Banco Macro (BMA) has announced its financial results for the fourth quarter of 2023, revealing a significant net income of ARS460 billion. This performance marks a notable increase from both the previous quarter and the same period in the prior year. The bank's return on equity (ROE) and return on assets (ROA) remained strong, at 33.2% and 8.7% respectively.
Despite higher inflation impacting the net monetary position, Banco Macro demonstrated solid growth in net operating income and total deposits. The acquisition of Itaú Argentina, now Banco BMA, for $50 million is a key strategic move expected to be integrated in the latter half of the year.
Key Takeaways
- Banco Macro's net income soared to ARS460 billion in Q4 2023.
- The bank's ROE and ROA were robust at 33.2% and 8.7%, respectively.
- Net operating income before expenses saw an increase both quarterly and annually.
- Loan growth was modest, with total deposits growing quarter-on-quarter.
- The efficiency ratio improved, although the net monetary position showed a loss due to inflation.
- The bank acquired Itaú Argentina for $50 million, aiming for integration in the second half of the year.
Company Outlook
- Banco Macro expects to integrate the acquired Itaú Argentina in the second half of the year.
- The bank targets an ROE of 15% to 20% in a normalized scenario.
Bearish Highlights
- The result from the net monetary position displayed a loss, attributed to a higher inflation rate of 53.3% for the quarter.
- The effective tax rate increased to 31.4% for the quarter and 32.5% for the full year, up from the previous year.
Bullish Highlights
- The bank's loan growth increased by 4% quarter-on-quarter, with a total loan portfolio reaching ARS1.8 trillion.
- Total deposits saw a 9% increase quarter-on-quarter, amounting to ARS3.4 trillion.
- The bank maintains a strong capitalization with excess capital of ARS1.75 trillion and high capital adequacy and Tier 1 ratios.
Misses
- Net interest income decreased compared to the previous quarter, although it showed an increase on a yearly basis.
- Provision for loan losses increased both quarter-on-quarter and year-on-year.
Q&A Highlights
- Jorge Scarinci indicated that securities performance in Q1 will not match the previous quarter's levels due to market conditions.
- The legal and operational merger with Itaú is expected to occur in the second half of the year, with a single brand launch between August and October.
- Despite negative real interest rates, the bank's margins remain attractive due to the cost of funds and yields on loans and securities.
Banco Macro's Q4 earnings call emphasized the bank's strong financial performance and strategic growth through the acquisition of Itaú Argentina. The bank's solid fundamentals, with healthy ROE and ROA, along with growth in deposits and controlled asset quality, paint a positive picture for the future. The integration of Itaú Argentina is a significant development that is anticipated to contribute to the bank's profitability in the upcoming periods.
InvestingPro Insights
Banco Macro's recent financial results have captured the attention of investors, showcasing the bank's solid performance and strategic acquisitions. Here are some InvestingPro Insights that could provide additional context to the bank's current position in the market:
InvestingPro Data highlights that Banco Macro has a market capitalization of $3.21 billion USD, reflecting its substantial presence in the banking sector. The bank's Price-to-Earnings (P/E) Ratio stands at 38.27, suggesting that the stock is trading at a premium based on its earnings. This is further substantiated by an adjusted P/E Ratio for the last twelve months as of Q3 2023, which is 35.37. Despite a slight decline in revenue growth of -2.4% over the last twelve months as of Q3 2023, the bank has demonstrated a significant quarterly revenue growth of 22.91% in Q3 2023, indicating potential for future sales expansion.
Two InvestingPro Tips that are particularly relevant to Banco Macro's financial narrative include:
1. The bank is a prominent player in the Banks industry, which could provide a competitive edge in terms of market share and influence.
2. Analysts are predicting that Banco Macro will be profitable this year, aligning with the optimistic financial results reported for Q4 2023.
For investors looking for deeper insights and additional tips, there are 13 more InvestingPro Tips available for Banco Macro at https://www.investing.com/pro/BMA. These tips could help investors make more informed decisions about their investments in the bank. To access these insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enriching your financial analysis with expert data and forecasts.
