Report of Foreign Issuer (6-k)

Date : 10/09/2018 @ 1:16PM
Source : Edgar (US Regulatory)
Stock : Banco Macro S.A. Adr (Representing Ten Class B ) (BMA)
Quote : 39.4  -0.25 (-0.63%) @ 12:26PM

Report of Foreign Issuer (6-k)

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

 

 

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

 

October 8, 2018

 

 

 

Commission File Number: 001-32827

 

 

 

MACRO BANK INC.

(Translation of registrant’s name into English)

 

 

 

Sarmiento 447

Buenos Aires C1 1041

Tel: 54 11 5222 6500

 

(Address of registrant’s principal executive offices)

 

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F x Form 40-F ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Yes ¨ No x

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Yes ¨ No x

 

 

 

 

BANCO MACRO S.A.

 

Interim consolidated financial statements as of March 31, 2018 together with the Reports on review of consolidated interim financial statements.

 

CONTENT

 

· Cover Sheet
· Condensed consolidated interim balance sheet 1
· Condensed consolidated interim statement of income 4
· Condensed consolidated interim statement of other comprehensive income 6
· Condensed consolidated interim statement of changes in shareholders’ equity 7
· Condensed consolidated interim statement of cash flows 8
· Notes to the condensed consolidated interim financial statements 10
· Consolidated Exhibits 80
· Condensed separate interim balance sheet 109
· Condensed separate interim statement of income 111
· Condensed separate interim statement of other comprehensive income 113
· Condensed separate interim statement of changes in shareholders’ equity 114
· Condensed separate interim statement of cash flows 115
· Notes to the condensed separate interim financial statements 117
· Separate Exhibits 138
· Review report on condensed consolidated interim – period financial statements 1
· Review report on condensed separate interim – period  financial statements 1

 

 

 

 

CONDENSED CONSOLIDATED INTERIM

FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

 

CORPORATE NAME: Banco Macro SA

 

REGISTERED OFFICE: Sarmiento 447 – Autonomous City of Buenos Aires

 

CORPORATE PURPOSE AND MAIN ACTIVITY: Commercial Bank

 

CENTRAL BANK OF ARGENTINA: Authorized as “Argentine private bank” under No. 285.

 

REGISTRATION WITH THE PUBLIC REGISTRY OF COMMERCE: Under No. 1154 - By-laws Book No. 2, Folio 75 dated March 8, 1967

 

BY-LAWS EXPIRY DATE: March 8, 2066

 

REGISTRATION WITH THE IGJ (SUPERINTENDENCY OF CORPORATIONS): Under No. 9777 – Corporations Book No. 119 Volume A of Sociedades Anónimas , dated October 8, 1996.

 

PERSONAL TAX IDENTIFICATION NUMBER: 30-50001008-4

 

REGISTRATION DATES OF AMENDMENTS TO BY-LAWS:

 

August 18, 1972, August 10, 1973, July 15, 1975, May 30, 1985, September 3, 1992, May 10, 1993, November 8, 1995, October 8, 1996, March 23, 1999, September 6, 1999, June 10, 2003, December 17, 2003, September 14, 2005, February 8, 2006, July 11, 2006, July 14, 2009, November 14, 2012, August 2, 2014.

 

 

 

 

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

AS OF MARCH 31, 2018 AND DECEMBER 31, 2017 AND 2016

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Items   Notes   03/31/2018     12/31/2017     12/31/2016  
                             
ASSETS                            
Cash and Deposits in Banks         29,440,799       35,561,574       35,986,159  
Cash         7,386,019       6,761,426       4,871,152  
Financial Entities and Correspondent Banks                      
Central Bank of Argentina         19,891,660       23,703,476       28,482,100  
Other Local and Foreign Entities         1,948,191       3,781,451       2,631,916  
Other         214,929       1,315,221       991  
Debt Securities at fair value through profit or loss   42     605,195       1,086,028       332,481  
Derivative Financial Instruments   8     4,562       8,228       9,721  
Repo Transactions   4     587,283       1,419,808       19,124  
Other financial assets         3,054,960       2,272,679       1,105,513  
Loans and other financing         147,618,804       132,658,674       88,390,646  
Non-financial Public Sector         1,886,029       1,865,886       1,584,960  
Other Financial Entities         4,041,993       3,239,511       1,713,170  
Non-financial Private Sector and Foreign Residents         141,690,782       127,553,277       85,092,516  
Other Debt Securities   42     34,745,683       34,703,765       20,395,499  
Financial Assets delivered as guarantee   5     4,729,157       7,638,352       3,690,694  
Investments in Equity Instruments   42     110,231       282,659       406,868  
Investment in subsidiaries, associates and joint arrangements         287,999       218,947       124,268  
Property, Plant and Equipment         7,233,681       7,040,152       6,066,706  
Intangible Assets         947,279       880,683       656,178  
Deferred Income Tax Assets   21     33,373       27,762        
Other Non-financial Assets         2,157,851       2,339,869       2,097,090  
Non-current assets held for sale         109,356       199,890       89,648  
TOTAL ASSETS         231,666,213       226,339,070       159,370,595  

 

 

Delfín Jorge Ezequiel Carballo

   

Chairperson

  1 -  

 

 

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

AS OF MARCH 31, 2018 AND DECEMBER 31, 2017 AND 2016

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Items   Notes   03/31/2018     12/31/2017     12/31/2016  
                       
LIABILITIES                            
Deposits         149,488,093       144,129,177       111,862,805  
Non-financial Public Sector         13,846,676       12,890,701       9,468,055  
Financial Sector         93,158       81,359       55,867  
Non-financial Private Sector and Foreign Residents         135.548.259       131,157,117       102,338,883  
Liabilities at fair value through profit or loss         12,755       6,450        
Derivative Financial Instruments   8     13,656       23,107        
Repo Transactions   4     9,245       2,688,093       1,095,634  
Other Financial Liabilities         9,093,898       10,561,203       6,341,674  
Financing received from the Central Bank of Argentina and other financial entities         486,995       1,174,111       260,458  
Issued Corporate Bonds   37     4,913,044       4,712,216       1,684,636  
Current Income Tax Liabilities         4,072,103       3,975,320       1,749,800  
Subordinated Corporate Bonds   37     8,257,754       7,565,759       6,376,537  
Provisions   17     734,632       694,919       335,007  
Deferred Income Tax Liabilities   21     357,919       496,849       1,321,393  
Other Non-financial Liabilities         3,917,229       3,576,002       3,164,158  
TOTAL LIABILITIES         181,357,323       179,603,206       134,192,102  

 

 

Delfín Jorge Ezequiel Carballo

   

Chairperson

  2 -  

 

 

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

AS OF MARCH 31, 2018 AND DECEMBER 31, 2017 AND 2016

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Items   Notes   03/31/2018     12/31/2017     12/31/2016  
                       
SHAREHOLDERS’ EQUITY                            
                             
Capital Stock   29     669,663       669,663       584,563  
Non-capital contributions         12,428,461       12,428,461       399,499  
Adjustments to Shareholders’ Equity         4,511       4,511       4,511  
Earnings Reserved         20,363,386       20,363,386       14,384,820  
Unappropiated Retained Earnings         12,864,441       2,799,084       2,990,757  
Other Comprehensive Income         213,069       204,560       65,711  
Net Income for the period / fiscal year         3,542,183       10,065,357       6,540,832  
Net Shareholders’ Equity attributable to the owners of parent company (*)         50,085,714       46,535,022       24,970,693  
Net Shareholders’ Equity attributable to non-controlling interests         223,176       200,842       207,800  
                             
TOTAL SHAREHOLDERS’ EQUITY         50,308,890       46,735,864       25,178,493  

 

 

Delfín Jorge Ezequiel Carballo

   

Chairperson

  3 -  

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF INCOME

FOR THE THREE MONTHS PERIODS ENDED MARCH 31, 2018 AND 2017

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Items   Notes   Quarter
ended
03/31/2018
    Quarter
ended
03/31/2017
    Accumulated
from beginning
of year up to
03/31/2018
    Accumulated
from beginning
of year up to
03/31/2017
 
                             
Interests income         11,336,771       7,458,410       11,336,771       7,458,410  
Interests expense         3,395,679       2,276,586       3,395,679       2,276,586  
Net interests income         7,941,092       5,181,824       7,941,092       5,181,824  
Commissions income   22     1,835,499       1,425,046       1,835,499       1,425,046  
Commissions expense         184,925       154,444       184,925       154,444  
Net Commissions income         1,650,574       1,270,602       1,650,574       1,270,602  
Subtotal (Net Interests income + Net Commissions income)         9,591,666       6,452,426       9,591,666       6,452,426  
Net Income from measurement of financial instruments at fair value through profit or loss         249,249       29,341       249,249       29,341  
Loss from sold assets at amortized cost         (2,945 )     (13,683 )     (2,945 )     (13,683 )
Difference in quoted prices of gold and foreign currency   23     150,592       182,068       150,592       182,068  
Other operating income   24     1,304,031       1,063,383       1,304,031       1,063,383  
Provision for loan losses         566,812       362,950       566,812       362,950  
Net Operating Income         10,725,781       7,350,585       10,725,781       7,350,585  
Employee benefits   25     2,017,746       1,720,415       2,017,746       1,720,415  
Administrative expenses   26     1,402,010       1,013,463       1,402,010       1,013,463  
Depreciation of Property, Plant and Equipment         162.875       130,046       162,875       130,046  
Other Operating Expenses   27     2,029,163       1,408,808       2,029,163       1,408,808  
Operating Income         5,113,987       3,077,853       5,113,987       3,077,853  
Income from associates and joint arrangements         75,363       40,987       75,363       40,987  
Income before tax on continuing operations   21     5,189,350       3,118,840       5,189,350       3,118,840  
Income tax on continuing operations         1.624.813       1,096,228       1,624,813       1,096,228  
Net Income from continuing operations         3.564.537       2,022,612       3,564,537       2,022,612  
Net Income for the period         3,564,537       2,022,612       3,564,537       2,022,612  
Net Income for the period attributable to the owners of the Parent Company         3,542,183       2,005,248       3,542,183       2,005,248  
Net Income for the period attributable to non-controlling interests         22,354       17,364       22,354       17,364  

 

 

Delfín Jorge Ezequiel Carballo

   

Chairperson

  4 -  

 

 

Items   Accumulated
from beginning
of year up to
03/31/2018
    Accumulated
from beginning
of year up to
03/31/2017
 
             
Net Profit attributable to Parent’s shareholders     3,542,183       2,005,248  
PLUS: Potential diluted earnings per common share                
Net Profit attributable to Parent’s shareholders adjusted as per diluted earnings     3,542,183       2,005,248  
Weighted average of outstanding common shares for the period     669,663       584,563  
PLUS: Weighted average of the number of additional common shares with dilution effects                
Weighted average of outstanding common shares for the period adjusted as per dilution effect     669,663       584,563  
Basic earnings per share     5.2895       3.4303  

 

 

Delfín Jorge Ezequiel Carballo

   

Chairperson

  5 -  

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF OTHER COMPREHENSIVE INCOME

FOR THE THREE MONTHS PERIODS ENDED MARCH 31, 2018 AND 2017

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Items   Notes   Quarter
ended
03/31/2018
   

Quarter

ended
03/31/2017

    Accumulated
from beginning
of year up to
03/31/2018
    Accumulated
from beginning
of year up to
03/31/2017
 
                             
Net Income for the period       3,564,537       2,022,612       3,564,537       2,022,612  
Foreign currency translation differences in financial statements conversion         53,659       (22,526 )     53,659       (22,526 )
Foreign currency translation differences for the period         53,659       (22,526 )     53,659       (22,526 )
Profits or losses for financial instruments measured at fair value through other comprehensive income (FVOCI) (IFRS 9(4.1.2)(a)         (45,170 )     (2,938 )     (45,170 )     (2,938 )
Income for the period from financial instruments at fair value through other comprehensive income (FVOCI)         (61,750 )     1,614       (61,750 )     1,614  
Income tax         16,580       (4,552 )     16,580       (4,552 )
Total other comprehensive income that is subsequently reclassified to profit or loss         8,489       (25,464 )     8,489       (25,464 )
Total Other Comprehensive Income         8,489       (25,464 )     8,489       (25,464 )
Total Comprehensive Income for the period         3,573,026       1,997,148       3,573,026       1,997,148  
Total Comprehensive Income attributable to the owners of the parent Company         3,550,692       1,980,129       3,550,692       1,980,129  
Total Comprehensive Income attributable to non-controlling interests         22,334       17,019       22,334       17,019  

 

 

Delfín Jorge Ezequiel Carballo

   

Chairperson

  6 -  

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS PERIOD ENDED MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

    Capital
Stock
    Non-capital
Contributions
          Other Comprehensive
Income
    Earnings Reserved                          
Changes   Outstanding
shares
    Stock
issuance
Premium
    Adjustments
to
Shareholders´
Equity
    Accumulat.
foreign
currency
translation
difference in
financial
statemets
conversion
    Other     Legal     Other    

Unappropiated

Retained
Earnings

    Total Equity
net of
Controlling
Interests
    Total Equity
net of Non-
controlling
Interests
    Total
Equity
 
