Banco Macro S.A.(US:BMA)2023-04-27 16:00Portfolio Composition - The portfolio composition from Corporate Banking shows a decline in corporate companies from 31% in 2020 to 10% in 2022, while agricultural companies increased from 25% to 34% in the same period[109]. Credit Risk Management - The Credit Risk Department has implemented a risk rating model that evaluates both quantitative and qualitative factors for individual and corporate clients, enhancing the efficiency of the credit risk rating process[113]. - The credit risk management system includes automated tools for calculating key performance indicators to monitor business changes according to the defined risk appetite[113]. - Argentine banks must maintain minimum credit provisions based on client risk categories, with "Irrecoverable" loans requiring a 50% provision for those with preferred guarantees and 100% for those without[135]. - The minimum credit provisions for "With high risk of insolvency" loans are set at 25% with preferred guarantees and 50% without[135]. - The classification of borrowers includes categories such as Normal Situation, Low Risk, Medium Risk, and High Risk based on overdue periods[165]. - Loans classified as irrecoverable are those with payment obligations overdue for more than 180 days[166]. - An additional allowance of Ps. 1,837 million was recorded as of December 31, 2022, due to uncertainties in credit risk and macroeconomic conditions[294]. Regulatory Framework - The Central Bank's Communication "A" 6885 regulates Payment Service Providers (PSPs) and mandates registration for those offering payment accounts[123]. - The Argentine Productive Financing Law No. 27,440 modernized the legal framework of the Argentine capital markets, impacting various financial laws and regulations[115]. - The Central Bank's guidelines for corporate governance now include a requirement for gender parity in financial institutions[124]. - The Anti-Money Laundering and Terrorism Financing Regime was established to combat illicit financial activities, with the UIF designated as the enforcement authority[125]. - The UIF updated provisions regarding Politically Exposed Persons (PEPs) with Resolution 35/2023, effective April 1, 2023, requiring risk evaluation after a two-year PEP status[132]. - The Central Bank has established a framework for Fintech operations, defining Payment Service Providers and regulating their activities[146]. - The Central Bank and CNV are designated as "Specific Control Agencies" to oversee compliance with AML/CFT procedures, with the authority to supervise and inspect reporting subjects[152]. - Resolution UIF 14/2023, effective from April 1, 2023, nullifies previous regulations and establishes new guidelines for managing money laundering and terrorist financing risks[152]. - Financial institutions are prohibited from maintaining anonymous accounts or accounts under fictitious names, with explicit measures required for foreign Politically Exposed Persons (PEPs)[152]. Economic Conditions - The inflation rate for the fiscal year ended December 31, 2022, was 94.79%, compared to 50.94% in 2021 and 36.14% in 2020[206]. - The Argentine economy has experienced significant volatility, characterized by high inflation and currency devaluation, affecting overall growth prospects[201]. - High inflation levels in Argentina could have long-term adverse consequences for the economy[223]. - The Argentine economy is vulnerable to external shocks, including geopolitical tensions and global economic instability, which could negatively impact capital flows[215]. - The purchasing power of wages in Argentina decreased by approximately 2.43 points from January to December 2022, reflecting the impact of high inflation[230]. - Consumer price inflation in Argentina was 94.8% in 2022, with estimates for 2023 projected at 110%[251]. - The gap between the official exchange rate and informal rates has widened to around 100% due to exchange controls[248]. Financial Performance - As of December 31, 2022, Banco Macro had total assets of Ps. 2,090,120.2 million (U.S.$ 11,800.0 million) and total loans of Ps. 598,600.9 million (U.S.$ 3,379.5 million)[282]. - The bank's total deposits reached Ps. 1,295,395.1 million (U.S.$ 7,313.3 million) with approximately 4.6 million retail customers and 0.1 million corporate customers[282]. - Banco Macro's shareholders' equity increased from Ps. 445,581 million in 2020 to Ps. 512,229 million in 2022, reflecting a growth of 14.8%[283]. - The bank's competitive position includes being ranked first in terms of branches and second in terms of equity among private banks in Argentina as of September 30, 2022[282]. - The bank's strategy focuses on increasing fee income and loan origination targeting low- and middle-income individuals and SMEs, which are vulnerable to economic recessions[293]. Government Policies - The Argentine government reinstated exchange controls on September 1, 2019, affecting access to the foreign exchange market for various purposes[174]. - The Argentine government has implemented various monetary and fiscal measures to mitigate the adverse effects of the COVID-19 pandemic, including lower reserve requirements and tax reductions[255]. - The fiscal deficit of the Argentine government was Ps. 1,955,140.8 million in 2022, up from Ps. 1,407,641 million in 2021, indicating a significant increase in public expenditure[252]. - Public spending rose to Ps. 13,191,168 million in 2022, compared to Ps. 7,733,816 million in 2021, reflecting a substantial increase in government financial commitments[252]. Shareholder Information - Significant shareholders, Security Trust JHB BMA and Delfín Jorge Ezequiel Carballo, own a combined total of 110,473,881 Class B shares, which could influence major decisions within the company[265]. - Shareholders may have preemptive rights to subscribe to new shares during capital increases, but U.S. holders of Class B shares or ADSs may not exercise these rights unless a registration statement is effective[301]. Market Conditions - The bank does not expect the recent instability in the global banking system to negatively impact its operations[202]. - Changes in liquidity conditions in the Argentine financial system could adversely affect the company's business performance and funding sources[272]. - The trading prices of ADSs and Class B shares may differ across markets, potentially leading to arbitrage opportunities and unexpected volatility[302]. - A significant portion of the company's assets is located outside the United States, complicating the enforcement of U.S. court judgments against the company or its directors[304].