Full transcript - Banco Macro SA (NYSE:BMA) Q4 2023:
Operator: Good morning, ladies and gentlemen, and thank you for waiting. And at this time, we would like to welcome everyone to Banco Macro's fourth quarter 2023 earnings conference call. We would like to inform you that the fourth-quarter 2023 press release is available to download at the Investor Relations website of Banco Macro, and that is www.macro.com.ar/relaciones-inversores/. Also, this event is being recorded. [Operator Instructions]. It is now my pleasure to introduce our speakers. Joining us from Argentina are Mr. Gustavo Manriquez, Chief Executive Officer; Mr. Jorge Scarinci, Chief Financial Officer; and Mr. Nicolas Torres, Investor Relations. Now I'll turn the conference over to Mr. Torres. You may begin.
Nicolas Torres: Good morning, and welcome to Banco Macro's fourth quarter 2023 Conference Call. Any comments we may 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 it's available at our website. Fourth-quarter 2023 press release was distributed yesterday and is available at our website. All figures are in Argentine pesos and have been restated in terms of the measuring unit current at the end of the reporting period. As of 2020, the bank began reporting results applying hyperinflation accounting, in accordance with IFRS IAS 29, as established by the Central Bank. For ease of comparison, figures of previous quarters have been restated applying IAS 29 to reflect the accumulated effect of the inflation adjustment for each period through December 31, 2023. I will now briefly comment on the bank's fourth quarter 2023 financial results. Banco Macro's net income for the quarter was ARS460 billion, 3,894% higher or ARS448 billion higher than the third quarter and 789% or ARS408 billion higher than the result posted a year ago. The bank's accumulated ROE and ROA of 33.2% and 8.7% respectively, remains healthy and shows the bank's earnings potential. In fiscal year 2023, net income totaled ARS587.7 billion, 338% higher than in fiscal year '22. Total comprehensive income totaled ARS627 billion and was 438% higher than fiscal year 2022. Net operating income before general, administrative and personnel expenses for the fourth quarter of 2023 was ARS1.3 trillion, increasing ARS778 billion quarter-on-quarter. On a yearly basis, net operating income before general, administrative and personnel expenses increased 224% or ARS915 billion. In fiscal year 2023, net operating income before general and personnel expenses totaled ARS 2.84 trillion, 83% higher than in fiscal year 2022. In the fourth quarter of 2023, provision for loan losses totaled ARS18.2 billion, 144% or ARS10.7 billion higher than in the previous quarter. On a yearly basis, provision for loan losses increased 131% or ARS10.3 billion. In fiscal year 2023, provision for loan losses totaled ARS45.9 billion and were 125% higher than in fiscal year 2022. Operating income after general, administrative, and personnel expenses was ARS1 trillion, 189% or ARS680 billion higher than the third quarter of 2023 and 327% or ARS796 billion higher than the fourth quarter of 2022. In fiscal year 2023, operating income after general, administrative and personnel expenses totaled ARS2 trillion, 123% higher than in fiscal year 2022. In the quarter, net interest income totaled ARS183.7 billion, 6% or ARS10.9 billion higher than the result posted in the third quarter of 2023 and 29% or ARS77 billion lower than the result posted one year ago. In fiscal year 2023, net interest income totaled ARS829 billion and was 13% lower than fiscal year 2022. Interest income increased 28%, while interest expenses decreased -- increased 70%. In the fourth quarter of 2023, interest income totaled ARS573 billion, 13% or ARS84.5 billion lower than in the third quarter of 2023 and 7% or ARS45.3 billion lower than the previous year. Income from interest on loans and other financing totaled ARS372 billion, 36% or ARS98.5 billion higher compared with the previous quarter, mainly due to a 68% increase in the average volume of private sector loans, which was partially offset by 1,211 basis points decrease in the average lending rate. On a yearly basis, income from interest on loans increased 73% or ARS157.4 billion. In fiscal year 2023, income from interest on loans and other financing totaled ARS1.1 trillion, 43% higher than in fiscal year 2022. In the fourth quarter of 2023, interest on loans represented of total interest income. In the fourth quarter of 2023, income from government and private securities decreased 66% or ARS209.5 billion quarter on quarter due to the unwinding of our Leliq portfolio and decreased 72% or ARS271.6 billion compared with the same period of last year. In fiscal year 2023, income from government and private securities totaled ARS1.1 trillion, 3% higher than in fiscal year 2022. In the fourth quarter of 2023, income from repos totaled ARS84.2 billion, 46% or ARS26.6 billion higher than the previous quarter and 287% of ARS62.4 billion higher than a year ago. In the fourth quarter of 2023, FX income totaled ARS182.7 billion, 50% or ARS182.2 billion lower than the previous quarter and 92% or ARS87.5 billion higher than a year ago. The FX income gain was due to the 131% Argentine