                                                                   
Balance at the beginning of the fiscal year     669,663       12,428,461       4,511       137,148       67,412       4,994,932       15,368,454       12,864,441       46,535,022       200,842       46,735,864  
Total comprehensive income for the period                                                                                    
- Net income for the period                                                             3,542,183       3,542,183       22,354       3,564,537  
- Other comprehensive income for the period                             53,659       (45,170 )                             8,509       (20 )     8,489  
Balance at the end of the period     669,663       12,428,461       4,511       190,807       22,262       4,994,932       15,368,454       16,406,624       50,085,714       223,176       50,308,890  

  

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS PERIOD ENDED MARCH 31, 2017

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

    Capital
Stock
    Non-capital
Contributions
         

Other Comprehensive

Income

    Earnings Reserved                          
Changes   Outstanding
shares
    Stock
issuance
Premium
    Adjustments
to
Shareholders´
Equity
    Accumulat.
foreign
currency
translation
difference in
financial
statemets
conversion
    Other     Legal     Other     Unappropiated
Retained
Earnings
    Total Equity
net of
Controlling
Interests
    Total Equity
net of Non-
controlling
Interests
    Total
Equity
 
                                                                   
Balance at the beginning of the fiscal year     584,563       399,499       4,511               65,711       3,686,472       10,698,348       9,531,589       24,970,693       207,800       25,178,493  
Total comprehensive income for the period                                                                                    
- Net income for the period                                                             2,005,248       2,005,248       17,364       2,022,612  
- Other comprehensive income for the period                             (22,526 )     (2,593 )                             (25,119 )     (345 )     (25,464 )
Balance at the end of the period     584,563       399,499       4,511       (22,526 )     63,118       3,686,472       10,698,348       11,536,837       26,950,822       224,819       27,175,641  

 

 

Delfín Jorge Ezequiel Carballo

   

Chairperson

  7 -  

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS PERIODS ENDED MARCH 31, 2018 AND 2017

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Items   Notes   03/31/2018     03/31/2017  
                 
CASH FLOWS FROM OPERATING ACTIVITIES                  
Income for the period before Income Tax         5,189,350       3,118,840  
Adjustments to obtain cash flows from operating activities:                    
Amortization and depreciation         162,875       130,046  
Provision for loan losses         566,812       362,950  
Other adjustments         (321,845 )     (228,632 )
Net increase/ decrease from operating assets:                    
Debt Securities at fair value though profit and loss         480.789       (1,803,384 )
Derivative financial instruments         3,666       4,244  
Repo transactions         832,525       (8,570,001 )
Loans and other financing                    
Non-financial public sector         (20,143 )     1,056,464  
Other financial entities         (802,482 )     (158,656 )
Non-financial private sector and foreign residents         (14,698,483 )     (7,260,976 )
Other debt securities         9,111,246       (9,610,578 )
Financial assets delivered as guarantee         2,909,195       1,146,945  
Investments in equity instruments         172,427       300,404  
Other assets         (1,057,287 )     (157,890 )
Net increase/ decrease from operating liabilities:                    
Deposits                    
Non-financial public sector         955,975       3,468,425  
Financial sector         11,799       (4,998 )
Non-financial private sector and foreign residents         4,391,142       (206,750 )
Liabilities at fair value through profit or loss         6,305          
Derivative financial instruments         (9,451 )        
Repo transactions         (2,678,848 )     (1,066,161 )
Other liabilities         (2,506,061 )     170,647  
Collections / payments for Income Tax         (843,275 )     (559,587 )
TOTAL CASH FROM OPERATING ACTIVITIES (A)         1,856,231       (19,868,648 )

 

 

Delfín Jorge Ezequiel Carballo

   

Chairperson

  8 -  

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Items   Notes   03/31/2018     03/31/2017  
                 
CASH FLOWS FROM INVESTING ACTIVITIES                  
Payments:                    
Acquisition of PPE, intangible assets and other assets         (200,713 )     (308,640 )
TOTAL CASH USED IN INVESTING ACTIVITIES (B)         (200,713 )     (308,640 )
CASH FLOWS FROM FINANCING ACTIVITIES                    
Payments:                    
Non-subordinated corporate bonds                 (1,766,904 )
Central Bank of Argentina         (22 )     (34 )
Financing from local financial entities         (200,000 )     (1,628 )
Proceeds:                    
Central Bank of Argentina         1,822       14  
Financing to local financial entities         152,196          
Other proceeds related to financing activities                 1,646  
TOTAL CASH USED IN FINANCING ACTIVITIES (C)         (46,004 )     (1,766,906 )
EFFECT OF EXCHANGE RATE FLUCTUATIONS (D)         1,428,448       36,579  
TOTAL CHANGES IN CASH FLOWS                    
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C+D)         3,037,962       (21,907,615 )
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FISCAL YEAR   28     41,203,545       52,070,153  
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD   28     44,241,507       30,162,538  

 

 

Delfín Jorge Ezequiel Carballo

   

Chairperson

  9 -  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

1. CORPORATE INFORMATION

 

Banco Macro SA (hereinafter, the Bank), is a stock corporation (sociedad anónima), organized in the Republic of Argentina that offers traditional banking products and services to companies, including those companies operating in regional economies, as well as to individuals, strengthening in this way its goal to be a multi-services bank. In addition, through its subsidiaries, the Bank performs transactions as a trustee agent, direction and management of mutual funds and stock exchange services.

 

Macro Compañía Financiera SA was created in 1977, as a non-banking financial institution. In May 1988, it received the authorization to operate as a commercial bank and it was incorporated as Banco Macro SA. Subsequently, as a result of the merger process with other entities, it adopted other names (among them, Banco Macro Bansud SA) and since August 2006, Banco Macro SA.

 

The Bank´s shares have been publicly listed on the Bolsas y Mercados Argentinos (BYMA) since November 1994, as from March 24, 2006 they are listed on the New York Stock Exchange (NYSE). Additionally, on October 15, 2015 they were authorized to list on the Mercado Abierto Electrónico SA (MAE).

 

Since 1994, Banco Macro SA’s market strategy was mainly focused on the regional areas outside the City of Buenos Aires. Following this strategy, in 1996, Banco Macro SA started the process to acquire entities and assets and liabilities during the privatization of provincial and other banks.

 

On May 15, 2018, the Board of Directors approved the issuance of these Condensed consolidated interim financial statements.

 

2. OPERATIONS OF THE BANK

 

2.1. Agreement with the Misiones Provincial Government

 

The Bank and the Misiones Provincial Government entered into a special-relationship agreement whereby the Bank was appointed, for a five-year term since January 1, 1996, as the Provincial Government’s exclusive financial agent, as well as revenue collection and obligation payment agent.

 

On November 25, 1999, and December 28, 2006, extensions to such agreement were agreed upon, making it currently effective through December 31, 2019.

 

As of March 31, 2018 and December 31, 2017 and 2016, the deposits held by the Misiones Provincial Government with the Bank amounted to 4,251,480, 3,255,353 and 2,495,781(including 334,437, 333,032 and 139,610 related to court deposits), respectively.

 

2.2. Agreement with the Salta Provincial Government

 

The Bank and the Salta Provincial Government entered into a special-relationship agreement whereby the Bank was appointed, for a ten-year term since March 1, 1996, as the Provincial Government’s exclusive financial agent, as well as revenue collection and obligation payment agent.

 

On February 22, 2005 and August 22, 2014, extensions to such agreements were agreed upon, making it currently effective through February 28, 2026.

 

As of March 31, 2018 and December 31, 2017 and 2016, the deposits held by the Salta Provincial Government with the Bank amounted to 1,129,508, 908,270 and 1,340,738 (including 494,122, 458,550 and 370,154 related to court deposits), respectively.

 

2.3. Agreement with the Jujuy Provincial Government

 

The Bank and the Jujuy Provincial Government entered into a special-relationship agreement whereby the Bank was appointed, for a ten-year term since January 12, 1998, as the Provincial Government’s exclusive financial agent, as well as revenue collection and obligation payment agent.

 

On April 29, 2005 and July 8, 2014, extensions to such agreement were agreed upon, making it currently effective through September 30, 2024.

 

  10  -  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

As of March 31, 2018 and December 31, 2017 and 2016, the deposits held by the Jujuy Provincial Government with the Bank amounted to 2,610,479, 4,649,184 and 1,580,312 (including 376,766, 320,825 and 253,622 related to court deposits), respectively.

 

2.4. Banco del Tucumán SA

 

Banco del Tucumán SA acts as an exclusive financial agent and as revenue collection and obligation payment agent of the Tucumán Provincial Government and of the Municipality of San Miguel de Tucumán, respectively.

 

The service agreement with the Tucumán Provincial Government is currently effective through the year 2021, while the agreement executed with the Municipality of San Miguel de Tucumán was automatically extended through the year 2023, as set forth in the original agreement.

 

As of March 31, 2018 and December 31, 2017 and 2016, the deposits held by the Tucumán Provincial Government and the Municipality of San Miguel de Tucumán with Banco del Tucumán SA amounted to 3,790,426, 1,913,801 and 2,450,436 (including 1,294,894, 1,225,993 and 943,683 related to court deposits), respectively.

 

3. BASIS FOR THE PREPARATION OF THESE FINANCIAL STATEMENTS AND APPLICABLE ACCOUNTING STANDARDS

 

Preparation basis

 

Applicable Accounting Standards

 

On February 12, 2014 the Central Bank, through Communiqué “A” 5541 established the general guidelines towards conversion to the IFRS issued by the International Accounting Standards Board (IASB) for preparing financial statements of the entities under its supervision, for the annual fiscal years beginning on January 1, 2018 as well as those of interim-periods.

 

Additionally, through Communiqués “A” 6114, the Central Bank set specific guidelines within the scope of such convergence process, among which it defined (i) the transitory exception to the application of section 5.5 “Impairment” of the IFRS 9 “Financial Instruments” (sections B5.5.1 to B5.5.55)) up to the fiscal years beginning as of January 1, 2020; and (ii) in order to calculate the effective interest rate of assets and liabilities so requiring it for the measurement thereof, pursuant to IFRS 9, up to December 31, 2019, the Bank may transitorily make a global estimate of the calculation of the effective interest rate on a group of financial assets or liabilities with similar characteristics which shall be applied such effective interest rate. To the date of the present condensed consolidated interim financial statements the Bank is in the process of determining and quantifying the effect the application of section 5.5 “Impairment” mentioned in (i) above will have. Finally, through Communiqués “A” 6323 and 6324 and supplementary rules, the Central Bank defined the minimum chart of accounts and the provisions applicable to the preparation and presentation of the financial statements of financial entities for the fiscal years beginning on January 1, 2018, respectively.

 

The accompanying Condensed consolidated interim financial statements of the Bank were prepared pursuant to Communiqué “A” 6114 and supplementary rules of the Central Bank. Taking into account the exceptions described in the preceding paragraph, the new regulatory framework comprises the Standards and Interpretations adopted by the IASB and includes:

 

- the IFRS;
- the International Accounting Standards (IAS); and
- the interpretations developed by the IFRS Interpretations Committee (IFRIC) or former IFRIC (SIC).

 

The accompanying Condensed consolidated interim financial statements are the first Financial Statements presented in accordance with Central Bank Communiqué “A” 6114. For the preparation of the present Financial Statements the Bank applied the basis for the preparation and consolidation, the accounting policies and the material accounting judgements, estimates and assumptions described in this Note. The Bank further contemplated the exceptions and exemptions provided for in IFRS 1 “First-time Adoption of International Financial Reporting Standards” and those applied for the preparation of the accompanying Condensed consolidated interim financial statements are described in the section “First-time Adoption of International Financial Reporting Standards in accordance with Communiqué 6114 of the Central Bank” of this Note.

 

  11  -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Up to the fiscal year ended December 31, 2017, the Bank prepared its consolidated Financial Statements in accordance with the rules and standards issued by the Central Bank. The financial information for previous fiscal years and included in the accompanying consolidated Financial Statements for comparative purposes, was modified and is disclosed in accordance with the basis described in the preceding paragraphs. The effects of changes between the standards applied as of the end of the fiscal year ended December 31, 2017 and the IFRS are explained in the reconciliations disclosed under the title “First-time Adoption of International Financial Reporting Standards in accordance with Central Bank Communiqué “A” 6114” of this Note 3.

 

The accompanying condensed consolidated interim financial statements for the three months period ended March 31, 2018 have been prepared in accordance with IAS 34 “Interim Financial Reporting”.

 

These condensed consolidated interim Financial Statements include all the necessary information for an appropriate understanding, by the users thereof, of the basis for the preparation and disclosure used therein, as well as the relevant events and transactions occurred after the issuance of the last annual consolidated Financial Statements for the fiscal year ended December 31, 2017. Nevertheless, the present condensed consolidated interim Financial Statements do not include all the information or all the disclosures required for the annual consolidated financial statements prepared in accordance with the IAS 1 “Presentation of Financial Statements”. Therefore, the accompanying condensed consolidated interim Financial Statements must be read together with the annual consolidated financial statements for the fiscal year ended December 31, 2017.

 

The accounting policies comply with the IFRS as currently approved and are applicable to the preparation of the first annual consolidated Financial Statements in accordance with the IFRS (December 31, 2018). Notwithstanding the above, these accounting policies might change if, at the time of preparing those first annual Financial Statements in accordance with the IFRS, new standards are issued or the existing ones are modified, or the compulsory application to that date is modified, or if the Bank chooses to change its choice of any of the exemptions under IFRS 1. Generally, the Central Bank does not allow the anticipated application of any IFRS, unless it expressly states the contrary.

