Banco Macro S.A.(BMA) - 2019 Q4 - Annual Report

Financial Performance - Net interest income for the year ended December 31, 2019, was ARS 87,409,681, an increase of 18.5% from ARS 73,787,943 in 2018[31] - Total operating expenses for 2019 were ARS 59,110,624, up from ARS 53,200,092 in 2018, reflecting a growth of 11.0%[31] - Net income for the fiscal year 2019 was ARS 20,650,647, compared to a net loss of ARS 1,081,829 in 2018, marking a significant turnaround[31] - Basic earnings per share for 2019 were ARS 32.30, a recovery from a loss of ARS 1.64 per share in 2018[31] - Dividends per share approved by the shareholders' meeting for 2019 were ARS 20.00, up from ARS 10.00 in 2018[31] Asset and Liability Management - Total assets as of December 31, 2019, amounted to ARS 445,239,870, a decrease from ARS 540,301,708 in 2018[32] - Cash and deposits in banks decreased to ARS 100,680,063 in 2019 from ARS 115,012,597 in 2018, a decline of 12.0%[32] - Loans and other financing decreased to ARS 220,897,814 in 2019 from ARS 275,611,789 in 2018, a reduction of 19.9%[32] - Total liabilities as of December 31, 2019, were ARS 339,183,484, down from ARS 446,608,767 in 2018, indicating a decrease of 24.1%[32] Capital and Equity - Total equity as a percentage of total assets increased to 23.82% in 2019 from 17.34% in 2018, demonstrating enhanced capital strength[34] - Return on average equity rose to 21.32% in 2019, up from (1.01)% in 2018, indicating a strong recovery[34] Operational Efficiency - The efficiency ratio improved to 32.05% in 2019 from 38.15% in 2018, indicating better operational efficiency[34] - Non-performing loans as a percentage of total loans decreased to 1.71% in 2019 from 1.88% in 2018, reflecting improved asset quality[34] Economic Environment - The Argentine economy contracted by 2.2% in 2019, highlighting external economic challenges that could impact future performance[42] - The Consumer Price Index (CPI) reached 53.8% in 2019, marking the highest inflation rate since 1991[93] - The Argentine peso depreciated by 52% against the U.S. dollar in 2019, following previous depreciations of 58% in 2018 and 16% in 2017[96] - The Argentine economy is categorized as hyperinflationary, with a projected three-year cumulative inflation rate exceeding 100%[194] Government and Regulatory Impact - The Argentine government has faced litigation from foreign shareholders and bondholders, which may result in adverse judgments affecting its financial resources[69] - The Argentine government has implemented various economic interventions, including a tax amnesty for small and medium-sized companies and changes to the personal assets tax rate[80] - Regulatory measures by the Argentine government could have a material adverse effect on financial institutions, including penalties for non-compliance with regulations[147] COVID-19 Impact - COVID-19 has disrupted business activities, leading to increased volatility in financial markets and potential rises in impaired loans[108] - The Argentine government has implemented various monetary and fiscal measures in response to COVID-19, including layoff limitations and tax reductions[109] - The pandemic has significantly impacted the Argentine economy, leading to increased morosity levels in the financial system, with uncertain future effects[177] Company Strategy and Operations - The company considers Argentina's economy as "hyperinflationary" under IAS 29 for accounting periods ending after July 1, 2018[29] - The company will continue to consider acquisition opportunities, but there is no assurance that suitable candidates will be identified or that acquisitions will be completed successfully[174] - The company faces risks related to credit risk and potential credit losses, which may be exacerbated by changes in borrowers' income levels and economic conditions[175] Market Conditions - Changes in market conditions, including fluctuations in interest and currency exchange rates, could materially impact the company's financial results[179] - The Argentine securities market is less liquid and more volatile than major markets, which may limit the ability to sell shares at desired prices[207] Corporate Governance - Significant shareholders hold a combined total of 110,095,443 Class B shares, which could allow them to control major decisions without the concurrence of other shareholders[172] - Shareholders of Banco Macro are generally liable only for the payment of the shares they subscribe, with specific liabilities for conflicts of interest[209]