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Executives

Jorge Scarinci - Finance and IR

Analysts

Jorge Chirino - Morgan Stanley

Federico Rey - Raymond James

Nicolas Chialva - Itaú BBA

Banco Macro SA (BMA) Q3 2012 Earnings Call November 8, 2012 11:00 AM ET

Operator

Good morning ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to the Banco Macro’s 3Q12 Earnings Conference Call. We would like to inform you that 3Q12 Press Release is available to download at the Investor Relations website of Banco Macro at www.macro.com.ar. Also this event is being recorded and all participants will be 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 Mr. Jorge Scarinci, Finance and IR Manager. You may begin your conference.

Jorge Scarinci

Good morning and well come to Banco Macro third quarter 2012 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 filled to the SEC and is available at our website. Third quarter 2012 Press Release was distributed yesterday and it is also available at our website.

Banco Marco is one of the leading private banks in Argentina, with a strong presence in the interior of the country and a branch network of 427 branches. Even though we are a universal bank, we focus on low to middle income individuals and SMEs. Banco Marco is a financial agent of four provinces in Argentina, Salta, Jujuy, Misiones, and Tucuman.

I will now briefly comment on the bank’s third quarter 2012 financial results. Banco Marco’s net income for the quarter was 411.9 million pesos or 31% higher than the 314.2 million pesos one year ago. The bank’s quarter annualized return-on-equity and return-on-assets of 29.4% and 3.7% respectively remains healthy and shows the banks earning potential.

Nevertheless Banco Marco decided to fully amortize the Amparos on (inaudible) 45 million pesos. With these onetime (inaudible) being excluded third quarter 2012 net income would have been 456.9 million pesos and the result would have represented a return-on-equity and return-on-asset of 32.7% and 4.1% respectively.

In the quarter, net financial income totaled 1.1 billion pesos or 38% higher than the 766.5 million pesos registered one year ago. These performance can be traced to our 50% year-on-year increase in financial income and a 72% year-on-year increase in financial expanses. Within financial income, EBIT on loans rose 52% year-on-year due to an 41% growth in the average loan portfolio and a 300 basis point increase in the average lending interest rates.

In the third quarter 2012, interest on loans represented 85% of total financial income, compared to the 84% in the same quarter of last year. On the other hand, net income from government and private securities decreased 13% year-on-year due to the lower income from government securities mainly (inaudible) which was justified by a smaller average portfolio of these securities.

Meanwhile, within financial expenses interest on deposits grew 88% year-on-year due to our 28% increase in volume of deposits and accretion of 50 basis points increase in the average deposit interest rates. The total combined rate, we saw an increase of deposit net interest margin from 10.7% in the same quarter of last year through 11.9% as of the third quarter of 2012, cause we excluded bond gains and warranty loss on the calculation, the bank’s net interest margin widened to 12.4% from last year’s level of 10.4%.

The bank’s net fee income grew 23% year-on-year, based on deposit accounts, on debit and credit card fees. Administrative expenses rose 21% year-on-year, mainly due to an increase in personal expenses and higher operating expenses. Including personal expenses (inaudible) to the 23%, average (inaudible) increase with the union back in May 2012. The cumulated efficiency ratio reached 50.4%, much better than 55.8% level posted in the third quarter of 2011.

As of September 2012, Banco Marco’s effective income tax rate was 38% lower than the 43.1% posted in the second quarter of 2012. In terms on loan growth, the bank financing to the private sector grew 7% quarter-on-quarter and 23% on year-on-year, which continues showing some deterioration in the economy in the third quarter of this year. Personal and credit card loans also grew during the quarter.

On the funding side, total deposit grew 3% quarter-on-quarter and 23% year-on-year. Private sector deposits grew 4% on a quarterly basis while public sector deposit slightly decreased. (Inaudible) deposits and increasing (inaudible) deposit 6% was observed, while foreign currency deposit decreased 7%. As of September 2012, Banco Marco’s transaction accounts represented approximately 42% of total deposits and therefore the bank’s average annual (inaudible) fund was 7.4%.

In terms of asset quality, Banco Marco’s non-performing to total financing ratio reached 1.6%, compared to last level of 1.34%. The current ratio reached 161.4%. In terms of capitalization, Banco Marco accounted capital of 2 billion pesos which represented a capitalization ratio of 18.5%. Even though in the third quarter 2012, the new operational risk requirement increased from 50% on the previous quarter to 75% in the current quarter.