 

Transcription in the Books of Accounts

 

To the date of the accompanying Financial Statements, the same are in the process of being transcribed in the Bank’s Books of Account.

 

Figures expressed in thousands of Pesos

 

The accompanying consolidated Financial Statements disclose figures expressed in thousands of Argentine pesos and round the amounts in thousands of pesos to the nearest whole number, unless it expressly states the contrary.

 

Balance Sheet Disclosure

 

The Bank presents its assets and liabilities in order of liquidity. The analysis referred to the recovery of assets and settlement of liabilities during the 12 months following the reporting date (current assets and liabilities) and more than 12 months after the reporting date (non-current assets and liabilities) is disclosed in Note 19 to the accompanying condensed consolidated interim financial statements.

 

Financial assets and financial liabilities are generally disclosed in gross numbers in the Balance Sheet. They are only compensated and disclosed in net figures when there is a legal and unconditional right to compensate such financial assets and liabilities and the Management intends to settle them on a net basis or to realize assets and settle liabilities simultaneously.

 

Note also that the present condensed consolidated interim financial statements were prepare on the basis of historical amounts, except for monetary Regulation Instruments of the Central Bank and certain Federal Government Securities, which were valued at fair value through Other Comprehensive Income (OCI) and Provincial Government Securities, Corporate Bonds, Debt Securities and Certificates of Participation in Financial Trusts, listed or unlisted Securities and certain Federal Government Securities, which were valued at Fair Value Through Profit or Loss. In addition, as to derivative instruments (term and forward transactions) both assets and liabilities were valued at Fair Value through Profit or Loss.

 

  12  -  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Comparative information

 

The present Condensed consolidated interim balance sheet as of March 31, 2018, is presented comparatively with year-end data of the immediately preceding fiscal year, while the Statement of income and Other comprehensive income, the Statement of changes in shareholders’ equity and the Statement of cash flows and Cash equivalents for the three-month period ended March 31, 2018, are presented comparatively with data as of same period of the immediately preceding fiscal year.

 

In compliance with IFRS 1 “First-time Adoption of International Financial Reporting Standards” and since the accompanying Condensed consolidated interim financial statements are the first ones being submitted pursuant to Communiqué “A” 6114 of the Central Bank, we include the opening Balance sheet to the transition date (December 31, 2016).

 

Unit of measure

 

The Bank’s Financial statements recognize the changes in the peso purchasing power until February 28, 2003, when the adjustments to reflect those changes were discontinued, and as required by Presidential Decree 664/2003, Article No. 312 of General Resolution No. 7/2015 of the Superintendency of Corporations (Public Registry of Commerce), Central Bank Communiqué “A” 3921 and the General Resolution No. 441 issued by the CNV (Argentine Securities Exchange Commission).

 

IAS 29 “Financial Reporting in Hyperinflationary Economies” establishes that the financial statements of any entity whose functional currency is the currency of a hyperinflationary economy, whether they are based on a historical cost approach or a current cost approach, shall be expressed in terms of the measuring unit current at the end of the reporting period, computing for such purpose the inflation produced from the acquisition date, in the case of non-monetary items carried at cost or cost less accumulated depreciation, or from the revaluation date, in the case of non-monetary items carried at amounts current on dates other than that of the balance sheet or the acquisition date. For this purpose, although the standard does not fix an absolute inflation rate at which hyperinflation is deemed to arise, it is a general practice to consider for this purpose a variation approaching or exceeding 100% cumulative inflation over three years, together with other qualitative factors regarding the macroeconomic environment.

 

The Bank evaluates whether the argentine peso meets the characteristics to qualify as the currency of an hyperinflationary economy following the provisions under IAS 29, and to evaluate the above mentioned quantitative factor the Bank takes into account the evolution of the internal wholesale price index (WPI) published by the Instituto Nacional de Estadísticas y Censos (INDEC), since such index is the one that best reflects the conditions required by IAS 29.

 

From the assumption of the current federal government, that took place on December 10, 2015, the INDEC started a reorganization process. Such Organism announced monthly inflation data measured based on the WPI starting on January 2016, without giving any specific inflation to the months of November and December 2015. To the date of approval of the accompanying Condensed consolidated interm financial statements, the last WPI published by INDEC is that for the month of March 2018 and the cumulative inflation rate for the period of three years ended that same month is approximately 95%.

 

Although not all necessary objective conditions are met to qualify the economy as hyperinflationary, it is necessary to consider in the interpretation of the Financial statements the fact that during the last fiscal years there have been significant variations in the prices of indicators relevant to the economy, such as wage cost, interest rate and foreign exchange rate.

 

Basis for Consolidation

 

The accompanying Condensed consolidated interim financial statements include the Financial Statements of the Bank and its subsidiaries as of March 31, 2018.

 

Subsidiaries are all the entities controlled by the Bank. The Bank controls other entity when it is exposed, or has rights, to variable returns from its continuing involvement with such other entity, and has the ability to use its power to direct the operating and financing policies of such other entity, to affect the amounts of such returns.

 

This generally happens when there is a shareholding of more than half of its shares having voting rights.

 

  13  -  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Notwithstanding the above, under certain particular circumstances, the Bank may still have control with less than a 50% participating interest or may not have the control even if it holds more than half of the shares of such other entity. Upon evaluating whether it has power over the controlled entity, and therefore controls the variation of its returns, the Bank shall consider all relevant facts and circumstances, including:

 

- the purpose and design of the controlled entity,

 

- what the relevant activities are and how decisions about those activities are made and whether the Bank has the ability to direct such relevant activities,

 

- contractual arrangements such as call rights, put rights and liquidation rights,

 

- whether the Bank is exposed, or has rights, to variable returns from its involvement with such controlled entity, and whether the Bank has the ability to use its power over the controlled entity to affect the amount of the Bank’s returns.

 

The Bank has no interests in structured entities that required to be consolidated.

 

Subsidiaries are completely consolidated since the date of the effective transfer of the control over the same to the Bank and consolidation ceases when the Bank loses control over the subsidiaries. The accompanying condensed consolidated interim Financial Statements include the assets, liabilities, income and each component of other comprehensive income of the Bank and its subsidiaries. Transactions between consolidated entities are completely eliminated.

 

Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary are equity transactions. However, if a parent company loses control of a subsidiary, it shall derecognize the assets (including any goodwill) and liabilities of the subsidiary, any non-controlling interests in the former subsidiary and other capital components, while any profit or loss derived from the transaction, event or circumstances that resulted in the loss of control shall be recognized as a profit or loss, and any investment retained in the former subsidiary shall be recognized at its fair value at the date when control is lost.

 

The Financial Statements of the subsidiaries have been prepared to the same dates and for the same accounting periods as those of the Bank, using uniform accounting policies consistent with those applied by the latter. In case necessary, adjustments shall be made to the Financial Statements of the subsidiaries so that the accounting policies used by the group will be uniform.

 

The Bank considers the Argentine peso as its functional and presentation currency. To such effect, before consolidation, the Financial statements of its subsidiary Macro Bank Limited, originally expressed in US dollars, were translated to pesos (presentation currency) using the following method:

 

· Assets and liabilities were converted at the reference exchange rate of the Central Bank, in force for that foreign currency at the closing of business on the last business day of the period, ended March 31, 2018 and of the fiscal years ended December 31, 2017 and 2016.

 

· Figures related to the owners’ contributions (capital stock, stock issuance premium and irrevocable capital contributions) were translated applying the effective exchange rates as of the date on which such contributions were paid in.

 

· Income for the periods of three months ended March 31, 2018 and 2017 were translated to pesos on a monthly basis, using the monthly average of the reference exchange rate of the Central Bank.

 

· Foreign currency translation differences arising as a result of the preceding paragraphs are recognized as a separate component within the Shareholders’ Equity account reporting them in the Statement of Other Comprehensive Income, which is called “Foreign currency translation differencies in financial statements conversion”.

 

· Non-monetary items measured at historical cost were converted at the reference Exchange rate of the Central Bank as of the date on which such items were recognized.

 

On the other hand, non-controlling interests represent the portion of income and equity not directly or indirectly attributable to the Bank and in the accompanying Condensed consolidated intermin financial statements they are disclosed as a separate line in the Balance Sheet, the Statement of Income, the Statement of Other Comprehensive Income and the Statement of Changes in Shareholders’ Equity.

 

  14  -  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

As of March 31, 2018 and December 31, 2017 and 2016, the Bank has consolidated its Financial Statements with the Financial Statements of the following companies:

 

Subsidiaries   Principal Place of Business   Country   Main Activity
Banco del Tucumán SA   San Martín 721 – San Miguel de Tucumán – Province of Tucumán   Argentina   Banking Entity
             
Macro Securities SA (a) and (b)   Juana Manso 555 – 8th floor, Office A – Autonomous City of Buenos Aires   Argentina   Stock-Exchange Services
             
Macro Fiducia SA   Sarmiento 447 – 7th floor– Autonomous City of Buenos Aires   Argentina   Services
             
Macro Fondos SGFCISA   Juana Manso 555 – 9th floor, Office A – Autonomous City of Buenos Aires   Argentina   Direction and Management of Mutual Funds
             
Macro Bank Limited (c)   Caves Village, Building 8 Office 1 – West Bay St., Nassau   Bahamas   Banking Entity

 

(a) Consolidates with Macro Fondos SGFCI SA (80,90% Participating and Voting Interest).

 

(b) The indirect interest of Banco Macro SA comes from Macro Fiducia SA.

 

(c) Consolidates with Sud Asesores (ROU) SA (100% Voting Interest–Equity interest 2,278).

 

The table below shows the Bank’s participating interest in the companies it consolidates as of March 31, 2018 and December 31, 2017 and 2016:

 

    Shares   Bank’s Participating Interest     Non-Controlling Interest  
Subsidiaries   Type   Number     Total Capital
Stock
    Voting
Interest
    Total Capital
Stock
    Voting
Interest
 
Banco del Tucumán SA   Common     395,341       89.932 %     89.932 %     10.068 %     10.068 %
Macro Securities SA   Common     12,776,680       99.921 %     99.932 %     0.079 %     0.068 %
Macro Fiducia SA   Common     6,475,143       98.605 %     98.605 %     1.395 %     1.395 %
Macro Fondos SGFCISA   Common     327,183       99.936 %     100.00 %     0.064 %     -  
Macro Bank Limited   Common     39,816,899       99.999 %     100.00 %     0.001 %     -  

 

Total assets, liabilities and net equity of the Bank and each of its subsidiaries as of March 31, 2018 and December 31, 2017 and 2016 are as follows:

 

As of 03/31/2018   Banco Macro
SA
    Banco del
Tucumán SA
    Other
Subsidiaries
    Eliminations     Consolidated  
                               
Assets     217,012,053       16,267,893       3,013,446       (4,627,179 )     231,666,213  
Liabilities     166,926,339       14,059,830       1,327,353       (956,199 )     181,357,323  
Equity attributable to the owners of the Bank                                     50,085,714  
Equity attributable to non-controlling interests                                     223,176  

 

As of 12/31/2017   Banco Macro
SA
    Banco del
Tucumán SA
    Other
Subsidiaries
    Eliminations     Consolidated  
                               
Assets     213,157,890       14,789,932       2,922,317       (4,531,069 )     226,339,070  
Liabilities     166,622,874       12,802,723       1,259,908       (1,082,293 )     179,603,212  
Equity attributable to the owners of the Bank                                     46,535,022  
Equity attributable to non-controlling interests                                     200,842  

 

  15  -  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

As of 12/31/2016   Banco Macro
SA
    Banco del
Tucumán SA
    Other
Subsidiaries
    Eliminations     Consolidated  
                               
Assets     148,783,028       11,548,487       2,215,093       (3,176,013 )     159,370,595  
Liabilities     123,812,335       9,489,193       1,107,074       (216,500 )     134,192,102  
Equity attributable to the owners of the Bank                                     24,970,693  
Equity attributable to non-controlling interests                                     207,800  

 

The Bank’s Management considers there are no other companies or structured entities to be included in the Financial Statements as of March 31, 2018 and December 31, 2017 and 2016.

 

Summary of significant accounting policies

 

Below there is a description of the principal valuation and disclosure criteria used for the preparation of the accompanying Conndensed consolidated interim financial satements as of March 31, 2018 and December 31, 2017 and 2016:

 

3.1 Assets and liabilities denominated in foreign currency :

 

The Bank considers the Argentine Peso as its functional and presentation currency. The assets and liabilities denominated in foreign currency, mainly in US dollars, were valued at Central Bank benchmark US dollar exchange rate effective as of the closing date of transactions on the last business day of each period or fiscal year, as applicable.

 

Additionally, assets and liabilities denominated in other foreign currencies were translated at the repo exchange rate communicated by the Central Bank. Foreign exchange differences were recorded in the related statements of income as “Difference in quoted prices of gold and foreign currency”.

 

3.2 Financial Instruments

 

Initial Recognition and Measurement

 

The purchase and sale of financial assets requiring the delivery of assets within the term generally established by the rules and regulations or the market conditions are recorded on the transaction’s trading date, i.e., on the date the Bank undertakes to acquire or sell the relevant asset.