peso depreciation against the US dollar and the bank’s dollar positions during the quarter, including dollar linked and dual bonds. It is important to notice that the bank's long dollar position decreased 42% during the quarter. In fiscal year 2023, FX income totaled ARS798.2 billion, 312% above the result posted in fiscal year 2022. In the fourth quarter of 2023, interest expense total ARS389 billion, 20% or ARS95.5 billion lower compared to the third quarter of 2023 and 9% or ARS31.4 billion higher on a yearly basis. Within interest expenses, interest on deposits decreased 21% from ARS97.6 billion quarter-on-quarter, mainly driven by a 2,750 basis point increase in the average interest rate paid on deposits, while the average volume of private sector deposits increased 38%. On a yearly basis, interest on deposits increased 9% or ARS31.4 billion. In the fourth quarter of 2023, interest on deposits represented 97% of the bank's financial expenses. In the fourth quarter of 2023, the bank's net interest margin, including FX, was 33.8%, lower than the 58.7% posted in the third quarter of 2023 and 32.7% posted in the fourth quarter of 2022. In the fourth quarter of 2020, Banco Macro's net fee income totaled ARS55.6 billion, 2% or ARS1.2 billion higher than the third quarter of 2023 and was 5% or ARS2.4 billion higher than the same period of last year. In fiscal year 2023, net fee income totaled ARS220.8 billion, 4% higher than fiscal year 2022. In the fourth quarter of 2023, net income from financial assets and liabilities at fair value through profit or loss totaled ARS895.2 billion gain, mainly due to the mark-to-market of some government securities, mainly dual bonds, which represent ARS835.2 billion. In fiscal year 2023, net income from financial assets and liabilities at fair value through profit or loss totaled ARS970.2 billion, 551% higher than in fiscal year 2022. In the quarter, other operating income totaled ARS25.2 billion, increasing 45% or ARS7.9 billion compared to the third quarter of 2023. On a yearly basis, other operating income increased 40% or ARS7.2 billion. In fiscal year 2023, other operating income totaled ARS72.9 billion, 11% higher than in fiscal year 2022. In the fourth quarter of 2023, Banco Macro's administrative expenses plus employee benefits totaled ARS152.5 billion, 50% or ARS51 billion higher than the previous quarter, due to higher employee benefits, which increased 35%, and higher administrative expenses, which increased 80%. On a yearly basis, administrative expenses plus employee benefits increased 68% or ARS61.5 billion. For fiscal year 2023, administrative expenses plus employee benefits increased 22% compared to fiscal year 2022. As of the fourth quarter of 2023, the efficiency ratio reached 18.6%, improving from the 23% posted in the third quarter of 2023 and 28.6% posted one year ago. In the fourth quarter of 2023, expenses increased 51%, while income plus net fee income plus other operating income increased 149%. In the fourth quarter of 2023, the result from the net monetary position totaled ARS525.8 billion loss, ARS194.8 billion higher than the loss posted in third quarter of 2023 and 196% or ARS348.4 billion higher than the loss posted one year ago. Higher inflation was observed during the quarter, which was 18.5% higher than in the third quarter of 2023. Inflation in the quarter was 53.3% compared to 34.8% in the third quarter of 2023. In fiscal year 2023, the result from the net monetary position totaled ARS1.3 trillion, 84% higher than the one posted in fiscal year 2022. Inflation in 2023 reached 211% compared to 94.8% registered in 2022. In the fourth quarter of 2023, Banco Macro's effective tax rate was 31.4%. And the full year 2023, the effective income tax rate was 32.5% higher than the 31.1% registered in fiscal year 2022. Further information is provided in note 25 to our financial statements. In terms of loan growth, the bank's total financing reached ARS1.8 trillion, increasing 4% or ARS65.6 billion quarter on quarter and decreasing 2% or ARS30 billion year on year. Within commercial loans, overdrafts stand out with a 66% or ARS114.9 billion increase and others with a 30% or ARS74 billion increase. Within consumer lending, personal loans decreased 22% or ARS65.9 billion, while credit card loans decreased 7% or ARS38.4 billion. In fiscal year 2023, overdraft, documents, and others standout with an 88%, 33%, and 48% increase, respectively. It is important to mention that Banco Macro's market share over private sector loans as of December 2023 reached 9.1%. On the funding side, total deposits increased 9% or ARS290.4 billion quarter-on-quarter, totaling ARS3.4 trillion and decreased 16% or ARS663.7 billion year on year. Private sector deposits increased 13% or ARS360.8 billion quarter-on-quarter, while public sector deposits decreased 31% or ARS85.3 billion quarter-on-quarter. The increase in private sector deposits was led by demand deposits, which increased 41% or ARS562.8 billion, while time deposits decreased 23% or ARS313.2 billion. Within private sector deposits, peso deposits decreased 10% or ARS252.6 million, while US dollars deposits decreased 8% or $107 million. As of December 2023, Banco Macro's transactional