The Bank’s aim is to make the best use of this excess capital. Also in regard to liquidity we remain healthy. Liquid assets to total deposit rates reached 38%. Banco Marco’s (inaudible) for another positive quarter. We continue to show a solid financial position, asset quality is under control and closely monitor. We continue working to improve more our efficiency standard. We got one of the cleanest balance sheet in Argentina's banking sector and we keep a well optimized deposit base, which is one of the lowest cost of funds in Argentina's banking sector.

So, moderator at this time, we would like to take the questions that people might have. Thanks.

Question-and-Answer Session

Operator

(Operator instructions) your first question comes from the line of Jorge Chirino with Morgan Stanley. Jorge, your line is open.

Jorge Chirino - Morgan Stanley

Just a very quick question on the outlook for 2013. What are you expecting in terms of loan growth for next year? Where do you expect to see the growth from so many (ph) commercial? What are you seeing in terms of expenses and margins?

Jorge Scarinci

For this year what we are forecasting right now is some recovery on the economy, compared 2012. Mainly this is going to be fueled by the high level of commodity prices that forecasted high harvest for Surya (ph). Also Brazil’s economy is recovering and that is also going to help Argentina’s economy to recover from a slaggy 2012. In terms of loan growth, what we are expecting is to be on the high 20s nominal growth. In terms of expense, I think that’s between mid and high 20s also, coming high with what (inaudible) for the increasing domestic prices. On margins, we are forecasting some stability in the margins with I would say, in our case we have around 12% net interest margin. So for next year we are seeing some stability around that between plus minus 50 basis points there.

Operator

Your next question comes from the line of Federico Rey with Raymond James.

Federico Rey - Raymond James

Bank (ph) to lender to 5% of the deposits, if I missed this.

Operator

Mr. Ray, if you would so kind to repeat your question, I believe your line was muted.

Federico Rey - Raymond James

Hello, Jorge?

Jorge Scarinci

Yes Federico, can you repeat your question because I think you were on mute.

Federico Rey - Raymond James

Okay, yes. I would like if you can comment on the progress in term of complain with the regulation by the Central Bank to lend us 5% of the deposits into SMEs.

Jorge Scarinci

Federico, we don’t talk on this. You know that this is during the last day of December. So we are working to fulfill these requirements. We still have two months in order to extend these loans on the regulations set by the Central Bank. So we believe that we would have no problem to comply with it.

Operator

Your next question comes from the line of Nicolas Chialva with Itaú BBA.

Nicolas Chialva - Itaú BBA

Regarding asset quality, which has been performing quite well in 2012 and I’m wondering about your expectations for the near future and 2013 on loan expirations and deals (ph).

Jorge Scarinci

Hi Nicholas. No, we are seeing some stability basically because, I even commented in the previous question that we are looking forward for some recovery in the economy in 2013. So, we are seeing stability in terms of asset quality for both consumer and commercial. So in terms of provision for the next year, we are not forecasting many changes in terms of the normalized level of research that we do on a quarterly basis.

Nicolas Chialva - Itaú BBA

And then let me ask you a follow on question because during the second quarter, you spent some additional provisions and molding us, the coming performance was not that good. But the asset quality did not deteriorate significantly during that quarter either. What do you attribute this some (ph) performance to?

Jorge Scarinci

Basically it could be because many sectors continued to be profitable, as far as the liquidity in the season and of course I would say that the reward for being on our view or considered to be (inaudible) this is good basically because we view our, what become a non-performing that is back for you in terms of your great reward, in terms of that you have a recovery 3, 4, 5 (inaudible) and of course that increased your cost of taking you there, if you (inaudible) on the banking sector, in that case could be basically, well we have a low level of probability. So I think that’s a combination of all that.

Operator

And there are no questions at this time. This concludes the question-and-answer session. I will now turn over to Mr. Jorge Scarinci for final considerations.

Jorge Scarinci

Okay at this time I would like to thank everyone and of course we are available open to additional comments or questions and well, thanks everyone. Have a good day.

Operator

Thank you ladies and gentlemen. With this we conclude today’s presentation. We thank you for joining. You may now disconnect.

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