 

At initial recognition, the financial assets and liabilities were recognized at fair value. Those financial assets and liabilities not recognized at fair value through profit or loss, were recognized at fair value adjusted for transactions costs directly attributable to the acquisition or issue of the financial asset or liability.

 

At initial recognition, the fair value of a financial instrument is generally the transaction price. Nevertheless, if part of the consideration received or paid is for something different from the financial instrument, the Bank estimates the fair value of the financial instrument. Any additional amount regarding the consideration shall be an expense or lesser income, except it meets the requirements to be recognized as any other type of asset.

 

Subsequent measurement – Business Model

 

The Bank established three categories for the classification and measurement of its financial instruments, in accordance with the Bank’s business model to manage its financial assets and the contractual cash flow characteristics thereof:

 

- at amortized cost: the objective of the business model is to hold financial assets in order to collect contractual cash flows.

 

- at fair value through other comprehensive income: the objective of the business model is both collecting the contractual cash flows of the financial asset and/or of those derived from the sale of the financial asset.

 

- at fair value from profit or loss: the objective of the business model is generating income derived from the purchase and sale of financial assets.

 

  - 16 -  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Therefore, the bank measures its financial assets at fair value, except for those that meet the following two conditions and are measured at amortized cost:

 

- the financial assets are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows,

 

- the contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

The Bank’s business model is determined at a level that reflects how groups of financial assets are managed together to achieve a particular business objective.

 

The business model is not assessed on an instrument-by-instrument approach, but it should rather be determined on a higher level of aggregation and is based on observable factors such as:

 

- how the performance of the business model and the financial assets held within that business model are evaluated and reported to the Bank’s key management personnel,

 

- the risks that affect the performance of the business model (and the financial assets held within that business model) and, in particular, the way in which those risks are managed; and,

 

- the expected frequency, value, timing and reasons of sales are also important aspects.

 

The assessment of the business model is performed on the basis of scenarios that the Bank reasonably expects to occur, without taking into account the scenarios such as the so-called ‘worst case’ or ‘stress case’ scenarios. If after the initial recognition cash flows are realized in a way that is different from the Bank’s expectations, the Bank does not change the classification of the remaining financial assets held in that business model, but rather considers all relevant information to assess the newly originated or newly purchased financial assets.

 

Test of contractual cash flow characteristics

 

As part of the classification process, the Bank assessed the contractual terms of its financial instruments in order to determine if such financial instruments give rise to cash flows on specific dates which are solely payments of principal and interest on the principal amount outstanding.

 

For the purposes of this assessment, “principal” is defined as the fair value of the financial asset at initial recognition, provided such amount may change over the life of the financial asset, for example, if there are repayments of principal or premium amortization or discount.

 

The most significant elements of interest within a loan agreement are typically the consideration for the time value of money and credit risk.

 

In order to test contractual cash flow characteristics, the Bank applies judgment and considers relevant factors such as the currency in which the financial asset is denominated and the period for which the interest rate is set.

 

However, contractual terms that introduce exposure to risks or volatility in the contractual cash flows that are unrelated to a basic lending arrangement, do not give rise to contractual cash flows that are solely payments of principal and interest on the principal amount outstanding. In such cases, financial assets are required to be measured at fair value through profit or loss.

 

Therefore, the financial assets and liabilities were classified pursuant to the above expressed as “Financial assets at fair value through profit or loss”, “Financial assets at fair value through other comprehensive income” or “Financial assets at amortized cost”. Such classification is disclosed in Exhibit P “Categories of Financial Assets and Liabilities”.

 

· Financial assets at fair value through profit or loss

 

This category presents two subcategories: financial assets at fair value held for trading and financial assets initially designated at fair value by the Management or under section 6.7.1. of IFRS 9. The Bank’s Management, has not designated, at the beginning, financial assets at fair value through profit or loss.

 

  - 17 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

The Bank classifies the financial assets as held for trading when they have been acquired or incurred principally for the purpose of selling or repurchasing it in the near term or when they are part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking.

 

Financial assets and liabilities at fair value through profit or loss are recognized at fair value in the Balance Sheet. Changes in fair value are recognized under the item “Net Income for measurement of financial instruments at fair value through profit or loss”, as well as income or expenses for interest and dividends pursuant to the contractual terms and conditions, or when the right to receive payment of the dividend is established.

 

The fair value of instruments categorized as Level 1 was assessed by using the quotes effective as of the end of each period or fiscal year, as applicable, in active markets if representative. At present, for government or private securities or bonds, there are two main markets in which the Bank operates, that are BYMA and MAE. Additionally, as for derivatives, both MAE and Mercado a Término de Rosario S.A. (ROFEX) are deemed as active markets.

 

On the other hand, for certain instruments that do not have a quoted price in an active market, categorized as Level 2, the Bank used valuation techniques that included the use of market transactions performed under mutual independent terms and conditions, between interested and duly informed parties, provided there are any available, as well as references to the current fair value of other instrument being substantially similar, or otherwise the analysis of cash flows discounted at rates built from market information of similar instruments.

 

In addition, certain assets and liabilities included in this categorization were valued using identical quoted prices of identical instruments in “less active markets”.

 

Finally, the Bank has categorized as level 3 those assets and liabilities for which there are no identical or similar transactions in the market. In order to determine the market value of these instruments, the Bank used valuation techniques based on its own assumptions, which are similar to those that would be used by any other market player. For this approach, the Bank mainly used the cash flow discount model.

 

· Financial assets at fair value through other comprehensive income

 

A financial asset shall be measured at fair value through other comprehensive income if (i) the financial instrument is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and (ii) the contractual terms of the financial asset meet the determination that cash flows are solely payments of principal and interest on the principal amount outstanding.

 

Debt instruments at fair value through other comprehensive income are recognized in the Balance Sheet at fair value. Profits and losses derived from changes in fair value are recognized in other comprehensive income as “Profits or losses from financial instruments at fair value through other comprehensive income”. Income from interest, profit and loss from translation differences and impairment are recognized in the statement of income in the same manner as for financial assets measured at amortized cost and are disclosed as “Income from interest received”, “Difference in quoted prices of gold and foreign currency” and “Provision for loan losses”, respectively.

 

When the Bank has more than one investment on the same security, it must be considered that they shall be disclosed using the first in first out costing method.

 

On derecognition, gains and losses accumulated previously recognized in OCI are reclassified to profit or loss.

 

· Financial assets at amortized cost

 

They represent financial assets held in order to collect contractual cash flows and the contractual terms of which give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

  - 18 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

After initial recognition, these financial assets are recognized in the Balance Sheet at amortized cost using the effective interest method, less the allowance for loan losses. The effective interest method uses the rate that allows the discount of estimated future cash payments or receipts through the expected life of the financial instrument or lesser term, if applicable, to the net carrying amount of the financial asset or to the financial liability. When applying this method, the Bank identifies incremental direct costs as an integral part of the effective interest rate. For such purposes, interest is the consideration for the time value of money and for the credit risk associated with the amount of principal outstanding during a specific period of time. Income from interest and impairment are disclosed in the Statement of Income as “Income from interest received” and “Provision for loan losses”, respectively.

 

Changes in the allowance are presented in Exhibit R “Loss allowance – Allowance for uncollectibility risk”.

 

3.2.1 Cash and deposits in banks

 

They were value at their nominal value plus the relevant accrued interest, if applicable. Accrued interests were allocated to income as “Interests income”.

 

3.2.2 Repo transactions (purchase and sale of financial instruments)

 

These transactions were recognized in the Balance Sheet as financing granted (received), as “Repo transactions”.

 

The difference between purchase and sale prices of such instruments were recognized as interest accrued during the effective term of the transactions using the effective interest method and were allocated to income as “Interests income” and “Interests expense”.

 

3.2.3 Loans and other financing

 

Non-derivative financial assets that the Bank holds within a business model whose objective is to hold financial assets in order to collect contractual cash flows and the contractual terms of which give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

After initial recognition, loans and other financing were measured at amortized cost using the effective interest method, less the allowance for loan losses. The amortized cost was calculated taking into account any discount or premium incurred in the origination or acquisition, and origination fees or commissions, which are part of the effective interest rate. Income from interest was allocated to income as “Interests income”.

 

3.2.4 Allowance for loan losses and allowance for eventual commitments

 

These allowances were built-up based on estimated loan losses of the credit facilities of the Bank, deriving, among other aspects, from the assessment of the compliance level of debtors and the guarantees that secure the relevant transactions taking into account the provisions of Communiqué “A” 2950 and supplementary provisions of the Central Bank and the allowance policies of the Bank.

 

In the case of loans with specific allowances that are repaid or generate the reversion of allowances built-up in the current period, and in case of allowances built-up in previous fiscal years that turn out to exceed those deemed necessary, such allowance excess is reversed with impact on the income for the present period.

 

Impairment losses are included in the Statement of Income as “Provision for loan losses” and the changes in this accounting item are disclosed in Exhibit R “Value correction for credit losses – Allowance for uncolectibility risk”. The section “Accounting judgments, estimates and assumptions” in this Note includes a more detailed description of impairment estimates.

 

3.2.5 Financial liabilities

 

After initial recognition, certain financial liabilities were measured at amortized cost using the effective interest method, except for derivatives that were measured at fair value through profit or loss. Interests were allocated to income as “Interests expense”.

 

  - 19 -  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Within other financial liabilities we included guarantees granted and eventual liabilities, which must be disclosed in the Notes to the Financial statements, when the documents supporting such credit facilities are issued and are initially recognized at fair value of the commission received, in the Balance Sheet. After initial recognition, the liability for each guarantee was recognized at the higher of the amortized commission and the best estimate of the disbursement required to settle any financial obligation arising as a result of the financial guarantee.

 

Any increase in the liabilities related to a financial guarantee was recognized as income. The commission received has been recognized as “Income from commissions received” in the Statement of income, based on the amortization thereof following the straight-line method over the effective term of the financial guarantee granted.

 

3.2.6 Derivative financial instruments

 

Receivables from forward transactions without delivery of underlying assets

 

It includes forward purchase and sale transactions of foreign currency without delivery of traded underlying asset. Such transactions were measured at the fair value of the contracts and were performed by the Bank with intermediation purposes on its own account. The originated income was allocated to income as “Net income for measurement of financial instruments at fair value through profit or loss”.

 

Derecognition of financial assets and liabilities

 

A financial asset (or, if applicable, a part of a financial asset or a part of a group of similar financial assets) shall be derecognized when: (i) the contractual rights to the cash flows from the financial asset expire, or (ii) the Bank transfers the contractual rights to receive the cash flows of the financial asset or retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows received immediately to a third party pursuant to a transfer agreement.

 

A transfer shall qualify for derecognition of the financial asset only if (i) the Bank has transferred substantially all the risks and rewards of ownership of the financial asset, or (ii) it has neither transferred nor retained substantially all the risks and rewards of ownership of the financial asset, but has transferred the control of the financial asset, considering that the control is transferred if, and only if, the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without needing to impose additional restrictions on the transfer.

 

If the Bank neither transfers nor retains substantially all the risks and rewards of ownership of a transferred asset, and has retained the control over it, the Bank shall continue to recognize such transferred asset to the extent to which it is exposed to changes in the value of the transferred asset.

 

On the other hand, a financial liability is derecognized when the obligation specified in the relevant contract is discharged or cancelled or expires. When there is an exchange between an existing borrower and lender of debt instruments with substantially different terms, or the terms are substantially modified, such exchange or modification shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability, recognizing the difference between the carrying amount of a financial liability extinguished or transferred to another party and the consideration paid, in profit or loss as “Other operating income”.

 

Reclassification of financial assets and liabilities

 

The Bank does not reclassify its financial assets after the initial recognition thereof, except under extraordinary circumstances when it changes its business model for managing financial assets, as a result of external or internal changes significant to the Bank’s transactions. Financial liabilities are never reclassified. As of March 31, 2018 and December 31, 2017 and 2016, the Bank has made no reclassifications.

 

  - 20 -  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

3.3 Financial Leases

 

The Bank grants loans through financial leases, recognizing the current value of lease payments as a financial asset. The difference between the total lease receivables and the current value of financing is recognized as interest to accrue. This income is recognized during the term of the lease using the effective interest rate method, which reflects a constant rate of return and is recognized in profit or loss as “Interests income”. Losses originated for impairment are included in the Statement of income as “Provision for loan losses” and changes in this accounting item are disclosed in Exhibit R “Loss allowance– Allowance for uncolectibility risk”.

 

3.4 Investment in associates and joint arrangements

 

An associate is an entity over which the Bank has significant influence, i.e. the power to participate in the financial and operating policy decisions of such controlled entity, but without having the control thereof. Investments in associates were recognized through the equity method and they were initially recognized at cost. The Bank’s share in the profits or losses after the acquisition of its associates was accounted for in profits or losses, and its share in other comprehensive income after the acquisition were accounted for in other comprehensive income.