accounts represented approximately 59% of total deposits. Banco Macro's market share over private sector deposits as of December 2023 totaled 6.2%. In terms of asset quality, Banco Macro's nonperforming to total financial ratio reached 1.29%. The coverage ratio measured as total allowances under expected credit losses over nonperforming loans under Central Bank rules remained at 200.91%. Consumer portfolio nonperforming loans improved 13 basis points, down to 1.35% from 1.48% in the previous quarter, while commercial portfolio nonperforming loans deteriorated 6 basis points in the fourth quarter of 2023, up to 1.2% from 1.14% in the previous quarters. In terms of capitalization, Banco Macro accounted an excess capital of ARS1.75 trillion, which represented a capital adequacy ratio of 35.4% and a Tier 1 ratio of 32.8%. The bank's aim is to make the best use of its excess capital. The bank's liquidity remained more than appropriate. Liquid assets to total deposit ratio reached 118%. Overall, we have accounted for another positive quarter. We continue showing a solid financial position. Asset quality remain under control and closely monitored. We keep on working to improve more our efficiency standards and will keep a well atomized deposit base. Finally, on November 2, 2023, the Central Bank of Argentina did the sale of Itaú Argentina, now Banco BMA, to Banco Macro. Banco Macro has now acquired 100% of the share and both of Banco Itaú Argentina, Itaú Asset Management, and Itaú Valores. The price of the agreement was set at $50 million, which was paid on November 3, an additional amount resulting from a potential adjustment that will be eventually set based on the results obtained by Banco Itaú Argentina and Itaú Valores between April 1, 2023, and the closing date and will be determined at a future date. Result from the acquisition is now under income from associates and joint ventures and totaled ARS156 billion. And it shows in the fourth quarter of 2023. More information is provided in notes to our financial statements. At this time, we would like the questions that you may have.
Operator: [Operator Instructions]. The first question comes from Ernesto Gabilondo from Bank of America.
Ernesto Gabilondo: Thank you. Hi, good morning, Gustavo, Jorge, and Nico. Thanks for the opportunity and congrats on your strong earnings. My first question is on your investment securities and FX positions. Can you elaborate on how the positions benefited because of the high inflation, the high rates, and the FX? And how should we think about the valuation of these positions in 2024? If we continue to see higher inflation or FX depreciation, should we continue to see positive results? Or how should we think about them? And also related to this question, how much all of the Leliq do you continue to hold? Then my second question is on loan growth. I'm pretty sure that Macro will be one of the few banks in Argentina with a real loan growth in '23. Having said that, we saw that it was driven by commercial loans, but the retail part continues to be still very weak. So how should we think about loan growth -- real loan growth for this year? And for my last question is on your ROE. We saw the '23 ROE close around 33%. But again, it was highly driven because of the gains on investments, on securities. So considering that you will have a tougher Q over Q base in '24, how should we think about the ROE in this year? Thank you.
Jorge Scarinci: Hi, Ernesto. How are you? Thanks for your questions. Let's start with the first one, if I remember wrongly. In terms of the strategy that we carried out in the last quarter of 2023, basically at some point, we were forecasting that there could be some troubles with Leliq. So we decided to switch from Leliq into dual bonds, the bonds that are yielding -- were yielding inflation or evolution of the official FX the higher. Seems basically that we consider at that time that -- the week between the Central Bank and the Treasury was almost the same. So we were the first bank to switch the portfolio of Leliq. So at the end of November, we had no Leliq and we switched into dual bonds. And basically, we were also benefited by the devaluation of the official FX in December. And basically, that was -- those numbers were reflecting that the fourth quarter results that we posted basically yesterday, in 2024, part of those dual bonds who were like switching to inflation linked bonds. Of course, I cannot give you much of the details because it's not public information, but basically, we were switching a little bit of the dual into linked bonds. Of course, as I mentioned also, Leliq, we have [indiscernible] as of the end of November. In terms of loan growth, that was another question, I think the second question that you asked, yes, commercial loans showed a good performance. Please consider there that we are including Itaú’s portfolio mainly commercial. So that's why the comparison and the increase that you are showing in the numbers. I think that is well explained in the press release. And of course, in terms of Leliq, yes, the ROE that we posted in 2003 was a spectacular. Going forward, we think that we should be in more normalized levels between 15% to 20%, a positive ROE.
