Banco Macro S.A. (NYSE:BMA) Q4 2023 Earnings Call Transcript
Banco Macro S.A. (NYSE:BMA) Q4 2023 Earnings Call Transcript February 29, 2024
Banco Macro S.A. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
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.
See also 14 Countries with Low Humidity You Can Retire To and 15 Highest Paying Countries for Photographers.
To continue reading the Q&A session, please click here.