 

A joint arrangement is an arrangement of which the Bank and other party or parties have joint control. Under IFRS 11 “Joint Arrangements”, investments in these arrangements are classified as joint ventures or joint operations depending on the contractual rights and obligations of each investor, regardless of the legal structure of the arrangement. A joint venture is an arrangement pursuant to which the parties having joint control of the arrangement have rights to the net assets of such arrangement. A joint operation is an arrangement pursuant to which the parties having joint control of the arrangement have rights to the assets and obligations for the liabilities, relating to the arrangement. The Bank has assessed the nature of its joint arrangements and determined that the same are joint ventures. Investments in joint ventures were recognized using the equity method described in the paragraph above.

 

3.5 Property, plant and equipment

 

The Bank chose the cost model for all kinds of assets accounted for in this accounting item, taking into account the considerations mentioned in the section “First-time Adoption of International Financial Reporting Standards in accordance with Central Bank Communiqué “A” 6114” of this Note for the real property owned by the Bank. These assets were carried at their cost less any accumulated depreciation and any accumulated impairment losses, if applicable. The historical cost of acquisition includes all expenses directly attributable to the acquisition of the assets. Maintenance and repair costs were accounted for in profits or losses as incurred. Any replacement and significant improvement of an item of property, plant and equipment is recognized as an asset only when it is likely to produce any future economic benefits exceeding the return originally assessed for such asset.

 

Depreciation of the items of property, plant and equipment was assessed in proportion to the estimated months of useful life, depreciating completely on the acquisition month of the assets and not on the derecognition date. In addition, at least at each financial year-end, the Bank reviews if expectations regarding the useful life of each item of property, plant and equipment differ from previous estimates, in order to detect any material changes in useful life which, if confirmed, shall be adjusted applying the relevant correction to the depreciation of property, plant and equipment accounting item.

 

The residual value of the assets, as a whole, does not exceed their recoverable amount.

 

Furthermore, the Bank is building a new corporate building in the Autonomous City of Buenos Aires. Under IAS 23 “Borrowing Costs”, this is qualifying asset and therefore all costs related to financing directly or indirectly attributable to the acquisition and construction of this asset were capitalized.

 

3.6 I ntangible Assets

 

Intangible assets acquired separately were initially measured at cost. After initial recognition, they were accounted for at cost less any accumulated depreciation (for those to which finite useful lives have been allocated) and any accumulated impairment losses, if applicable.

 

  - 21 -  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Internally generated intangible assets, excluding capitalized development expenses, shall not be capitalized and the relevant disbursement shall be reported in the balance sheet for the period in which such expenditure is incurred.

 

Useful lives of intangible assets may be finite or indefinite.

 

Intangible assets with finite useful lives are amortized over their economic useful lives, and are reviewed in order to determine whether they had any impairment loss to the extent there is any evidence that indicates that the intangible asset may be impaired. The period and method of amortization for an intangible asset with a finite useful life are reviewed at least at the financial year-end of each reporting period. Amortization charges of intangible assets with finite useful lives are accounted for in the statement of income.

 

Intangible assets with indefinite useful lives are not amortized and are subject to annual tests in order to determine whether they are impaired, either individually or as part of the cash-generating unit to which such intangible assets were allocated. The Bank has not intangible assets with indefinite useful lives.

 

The gain or loss arising from the derecognition of an intangible asset shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the asset, and it shall be recognized in profit or loss when the asset is derecognized.

 

Development expenditure incurred in a specific project shall be recognized as intangible asset when the Bank can demonstrate all of the following:

 

- the technical feasibility of completing the intangible asset so that it will be available for use or sale,

 

- its intention to complete the intangible asset and use or sell it,

 

- how the intangible asset will generate probable future economic benefits,

 

- the availability of adequate resources to complete the development, and

 

- its ability to measure reliably the expenditure attributable to the intangible asset during its development.

 

After initial recognition of the development expenditure as an asset, such asset shall be carried at its cost less any accumulated amortization and any applicable accumulated impairment losses. Amortization shall begin when the development phase has been completed and the asset is available for use. The asset amortizes over the period in which the asset is expected to generate future benefits. Amortization is accounted for in the Statement of income. During the development phase, the asset is subject to annual tests to determine whether there is any impairment loss.

 

3.7 Investment Property

 

We included certain real property that the Bank holds for undetermined future use, which were recognized pursuant to IAS 40 “Investment Property”.

 

For this kind of property, the Bank chose the cost model described in Note 3.5 Property, plant and equipment.

 

An investment property is derecognized on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period of the retirement or disposal.

 

An entity shall transfer a property to, or from, investment property when, and only when, there is a change in use. For a transfer from investment property to an item of property, plant and equipment, the property’s deemed cost for subsequent accounting is its fair value at the date of change in use. If an item of property, plant and equipment becomes an investment property the Bank recognizes the asset up to the date of change in use in accordance with the policy established for property, plant and equipment.

 

  - 22 -  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

3.8 Non-current Assets Held for Sale

 

The Bank reclassifies in this category non-current assets of which the carrying amount will be recovered principally through a sale transaction rather than through continuing use. The asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and its sale must be highly probable.

 

Non-current assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.

 

3.9 Impairment of Non-financial Assets

 

The Bank evaluates, at least at each fiscal year-end, whether there are any events or changes in the circumstances that may indicate the impairment of non-financial assets or whether there is any evidence that a non-financial asset may be impaired.

 

When there is any evidence or when an annual impairment test is required for an asset, the Bank shall estimate the recoverable amount of such asset. If the carrying amount of an asset exceeds its recoverable amount, such asset is deemed impaired and its carrying amount shall be reduced to its recoverable amount. To the date of the accompanying Condensed consolidated interim financial statements, there is no evidence of impairment of non-financial assets.

 

3.10 Provisions

 

The Bank recognizes a provision if and only if the following circumstances are met: (a) the Bank has a present obligation as a result of a past event; (b) it is probable (i.e., it is more likely than not) that an outflow of resources will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation.

 

In order to determine the amount of provisions, the risks and uncertainties were considered taking into account the opinion of independent and internal legal advisors of the Bank. Where the effect of the time value of money is material, the provisions shall be discounted using a pre-tax rate that reflects, if applicable, current risks specific to the liability. When the discount is recognized, the effect of the provision derived from the lapse of time is accounted for as Interests expense” in the Statement of Income. Based on the analysis carried out, the Bank recognized as provision the amount of the best estimate of the expenditure required to settle the present obligation at the end of each reporting period.

 

The provisions accounted for by the Bank are reviewed at the end of each reporting period or fiscal year, as applicable, and adjusted to reflect the current best available estimate. In addition, provisions are recognized with specific allocation to be used only for the expenditures for which they were originally recognized.

 

In the event: a) the obligation is possible; or b) it is not probable that an outflow of resources will be required for the Bank to settle the obligation; or c) the amount of the obligation cannot be estimated reliably, the contingent liability shall not be recognized and shall be disclosed in the Notes. Nevertheless, when the possibility of an outflow of resources is remote, no disclosures shall be made.

 

3.11 Recognition of income and expenses

 

3.11.1 Revenue from interests income and interests expense

 

Revenue from interest received and expenses for interest paid were recognized according to their accrual period, applying the effective interest method.

 

Revenue from interest received includes the return on fixed income investments and negotiable instruments, as well as the discount and premium on financial instruments.

 

Bond coupons were recognized at the time they were declared.

 

  - 23 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

3.11.2 Loan commissions

 

Commission charges and direct incremental costs related with the granting of financing facilities were deferred and recognized adjusting the effective interest rate thereof.

 

3.11.3 Service commissions, fees and similar items

 

The commissions charged were accounted for to the extent the Bank satisfied each performance obligation undertaken in contracts with customers and in an amount that reflected the consideration to which the Bank expected to be entitled in exchange for those goods or services.

 

A performance obligation implies a promise in a contract with a customer to transfer: (i) a good or service (or a bundle of goods or services) that is distinct; or (ii) a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.

 

3.11.4 Non-financial revenue and expenses

 

They were accounted for to the extent the Bank satisfied each performance obligation undertaken in contracts with customers and in an amount that reflected the consideration to which the Bank expected to be entitled in exchange for those goods or services, as described in the preceding section.

 

3.12 Customer Loyalty Program

 

The loyalty program offered by the Bank consists in accumulating points generated by purchases made with the credit cards, which can be exchanged by any reward (including, among other offers, products, benefits and awards) available in the program platform.

 

The Bank concluded that the rewards to be granted originate a separate performance obligation. Therefore, at the end of each period or fiscal year, as the case may be, the Bank recognizes a provision for the rewards to be granted in “Other financial liabilities”.

 

Based on the variables that the Bank takes into account in order to estimate the (fair) value of the points granted to customers (and the relation thereof with the exchange of the Reward), it is worthwhile to mention that such estimates are subject to a significant level of uncertainty (and variation) that should be considered. These considerations are described in detail in the section “Accounting judgments, estimates and assumptions” in this Note.

 

3.13 Income Tax and Minimum Presumed Income Tax

 

a) Income Tax

 

Tax expense (tax income) comprises current tax expense (current tax income) and deferred tax expense (deferred tax income). This tax is accounted for as part of profit or loss in the statements, except in the case of accounting items that are to be recognized directly in other comprehensive income statements. In this case, each accounting item is presented before assessing their impact on Income Tax, which is accounted for in the relevant accounting item.

 

- Current income tax: the consolidated current income tax expense is the sum of the income tax expenses of the different entities that compose the Group, which were assessed, in each case, by applying the tax rate to the taxable income, in accordance with the Income Tax Law, or equivalent rule or provision, of the countries in which any subsidiary operates.

 

  - 24 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

- Deferred income tax: it is assessed based on the individual Financial statements of the Bank and of each of its subsidiaries and reflects the effects of temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. Assets and liabilities are measured using the tax rate that is expected to be applied to the taxable income in the years in which these differences are expected to be settled or recovered. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that will follow from the manner in which the Bank and its subsidiaries expect, at the end of the reporting period, to recover or settle the carrying amount of their assets and liabilities. Deferred tax assets and liabilities are recognized regardless of the time in which the temporary differences are expected to reverse. Deferred tax assets are recognized when it is probable that taxable profit will be available against which the deductible temporary difference can be utilized.

 

On December 29, 2017 the Argentine Executive Power passed and put into effect the Tax Reform Act which, among other things, reduces the corporate rate of income tax applicable to corporate retained earnings and impacts on the measurement of deferred tax assets and liabilities. This reduction in the corporate rate of income shall be implemented gradually over the next four years dropping from the 35% rate applicable for and including the fiscal year 2017, to a 25% rate in 2020. The effects thereof shall be considered from the deferred taxes assessed as of December 31, 2017, as follows: if reverse shall occur from January 1, 2018 and up to December 31, 2019, the applicable tax rate is 30% and if reversion shall occur from January 1, 2020 onwards, the applicable tax rate is 25%. In addition, through this tax reform the Government introduced changes in connection with the balancing tax, tax adjustment for inflation, treatment of acquisitions and investments made from January 1, 2018, tax revaluation and employer contributions among other issues.

 

b) Minimum Presumed Income Tax

 

In the fiscal year 1998, Law No. 25,063 established minimum presumed income tax for a ten-year term. At present, after subsequent extensions, and taking into account the provisions of Law No. 27,260, such tax is effective through the fiscal years ending up to and including December 31, 2018. This tax is supplementary to income tax, while the latter is levied on the taxable income for the year, minimum presumed income tax is a minimum levy assessment applicable on the potential income of certain production assets at a 1% rate. Therefore, the Bank’s tax obligation for each year will be equal to the higher of these taxes. In the case of entities subject to the Financial Entities Act, the above mentioned Law provides that such entities shall consider as taxable basis for the minimum presumed income tax 20% of their taxable assets after deducting those defined as non-taxable assets.

 

However, if minimum presumed income tax exceeds income tax in a given tax year, such excess may be computed as a payment on account of any income tax in excess of minimum presumed income tax that may occur in any of the following ten years, once accumulated net operating losses (NOLs) have been used.

 

As of March 31, 2018 and 2017, the amounts recognized for income tax exceeded those assessed for minimum presumed income tax for those same periods.

 

3.14 Earnings per share

 

Basic earnings per share shall be calculated by dividing Net profit attributable to parent´s shareholders of the Bank by the weighted average number of ordinary shares outstanding during the period.

 

3.15 Fiduciary activities and investment management

 

The Bank renders custody, administration, investment management and advisory services to third parties that originate the holding or placement of assets in the name of such third parties. These assets and the income on them are not included in the Financial Statements, since they are not owned by the Bank. The commissions derived from these activities are accounted for as “Commissions income” in the Statement of income.

 

  - 25 -  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Accounting judgments, estimates and assumptions

 

The preparation of the accompanying condensed consolidated interim financial statements requires the Bank’s Management to consider significant accounting judgments, estimates and assumptions that impact on the reported assets and liabilities, income, revenues and expenses, as well as the assessment and disclosure of contingent assets and liabilities, as of the end of the reporting period. The Bank’s reported amounts are based on the best estimate regarding the probability of occurrence of different future events and, therefore, the uncertainties associated with the estimates and assumptions made by the Bank’s Management may drive in the future to final amounts that may differ from those estimates and may require material adjustments to the reported amounts of the affected assets and liabilities.