Ernesto Gabilondo: Excellent. Super helpful. For '24, we should expect ROEs between 15% to 20%? Or this is something that will start to show up more in '25?
Jorge Scarinci: I think in a normalized scenario, I think that Banco Macro's should have no problem to deliver ROEs in the area of 20%. 2024, it's tough to forecast right now. Let's say around 15% in real terms and we could be fine-tuning this in coming quarters.
Ernesto Gabilondo: Excellent. Thank you very much, Jorge.
Jorge Scarinci: You're welcome.
Operator: The next question comes from Carlos Gomez from HSBC.
Carlos Gomez: Hi. Sorry, the line is [Technical Difficulty] so first of all, congratulations on the result. [Technical Difficulty] drivers the conditions in which you are operating in this first quarter of the year, meaning with relatively high inflation, with much lower swap rates from the Central Bank. What is it that we should expect in this first and second quarter of the year? And then what do you expect to see once we normalize by the end of the year? I'm talking in particular about securities gains and essentially your margin from financial and operation. And secondly, if you can give us a bit of an update on what you are going to do with your newly acquired asset, Itaú? When do you expect to integrate it and whether you've seen that there are more assets that come up for sale for you in the coming year -- over the coming years? Thank you.
Jorge Scarinci: Hi, Carlos. I couldn't hear exactly the first part of the question. Your first question, but the last part of your first question was talking about securities. In the first quarter of this year, of course, it is not possible to repeat the spectacular performance we had in the last quarter of last year. So I think we are going to have a more normalized behavior of securities gains in the first and second quarter. Again, it will depend on market conditions, depends on the volatility, and of course, bond prices. And I mean, we have demonstrated the bonds that we can be switching the portfolio into those bonds that deliver the best result. So I think that the result is going to be good, not -- again not as spectacular as the one that we see in the last quarter of last year. In terms of Itaú merge, I would say that is going to happen in the second half of this year. The legal merger of -- with Itaú. So that -- in the last part of the year, you are going to see, I mean, the consolidated normalized numbers, including Itaú in all the figures.
Carlos Gomez: Okay. So that is the legal merger. And in terms of operationally, [Technical Difficulty] in the bank? How long do you think that process will take?
Jorge Scarinci: Sorry, Carlos. Could you repeat that, please?
Carlos Gomez: Yes. My apologies again for the line. I was asking when do you think you will have the operational merger with Itaú and when will you be using a single brand?
Jorge Scarinci: Carlos, that is going to come in the second half of the year. Exactly, we believe that it's going to be between August and October, but still do not have an exact time. But second half, for sure.
Carlos Gomez: Second half, all right. That is good. And going back to the gains from the regional market, again with the swap rate and the case with negative real rates today, what you think in a normal market would be if these conditions are ramping?
Jorge Scarinci: I mean, yes, the environment here is negative real interest rate and is basically -- I mean now that you have to take into consideration that when you compare the average cost of funds of the bank and the yield that we are getting on loans and on the securities, even though they are still negative in real terms, the margins, they are quite attractive. Take into consideration that almost 50% of our deposits are close to 0%, the other 50% close to 100%. So we assume that the average cost of funds in the area of between 55% and 60%. Then you have to assume that loans are used in the area of , approx., under the Securities. Therefore, margins look still quite attractive for a banking intermediation tier. And therefore, that's why we continue to increase our funding on the asset side, increasing loans or securities, the better.
Carlos Gomez: Okay. Thank you very much.
Operator: And there are no further questions at this time. So this concludes the question and answer session. I will turn the conference back over to Mr. Nicolas Torres for some final considerations.
Nicolas Torres: Thank you all for your interest in Banco Macro. We appreciate your time and look forward to speaking with you again soon. Good day.
Operator: The conference has now concluded. Thank you for attending and have a great day. You may now disconnect.
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