%. The coverage ratio reached 143.94%. In terms of capitalization, Banco Macro’s accounted an excess capital of Ps.3.0 billion, which represented a capitalization ratio of 21.7%. The Bank’s aim is to make the best use of this excess capital.

The Bank’s liquidity remains appropriate [ph]. Liquid assets to total deposits ratio reached 29.5%. Banco Macro accounted for another positive quarter. We continue showing a solid financial position. Asset quality is under control and closely monitored. We continue working to improve more our efficiency standard. We have one of the cleanest balance sheet in Argentine’s banking sector, and we keep a well optimized deposit base, with one of the lowest cost of funds in Argentine’s banking sector.

At this time, we’d like to take the questions that you may have.

Question-and-Answer Session

Operator

Okay, at this time we are going to open it up for question and answers. (Operator instructions) the first question comes from Santiago Ruiz of Raymond James. Please go ahead.

Santiago Ruiz – Raymond James

Hello everyone. Thanks for letting me ask the question. My question is, how do you see at the end of 2013 consumer inventory in the funding rates on the loan market? Thank you.

Jorge Scarinci

Hi, Santiago. This is Jorge Scarinci speaking, which I’ve seen in the third, two quarter of year was also a slight increase in the funding rates. As you can see now in our press release the net interest margin of the bank slightly widened. So while we’ve forward what we’re looking for slightly continues upward trend on the funding side and in terms of margins or spreads. We are seeing them similar level than, second quarter of 2013 or slight widened.

Santiago Ruiz – Raymond James

Thank you.

Operator

(Operator Instructions) we have a question from the Sandra (inaudible) of BTG Pactual. Please go ahead.

Alonso Aramburo – BTG Pactual

Hi, this is Alonso from BTG. Thanks for the call. I wanted to ask you NPL ratio and maybe you can comment (inaudible) on the reclassification of (inaudible)?

Jorge Scarinci

We can barely hear you, but I think your question was related to the NPL ratio. As we have stated in the press release increase was mostly related to weaker (inaudible) of our clients basically from this sugar [ph] segment, sue [ph] our company that was downgraded to category five and that effected our NPL ratio that was deterioration in the ratio was justified by that.

Going forward, we are seeing the ratio of in the area of 2% by the end of the year and of course, the coverage ratio we continue being about 100%. We do not have quantity target in terms of coverage ratio, but of course we will be always about 100%. I think that was your questions but we can barely you.

Alonso Aramburo – BTG Pactual

That answers my questions, thanks a lot.

Jorge Scarinci

Okay, thanks.

Operator

(Operator Instructions) There are no questions at this time. This concludes the question-and-answer session. I’ll now turn the conference back over to Mrs. Ines Lanusse for final consideration.

Ines Lanusse

Okay, this ends our conference call. Thank you all for your interest in Banco Macro. We appreciate your time and look forward to speaking with you again. Have a good day.

Operator

This conference for Banco Macro has ended, you may now disconnect your line. Thank you.

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Source: Banco Macro Management Discusses Q2 2013 Results - Earnings Call Transcript

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