 

In certain cases, the Financial Statements prepared in accordance with Central Bank Communiqué “A” 6114, require that the assets and liabilities to be recognized and/or presented at their fair value. The fair value is the amount at which an asset can be exchanged, or at which a liability can be settled, in mutual independent terms and conditions between participants of the principal market (or most advantageous market) duly informed and willing to transact in an orderly and current transaction. When prices in active markets are available, we have used them as basis for valuation. When prices in active markets are not available, the Bank estimated those values as values based on the best available information, including the use of models and other assessment techniques.

 

Additionally, the Central Bank allows for additional allowances for loan losses and changes in classification of debtors, as the case maybe, based on the Bank’s risk management policy. The Risk Management Committee may decide to increase the amount of the provision for loan losses by establishing additional allowances after assessing the portfolio risk, basing its decision for example in the analysis of the local and international macroeconomic conditions.

 

As to the customer loyalty program, the Bank estimates the fair value of the points awarded to customers under the “Macropremia” program by applying statistics techniques. The data that feed the models include assumptions regarding exchange percentages, the product combinations available for exchange in the future and customers’ preferences.

 

First-time adoption of IFRSs under Central Bank Communiqué “A” 6114

 

Communiqué “A” 6324 requires the presentation of the following reconciliations:

 

- between the consolidated equity determined in accordance with the standards of the Central Bank and the consolidated equity determined in accordance with Cebtral Bank Communiqué “A” 6114, as of December 31, 2016 (date of transition) and December 31, 2017; and

 

- between the consolidated net income determined in accordance with Central Bank standards for the three-month period ended March 31, 2017 and the consolidated total comprehensive income determined in accordance with Central Bank Communiqué “A” 6114 to the same date.

 

In preparing these reconciliations, the Bank’s Management considered the IFRSs currently approved and applicable to the presentation of the accompanying condensed consolidated interim Financial Statements that are the first consolidated Financial Statements presented in accordance with Central Bank Communiqué “A” 6114, but applying the exceptions and exemptions under IFRS 1 described below:

 

  - 26 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

· Optional exemptions

 

- Business combinations:

 

The Bank decided not to apply IFRS 3 “Business Combinations” retroactively to the acquisition of subsidiaries (that are deemed businesses), investments in associates and interests in joint ventures occurred before December 31, 2016 (date of transition). Using this exemption implies that the carrying amounts of assets and liabilities measured pursuant to the Central Bank standards, and that must be recognized in accordance to the IFRSs, are the cost thereof attributed as of the acquisition date. After the acquisition date, measurements shall be made in accordance with the Central Bank Communiqué “A” 6114. Assets and liabilities that do not qualify to be recognized as such according to the IFRSs are excluded from the opening Balance sheet. In this sense, no previous amount which would have been recognized according to the Central Bank standards was excluded and no amount which was not previously recognized has been recognized, pursuant to the Central Bank standards. IFRS 1 also establishes that the carrying amount of goodwill measured according to the Central Bank standards shall be included in the opening balance sheet, regardless of the adjustments for impairment and for recognition or derecognition of certain intangible assets that qualify or not to be recognized as such according to IAS 38 “Intangible Assets”.

 

- Use of fair value as deemed cost for an item of property, plant and equipment and investment properties:

 

Properties and properties under construction were measured in the opening balance sheet as of December 31, 2016 (date of transition) at fair value, determined on the basis of valuations made to such date by an independent valuer who holds a recognized and relevant professional qualification. The Bank chose to use these values as carrying amount at the date of transition. After the date of transition, measurement of items of property, plant and equipment and investment property were made in accordance with IAS 16 “Property, Plant and Equipment” and IAS 40 “Investment Property”, respectively. To such effect, the Bank has chosen the cost model provided for under such standards.

 

- Accumulated translation differences:

 

The Bank decided to consider at zero accumulated currency translation differences as of December

31, 2016 (date of transition), for the foreign subsidiary Macro Bank Limited.

 

- Fair value measurement of financial assets at initial recognition:

 

For the presentation of the carrying amounts at the date of transition, related to the acquisition of loan portfolio, the Bank decided to go for the exemption contemplated in paragraph D of IFRS 1 and recognized prospectively the cost of transactions related to such acquisitions.

 

- Borrowing costs:

 

The Bank decided to apply the transitional provisions of IAS 23 and has capitalized borrowing costs in qualifying assets from December 31, 2016 (date of transition).

 

The Bank has not used other exemptions or exceptions available under IFRS 1.

 

· Obligatory exceptions

 

- Estimates

 

The significant accounting judgments, estimates and assumptions made by the Bank’s Management to determine the amounts according to the IFRS as of December 31, 2016 (date of transition), and as of December 31, 2017, were consistent with those made as of the same dates according to the Central Bank standards and reflect the current conditions as of the respective dates.

 

- Non-controlling interests

 

The total comprehensive income of subsidiaries was attributed to the owners of the parent company and to the non-controlling interests, from December 31, 2016 (date of transition).

 

  - 27 -  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Reconciliations required

 

· Reconciliation of consolidated equity as of December 31, 2016 (date of transition).

 

    Previous
Central Bank
Standards
    Adjustments and
Reclassifications
    IFRS
Balance
 
Total Assets     154,998,960       4,371,635       159,370,595  
Total Liabilities     132,893,062       1,299,040       134,192,102  
Equity     22,105,898       3,072,595       25,178,493  

 

Balance as of 12/31/2016   Equity
attributable to
owners
 
According to previous Central Bank Standards     22,105,898  
Adjustments and Reclassifications:        
Debt securities and investment in equity instruments     153,970  
Loans and other financing     (238,730 )
Property, plant and equipment and investment property     4,580,298  
Deferred income tax assets and liabilities     (1,321,392 )
Other non-financial liabilities     (370,143 )
Other adjustments     60,792  
Total adjustments and reclassifications     2,864,795  
Non-controlling interest     207,800  
Total adjustments     3,072,595  
         
Balance as of 12/31/2016 according to Central Bank Communiqué “A” 6114     25,178,493  
Equity attributable to parent company     24,970,693  
Equity attributable to non-controlling interests     207,800  

 

· Reconciliation of equity as of December 31, 2017.

 

    Previous
Central Bank
Standards
    Adjustments and
Reclassifications
    IFRS
Balance
 
Total Assets     224,242,704       2,096,366       226,339,070  
Total Liabilities     181,112,157       (1,508,945 )     179,603,212  
Equity     43,130,547       3,605,311       46,735,858  

 

  - 28 -  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Balance as of 12/31/2017   Equity
attributable to
owners
 
According to previous Central Bank Standards     43,130,547  
Adjustments and Reclassifications:        
Loans and other financing     (291,040 )
Property, plant and equipment and investment property     4,565,478  
Deferred income tax assets and liabilities     (496,849 )
Other non-financial liabilities     (515,769 )
Other adjustments     142,649  
Total adjustments and reclassifications     3,404,469  
Non-controlling interest     208,842  
Total adjustments     3,605,311  
         
Balance as of 12/31/2017 according to Central Bank Communiqué “A” 6114     46,735,858  
Equity attributable to parent company     46,535,016  
Equity attributable to non-controlling interests     200,842  

 

· Reconciliation of consolidated income and other comprehensive income for the three-month period ended March 31, 2017.

 

Reconciliation of income as of 03/31/2017   Net income
for the
period
    Other
comprehensive
income
    Comprehensive
Income
 
According to previous Central Bank Standards     1,764,045                  
Interests income     (12,250 )                
Administration expenses     91,936                  
Income Tax     98,100                  
Other adjustments     80,781                  
Foreign currency translation differences             (22,526 )        
Income from financial instruments at fair value through OCI             (2,938 )        
Total adjustments and reclassifications     258,567       (25,464 )        
Balance according to Central Bank Communiqué “A” 6114     2,022,612       (25,464 )     1,997,148  

 

Explanatory notes to the adjustments on transition to IFRS

 

This section includes a brief description of the main adjustments on transition to the standards established by Central Bank Communiqué “A” 6114 affecting equity as of December 31, 2016 (date of transition) and as of December 31, 2017, and the consolidated income and other comprehensive income for the three-month period ended March 31, 2017, and which arise from comparing the accounting policies applied by the Bank to the preparation of the Financial statements up to the end of the previous fiscal year ended December 31, 2017 (Central Bank) and the accounting policies applied by the Bank to the preparation of the Financial statements from the fiscal year beginning on January 1, 2018 onwards.

 

Debt securities

 

Adjustments in this accounting item arise mainly when the valuation established for each business model into which holdings were classified, differs from the valuation established by the Central Bank standards.

 

  - 29 -  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

In addition, the Bank carried out active repo transactions of which, under Central Bank standards, the underlying assets should be recognized as assets of the Bank. Under IFRS, these assets received from third parties do not meet the requirements to be recognized as such.

 

Furthermore, the Bank received security deposits which, under Central Bank standards, implied recognition of such security within this accounting item against a liability for deposits for the principal plus the agreed upon interest and the quoting difference, which was accounted for in Deposits. According to IFRS 9, these transactions neither imply the recognition of the asset nor the offset in liabilities. In addition, items accrued in favor were reclassified from “Interests expense” to “Expenses for services” within “Commissions related to security transactions”.

 

Additionally, Debt Securities in Financial Trusts, previously included in Other Receivables for Financial Intermediation, were recognized according to a business model in which the purpose of these holdings is principally to obtain contractual cash flows, and therefore they were measured at amortized cost, using the effective interest method. Under Central Bank standards these instruments were also measured at amortized cost.

 

Loans and other financing

 

The Bank’s loan portfolio was generated in a business model structure intended principally to receive contractual cash flows (composed of principal and interest). Under IFRS 9, the loan portfolio shall be measured at amortized cost, measuring it at the beginning at fair value, using the effective interest method, which implies that the commissions charged and the direct incremental costs related to the granting of such financing facilities shall be deferred and recognized over the term of the financing facility.

 

Under Central Bank standards, interests were accrued on the basis of exponential distribution in the periods in which they were generated and the commissions were charged and the direct costs were recognized at the time they were generated.

 

Furthermore, loan portfolio acquisitions made by the Bank were measured for in accordance with such IFRS, recognizing such acquired loan portfolios at fair value at the date of acquisition. Under Central Bank standards, these transactions were recognized at their contractual value.

 

Investments in equity instruments

 

The contributions to risk funds of Reciprocal Guarantee Companies (RGC) in which the Bank participates, do not meet the financial asset individual test, therefore they are not included in the Bank’s business model and were measured at their fair value through profit or loss.

 

As to those companies in which the Bank has no control or significant influence, such companies were recognized at the best approximation to the fair value through profit or loss according to IFRS 9. Under Central Bank standards, these approximations were recognized at cost, plus the nominal value of any dividends received on shares.

 

Non-financial assets

 

Under IFRS 15 “Revenue from Contracts with Customers”, the Bank included Contract Assets for commissions charged for the subscription to one of the Bank’s customer loyalty programs. In such program, the only performance obligation contemplated in the contract is the one that requires the Bank to contact its customer with a recognized airline. As consideration for this service, the Bank receives a membership fee.

 

Investments in associates and joint ventures

 

The Bank holds interests in UTEs (joint ventures), which according to IFRS 11 “Joint Arrangements” are accounted for using the equity method. Under Central Bank standards, the Bank used the proportional consolidation method.

 

  - 30 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Property, plant and equipment and investment property

 

For the presentation of the carrying amount to the date of transition the Bank used the exemption contemplated under “Optional exemptions”, which implied using the fair value as cost of acquisition. In order to determine such fair value, the Bank used valuations for all properties.

 

Since the Bank chose the cost model, the new cost of acquisition according to the IFRSs implied an increase in depreciations.

 

Additionally, within the item Property, plant and equipment, the Bank capitalized from the date of transition, the financing costs attributable to the construction of the new corporate building, in accordance with IAS 23.

 

Intangible assets

 

Under IAS 38, intangible assets shall be measured at cost. Under Central Bank standards, the Bank capitalized certain software costs and other organizational expenses, which according to the above mentioned IAS the Bank should have not recognized as intangible assets and, therefore, were accounted for in profit or loss for the relevant period.

 

Corporate Bonds

 

The Bank issued subordinated and unsubordinated Corporate Bonds that, according to IFRS 9, were measured at amortized cost, using the effective interest method, which implied having to account for lesser liabilities the direct placement expenses. Under Central Bank standards, such Corporate Bonds were measured in accordance with the unpaid balance of principal and accrued interest and the expenses were accounted for in profit or loss at the time they were generated.

 

Assets and liabilities for deferred income tax

 

According to IAS 12 “Income Tax”, the Bank shall recognize (i) the part of the current tax that is expected to be paid or recovered and (ii) the deferred tax that is the tax the Bank expects to settle or recover of Income Tax, for the accumulated tax losses and the temporary differences arising between the tax bases of assets and liabilities and their carrying amounts. Under Central Bank standards, the Bank assessed income tax applying the rate in force to the expected taxable profit, without taking into account the effect of differences between the carrying amount and its tax base.

 

Other non-financial liabilities

 

According to IFRS 15, the Bank recognized income arising in the course of its ordinary activities so that they represent the transfer of goods or services promised to customers in exchange for an amount that reflects the consideration the Bank expects to have the right to receive in exchange for such goods or services.

 

In addition, and under IAS 19 “Employee Benefits”, vacations are considered as irrevocable accumulating paid absences and shall be measured at the expected cost of such absences, based on the additional amount that the Bank expects to pay for such paid absences multiplied by the number of days accumulated in favor of the employees and unused at the end of the reporting period. Under Central Bank standards, charges for paid vacations were accounted for at the time the personnel used such benefit, i.e., when vacations were paid.

 

Capital stock – Stock issuance premium

 

Under IAS 32 “Financial Instruments: Presentation”, the costs incurred by the Bank with respect to the issuance of capital stock are accounted for as a deduction of the amount of such instrument, provided they are incremental costs directly attributable to such equity transaction, which would have been avoided if such transaction had not taken place. According to Central Bank standards, the Bank recognized such costs in profit or loss.

 

  - 31 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Foreign currency translation

 

Under IAS 21 “The Effects of Changes in Foreign Exchange Rates”, the Bank recognized and reclassified foreign exchange translation differences, with respect to the Bank’s interest in a foreign subsidiary. The Bank used the voluntary exemption under paragraph D of IFRS 1 “First-time Adoption of International Financial Reporting Standards” and did not recognize the translation differences accumulated as of the beginning of the date of transition.

 

Explanation of material adjustments in the Statement of Cash Flows

 

- Preparation method: the Bank chooses the Direct Method, except for the presentation of cash flows from operating activities, for which it shall use the indirect method.

 

- Cash: (i) it does not include the cash of UTEs, since under IFRS such balances are recognized using the proportional equity method and under Central Bank standards UTEs are recognized using the proportional consolidation method; (ii) the Bank incorporated foreign currency purchase and sale spot transactions previously not included in the Statement of Cash Flows under Central Bank standards.

 

- Cash equivalents: issuer must be the National Government or the Central Bank and they must have maturity periods of 90 days or less from the purchase date, whereas under Central Bank standards cash equivalents should meet the following requirements: they should be subject to insignificant risks regarding change of value and have maturity periods of 90 days or less from the purchase date.

 

New pronouncements

 

Pursuant to Communiqué “A” 6114 of the Central Bank, as new IFRS are approved and existing IFRS are amended or revoked and, once these changes are approved through Notices of Approval issued by the Argentine Federation of Professionals Councils in Economic Sciences (FACPCA for its Spanish acronym), the Central Bank shall issue a statement on the approval thereof for financial entities. Generally, financial entities shall not apply any IFRS in advance, except specifically authorized at the time of the approval thereof. In this case, the Bank shall adopt IFRS 16 “Leases” when such standard comes effective.

 

Such standard eliminates the dual accounting method for lessees that distinguishes between finance leases recognized within the Financial statements and operating leases for which future lease payments are not required to be recognized. Instead, it develops a single model, within the balance sheet, which is similar to the present finance lease. As to lessor, the standard maintains the present practice –i.e., lessors keep on classifying leases as finance and operating leases.

 

This standard is applicable to fiscal years beginning as of January 1, 2019. The Bank does not expect the above described standard to have a material impact on the consolidated Financial Statements.

 

4. REPO TRANSACTIONS

 

In the normal course of business, the Bank arranged repo transactions. According to IFRS 9, assets involved in repurchase and reverse repurchase transactions and received from or delivered to third parties, respectively, do not qualify to be recognized or derecognized, respectively.

 

As of March 31, 2018, and December 31, 2017 and 2016, the Bank has agreed repurchase and reverse repurchase transactions of government and private securities for 596,528, 4,107,901 and 1,114,758, respectively. Maturity of the agreed transactions as of March 2018 shall occur during the month of April 2018. Furthermore, to the those same dates, the securities delivered to guarantee the reverse repurchase transactions total 10,325, 2,993,719 and 1,201,029, respectively, and are recorded under “Financial assets delivered as guarantee”, while securities received guarantee repurchase transactions total 653,330, 1,591,288 and 19,335, respectively and were recognized outside the balance sheet.

 

Profits generated by the Bank as a result of its repurchase transactions arranged during the three-month periods ended March 31, 2018 and 2017 total 33,726 and 405,469, respectively, and are accounted for in “Income from interest received”. In addition, losses generated by the Bank as a result of its reverse repurchase transactions arranged during the three-month periods ended March 31, 2018 and 2017 total 30,970 and 19,234, respectively, and were recognized in “Interests expense”.

 

  - 32 -  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

5. FINANCIAL ASSETS DELIVERD AS GUARANTEE

 

As of March 31, 2018, and December 31, 2017 and 2016, the Bank delivered as guarantee the following financial assets:

 

    Carrying Amount  
Description   03/31/2018     12/31/2017     12/31/2016  
For transactions with the Central Bank     4,141,476       4,005,730       2,093,960  
For equity forward contracts     10,325       2,993,719       1,201,029  
For guarantee deposits     577,356       638,903       395,705  
Total     4,729,157       7,638,352       3,690,694  

 

The Bank’s Management considers there shall be no losses due to the restrictions on the above listed financial assets.

 

6. LOSS ALLOWANCE – ALLOWANCE FOR UNCOLLECTIBILITY RISK OF LOAN AND OTHER FINANCING LOSSES

 

Changes in allowances for loan losses as of March 31, 2018 are disclosed in Exhibit R “Loss allowance – Allowance for uncolectibility risk” in the accompanying condensed consolidated interim Financial Statements.

 

The table below presents the Bank’s changes in allowances as of December 31, 2017:

 

    Amount  
As of December 31, 2016     1,847,841  
Increases     1,961,997  
Reversals     1,117,295  
Charge-off     19,536  
As of December 31, 2017     2,673,007  

 

7. CONTINGENT TRANSACTIONS

 

In order to meet specific financial needs of customers, the Bank’s credit policy also includes, among others, the granting of guarantees, securities, bonds, letters of credit and documentary credits. Although these transactions are not recognized in the balance sheet, since they imply a possible obligation or liability for the Bank, they expose the Bank to additional credit risk to those recognized in the balance sheet and are, therefore, an integral part of the total risk of the Bank.

 

As of March 31, 2018 and December 31, 2017 and 2016, the Bank maintains the following contingent transactions:

 

    03/31/2018     12/31/2017     12/31/2016  
                   
Overdraft and unused agreed credits     384,314       255,710       191,007  
Guarantees granted     243,913       253,350       287,497  
Liabilities for foreign trade transactions     154,661       90,274       163,308  
      782,888       599,334       641,812  

 

Risks related to the contingent transactions described above have been evaluated and are controlled within the framework of the Bank’s credit risk policy described in Note 41.

 

8. DERIVATIVE FINANCIAL INSTRUMENTS

 

The Bank performs derivative transactions for trading purposes.

 

  - 33 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

At the beginning, derivatives often imply only a mutual exchange of promises with little or no investment. Nevertheless, these instruments frequently imply high levels of leverage and are quite volatile. A relatively small movement in the value of the underlying asset could have a significant impact in profit or loss. Furthermore, over-the-counter derivatives may expose the Bank to risks related to the absence of an exchange market in which to close an open position. The Bank’s exposure for derivative contracts is monitored on a regular basis as part of its general risk management framework. Information on the Bank’s credit risk management objectives and policies is included in Note 41.

 

The following tables show the notional values of these instruments, expressed in thousands, in the currency of origin. Notional values indicate the number of pending transactions at year end and are not indicative of either the market risk or the credit risk. Additionally, is presented the fair value of the derivative financial instruments recognized as assets or liabilities in the Balance sheet. Changes in fair values were accounted for in profit or loss, the breakdown of which is disclosed in Exhibit Q “Breakdown of profit or loss”:

  

    03/31/2018     12/31/2017     12/31/2016  
Derivative assets   Notional
Value
    Fair
Value
    Notional
Value
    Fair
Value
    Notional
Value
    Fair
Value
 
Foreign currency forward purchase contracts without delivery of underlying asset     2,500       3,437       9,200       6,863                  
Foreign currency forward sales contract without delivery of underlying asset     11,000       1,095       2,500       800       7,900       9,721  
Forward contracts of Government bonds     10,000       30       10,000       565                  
Total derivatives held for trading     23,500       4,562       21,700       8,228       7,900       9,721  

 

    03/31/2018     12/31/2017     12/31/2016  
Derivative liabilities   Notional
Value
    Fair
Value
    Notional
Value
    Fair
Value
    Notional
Value
    Fair
Value
 
Foreign currency forward purchase contracts without delivery of underlying asset     19,315       1,833       18,900       7,169                      
Foreign currency forward sales contract without delivery of underlying asset     16,800       11,823       25,600       15,938                  
Total derivatives held for trading     36,115       13,656       44,500       23,107                  

 

Derivatives held for trading are generally related with products offered by the Bank to its customers. The Bank shall also take positions expecting to benefit from favorable changes in prices, rates or indexes, i.e. take advantage of the high level of leverage of these contracts to obtain high yields, assuming at the same time high market risk. Additionally, they may be held for arbitrage, i.e. to obtain a benefit free of risk for the combination of a derivative product and a portfolio of financial assets, trying to benefit from anomalous situations in the prices of assets in the markets.

 

The Bank holds Forwards and Futures as derivative financial instruments. These are contractual agreements to buy or sell a specific financial instrument at a given price and a fixed date in the future. Forward contracts are customized contracts traded on an over-the-counter market. Futures contracts, in turn, correspond to transactions for standardized amounts, executed in a regulated market and subject to daily cash margin requirements. The main differences in risks associated with these types of contracts are the credit risk and the liquidity risk. In forward contracts there is counterparty risk, the Bank has credit exposure to counterparties of the agreements. The credit risk related to futures contracts is deemed very low because daily cash margin requirements help to guarantee these contracts are always fulfilled. In addition, forward contracts are generally settled in gross terms and, therefore, they are deemed to have higher settlement risk than futures contract that, except they are chosen to be executed by delivery, are settled on a net base. Both types of contracts expose the Bank to market risk.

 

9. FAIR VALUE QUANTITATIVE AND QUALITATIVE DISCLOSURES

 

The fair value is the amount at which an asset can be exchanged, or at which a liability can be settled, in mutual independent terms and conditions between participants of the principal market (or most advantageous market) duly informed and willing to transact in an orderly and current transaction, at the measurement date in the current market conditions whether the price is directly observable or estimated using a valuation technique under the assumption that the Bank is an ongoing business.

 

  - 34 -  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

When a financial instrument is quoted in a liquid and active market, its price in the market in a real transaction provides the most reliable evidence of its fair value. Nevertheless, when there is no quoted price in the market or it cannot be an evidence of the fair value of such instrument, in order to determine such fair value, the entities may use the market value of another instrument with similar characteristics, the analysis of discounted cash flows or other applicable techniques, which shall be significantly affected by the assumptions used.

 

Notwithstanding the above, the Bank’s Management has used its best judgment to estimate the fair values of its financial instruments, any technique to perform such estimate implies certain inherent fragility level. In conclusion, the fair value may not be indicative of the net realizable value or settlement value.

 

Fair value hierarchy

 

The Bank uses the following hierarchy to determine and disclose the fair value of financial instruments, according to the valuation technique applied:

 

- Level 1: quoted prices (unadjusted) observable in active markets for identical assets or liabilities.

 

- Level 2: Valuation techniques for which the data and variables having a significant impact on the determination of the fair value recognized or disclosed are observable for the asset or liability, either directly or indirectly.

 

- Level 3: Valuation techniques for which the data and variables having a significant impact on the determination of the fair value recognized or disclosed are not based on observable market information.

 

Exhibit P “Categories of Financial Assets and Liabilities” presents the hierarchy in the Bank’s financial asset and liability fair value measurement.

 

Description of valuation process

 

The fair value of instruments categorized as Level 1 was assessed by using quoted prices effective at the end of each reporting period or fiscal year, as applicable, in active markets for identical assets or liabilities, if representative. At present, for government and private securities, there are two principal markets in which the Bank operates, to wit: BYMA and MAE. Additionally, in the case of derivatives, both MAE and Mercado a Término de Rosario SA (ROFEX) are deemed active markets.

 

On the other hand, for certain assets and liabilities that do not have an active market, categorized as Level 2, the Bank used valuation techniques that included the use of market transactions performed under mutual independent terms and conditions, between interested and duly informed parties, provided there are any available, as well as references to the current fair value of other instrument being substantially similar, or otherwise the analysis of cash flows discounted at rates built from market information of similar instruments.

 

In addition, certain assets and liabilities included in this categorization were valued using identical price quotes of identical instruments in “less active markets”.

 

Finally, the Bank has categorized as level 3 those assets and liabilities for which there are no identical or similar transactions in the market. In order to determine the market value of these instruments, the Bank used valuation techniques based on its own assumptions, which are similar to those that would be used by any other market participant. For this approach, the Bank mainly used the cash flow discount model.

 

As of March 31, 2018, December 31, 2017 and 2016, the Bank has neither changed the techniques nor the assumptions used to estimate the fair value of the financial instruments.

 

Below is presented the reconciliation between the balances at the beginning and the end of the period of the financial assets and liabilities recognized at fair value, using the valuation techniques based on the Bank’s own assumptions, as of March 31, 2018 and December 31, 2017:

 

  - 35 -  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

    Fair values using valuation techniques based on the
Bank’s own assumptions (level 3)
March 31, 2018
 
Description   Debt Securities     Other Financial
Assets
    Investments in
Equity
Instruments
 
Balance at the beginning     35,841       161,751       35,774  
Transfers to Level 3                        
Transfers from Level 3                        
Profit and Loss     6,637       355       4,422  
Purchases, sales, issuance and settlement     (3,570 )     (70,353 )        
Balance at end of period     38,908       91,753       40,196  

 

    Fair values using valuation techniques based on the
Bank’s own assumptions (level 3)
December 31, 2017
 
Description   Debt Securities     Other Financial
Assets
    Investments in
Equity
Instruments
 
Balance at the beginning     45,834               15,668  
Transfers to Level 3                        
Transfers from Level 3                        
Profit and Loss     5,661               20,421  
Purchases, sales, issuance and settlement     (15,654 )     161,751       (315 )
Balance at end of period     35,841       161,751       35,774  

 

Instruments measured as level 3, include mainly debt securities and certificate of participation in financial trust, for which, the construction of fair values was obtained based on the Bank’s own assumptions that are not easily observable in the market. The most significant assumption was the placement cutoff rate of such instruments in the market at the end of the period, used to determine the actual value of cash flows.

 

Any increase (decrease) in these assumptions, considered separately, would derive in a higher or lower fair value.

 

Changes in fair value levels

 

The Bank monitors the availability of information in the market to evaluate the classification of financial instruments into the fair value hierarchy, as well as the resulting determination of transfers between levels 1, 2 and 3 at each period end.

 

As of March 31, 2018, December 31, 2017 and 2016, the Bank has not recognized any transfers between levels 1, 2 and 3 of the fair value hierarchy.

 

Financial assets and liabilities not recognized at fair value

 

Next follows a description the methods and assumptions used to determine the fair values of financial instruments no recognized at their fair value in the accompanying Financial Statements:

 

- Assets with fair value similar to the carrying amount: financial assets and liabilities that are liquid or have short-term maturities (less than three months) were deemed to have a fair value similar to the carrying amount.

 

- Fixed-rate financial instruments: The fair value of financial assets was recognized discounting future cash flows at current market rates, for each fiscal year, for financial instruments of similar characteristics. The estimated fair value of fixed-interest rate deposits was assessed discounting future cash flows by using market interest rates for deposits with similar maturities to those of the Bank’s portfolio.

 

Quoted assets and issued quoted liabilities the fair value was determined based on market prices.

 

  - 36 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

- Other financial instruments: financial assets and liabilities that are liquid or have short-term maturities were deemed to have a fair value similar to the carrying amount. This assumption also applies to deposits in savings accounts, checking accounts and others.

 

The following table shows a comparison between the fair value and the carrying amount of financial instruments not measured at fair value as of March 31, 2018 and December 31, 2017 and 2016:

 

    03/31/2018  
    Carrying
Amount
    Level 1     Level 2     Level 3    

Fair

Value

 
Financial Assets                                        
Cash and deposits in Banks     29,440,799       29,440,799                   29,440,799  
Repo transactions     587,283       587,283                       587,283  
Other financial assets     2,641,434       2,641,434                       2,641,434  
Loans and other financing     147,618,804               156,058       144,422,839       144,578,897  
Other debt securities     671,709       688,596               6,575       695,171  
Financial assets delivered as guarantee     4,718,832       4,718,832                       4,718,832  
      185,678,861       38,076,944       156,058       144,429,414       182,662,416  
                                         
Financial Liabilities                              
Deposits     149,488,093       75,024,729       74,550,704             149,575,433  
Other repo transactions     9,245       9,245                       9,245  
Other financial liabilities     9,093,898       7,667,136       1,423,151               9,090,287  
Financing received from the Central Bank and other financial entities     486,995               489,013               489,013  
Issued corporate bonds     4,913,044               4,387,694               4,387,694  
Subordinated corporate bonds     8,257,754               8,118,959               8,118,959  
      172,249,029       82,701,110       88,969,521               171,670,631  

 

    12/31/2017  
    Carrying
Amount
    Level 1     Level 2     Level 3     Fair
Value
 
Financial Assets                                        
Cash and deposits in Banks     35,561,574       35,561,574                   35,561,574  
Repo transactions     1,419,808       1,419,808                       1,419,808  
Other financial assets     1,789,433       1,789,433                       1,789,433  
Loans and other financing     132,658,674               485,347       129,472,430       129,957,777  
Other debt securities     937,713       944,876               7,916       952,792  
Financial assets delivered as guarantee     4,644,633       4,644,633                       4,644,633  
      177,011,835       44,360,324       485,347       129,480,346       174,326,017  
                                         
Financial Liabilities                                        
Deposits     144,129,177       77,959,810       66,265,387             144,225,197  
Other repo transactions     2,688,093       2,688,093                       2,688,093  
Other financial liabilities     10,561,203       9,175,314       1,391,699               10,567,013  
Financing received from the Central Bank and other financial entities     1,174,111               1,176,397               1,176,397  
Issued corporate bonds     4,712,216               4,432,977               4,432,977  
Subordinated corporate bonds     7,565,759               7,710,790               7,710,790  
      170.830.559       89.823.217       80.977.250               170.800.467  

 

  - 37 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

    12/31/2016  
    Carrying
Amount
    Level 1     Level 2     Level 3     Fair
Value
 
Financial Assets                                        
Cash and deposits in Banks     35,986,159       35,986,159                   35,986,159  
Repo transactions     19,124       19,124                       19,124  
Other financial assets     941,219       941,219                       941,219  
Loans and other financing     88,390,646               481,628       87,807,196       88,288,824  
Other debt securities     855,832       843,708       3,223       11,677       858,608  
Financial assets delivered as guarantee     2,489,665       2,489,665                       2,489,665  
      128,682,645       40,279,875       484,851       87,818,873       128,583,599  

 

    12/31/2016  
    Carrying
Amount
    Level 1     Level 2     Level 3     Fair
value
 
Financial Liabilities                                        
Deposits     111,862,805       58,773,034       53,175,424                     111,948,458  
Other repo transactions     1,095,634       1,095,634                       1,095,634  
Other financial liabilities     6,341,674       5,192,168       1,152,196               6,344,364  
Financing received from the Central Bank and other financial entities     260,458               259,775               259,775  
Issued corporate bonds     1,684,636               1,622,802               1,622,802  
Subordinated corporate bonds     6,376,537               5,994,056               5,994,056  
      127,621,744       65,060,836       62,204,253               127,265,089  

 

10. LEASES

 

The Bank, as lessor, entered into financial lease contracts, under the usual characteristics of this kind of transactions, without there being any issues that may differentiate them in any aspect from those performed in the Argentine financial market in general. The lease contracts in force do not represent significant balances with respect to the total financing granted by the Bank.

 

The following table shows the reconciliation between the total gross investment of financial leases and the current value of the minimum payments receivables for such leases: 

 

    03/31/2018     12/31/2017     12/31/2016  
    Total
Investment
    Current Value
of Minimum
Payments
    Total
Investment
    Current Value
of Minimum
Payments
    Total
Investment
    Current Value
of Minimum
Payments
 
Up to 1 year     331,079       237,780       339,397       237,730       235,152       171,648  
From 1 to 5 years     390,658       318,723       441,369       356,071       284,518       233,893  
More than 5 years                     175       172       2,601       2,597  
      721,737       556,503       780,941       593,973       522,271       408,138  

 

As of March 31, 2018, and December 31, 2017 and 2016, income for non-accrued interests totaled 165,234, 186,968 and 114,133, respectively.

 

Additionally, the Bank celebrated commercial contracts for the lease of real property, in which the Bank’s branches operate. Such lease contracts have an average term of 2 to 10 years, and most of them may be extended.

 

  - 38 -  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Future minimum payments for these operating lease contracts are as follows:

 

    03/31/2018     12/31/2017     12/31/2016  
Up to 1 year     160,466       163,107       134,520  
From 1 to 5 years     194,008       223,383       209,182  
More than 5 years                     1,228  
      354,474       386,490       344,930  

 

11. INVESTMENTS IN ASSOCIATES AND JOINT ARRANGEMENTS

 

11.1 Associated entities

 

The Bank holds investments in the following associated entities:

 

· Prisma Medios de Pagos SA: the existence of significant influence is evidenced through the analysis of the following elements: (i) none of its shareholders holds more than 20% of the capital stock, due to the corporate structure thereof; (ii) the Bank has a representative on the Board of Directors; (iii) this director is a member of the executive Committee of the associate entity, the latter being the body that performs the relevant activities of the associate entity.

 

In order to measure this investment, we have used the Financial Statements of Prisma Medios de Pagos SA as of December 31, 2017. Such Financial Statements were adjusted by the associate, in order to be able to measure the investment in accordance with the IFRS. Additionally, the Bank has considered, when applicable, the material transactions or events occurring between January 1, 2018 and March 31, 2018.

 

· Macro Warrants SA: the existence of significant influence is evidenced by the representation the Bank has in the Board of Directors of the associate. In order to measure this investment, we used accounting information of Macro Warrants SA as of December 31, 2017. Additionally, the Bank has considered, when applicable, the material transactions or events occurring between January 1, 2018 and March 31, 2018.

 

The following table presents the summarized financial information on the Bank’s investments in the Associates:

 

· Prisma Medios de Pago SA

 

Summarized Balance sheet   03/31/2018     12/31/2017     12/31/2016  
Total Assets     16,409,163       14,366,838       9,703,861  
Total Liabilities     13,826,145       12,492,991       8,815,774  
Net Shareholders’ Equity     2,583,018       1,873,847       888,087  
Proportional interest in the entity     7,61 %     7,61 %     7,61 %
Carrying Amount of Investment     196,568       142,600       67,583  

 

· Macro Warrant SA

 

Summarized Balance sheet   03/31/2018     12/31/2017     12/31/2016  
Total Assets     19,543       19,798       17,110  
Total Liabilities     6,126       3,265       3,424  
Net Shareholders’ Equity     13,417       16,533       13,686  
Proportional Interest in the entity     5 %     5 %     5 %
Carrying Amount of Investment     671       827       684  

 

11.2 Joint Ventures in which the Bank participates

 

The Bank participates in the following joint ventures, instrumented through Uniones Transitorias de Empresas (UTE):

 

  - 39 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

a) Banco Macro SA – Siemens Itron Business Services SA: on April 1, 1998, the Bank executed an agreement with Siemens Itron Services SA to organize an UTE controlled on a joint basis through a 50% interest, the purpose of which is to facilitate a data processing center for the tax administration, to modernize the systems and tax collection processes of the Province of Salta and manage and recover municipal taxes and fees.

 

b) Banco Macro SA – Gestiva SA: on May 4, 2010 and August 15, 2012, the Bank executed with Gestiva SA the UTE agreement to form “Banco Macro SA – Gestiva SA – Unión Transitoria de Empresas”, under joint control, the purpose of which relates to rendering the integral processing and management services of the tax system of the Province of Misiones, the management thereof and tax collection services. The Bank holds a 5% interest in this UTE.

 

· Unitron Business Servicies SA

 

Summarized Balance sheet   03/31/2018     12/31/2017     12/31/2016  
Total Assets     229,210       195,826       133,188  
Total Liabilities     60,255       54,646       30,362  
Net Shareholders’ Equity     168,955       141,180       102,826  
Proportional interest in the entity     50 %     50 %     50 %
Carrying Amount of Investment     84,478       70,590       51,413  

 

· Gestiva SA

 

Summarized Balance sheet   03/31/2018     12/31/2017     12/31/2016  
Total Assets     146,132       116,885       107,376  
Total Liabilities     20,492       18,319       15,616  
Net Shareholders’ Equity     125,640       98,566       91,760  
Proportional interest in the entity     5 %     5 %     5 %
Carrying Amount of Investment     6,282       4,928       4,588  

 

For additional information on investments on joint ventures, see Exhibit E “Detailed information on interests in other companies”, within the Condensed separate interim financial statements.

 

12. RELATED PARTIES

 

A related party is a person or entity that is related to the Bank:

 

- has control or joint control of the Bank;

- has significant influence over the Bank;

- is a member of the key management personnel of the Bank or of a parent of the Bank;

- members of the same group;

- one entity is an associate (or an associate of a member of a group of which the other entity is a member).

 

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Bank, directly or indirectly. The Bank considers as key management personnel, for the purposes of IAS 24, the members of the Board of Directors and the Senior Management member of the Risk Management Committee, Asset and Liability Committee and the Senior Credit Committee.

 

As of March 31, 2018 and December 31, 2017 and 2016, there is a total amount of 449,114, 363,543 and 305,417, respectively, as unpaid financial assistance granted by the Bank to its associates and related parties and deposits of its associates and related parties of 2,077,127, 2,796,027 and 2,337,840, respectively:

 

  - 40 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

    Subsidiaries(1)     Associates and other related parties  
    Maximum balances
as of 03/31/2018
    Balance as of
03/31/2018
    Maximum balances
as of 03/31/2018
    Balance as of
03/31/2018
 
Documents                 203,035       201,963  
Overdraft                     42,157       16,952  
Credit cards     274       263       43,985       37,781  
Leases     6,630       6,630       2,041       2,002  
Personal loans                     848       848  
Mortgage loans                     14,295       14,243  
Other loans     752,199       752,199       156,361       153,757  
Guarantees granted     443       443       21,825       21,568  
Total assistance     759,546       759,535       484,547       449,114  
Deposits             181,370               2,077,127  

 

    Subsidiaries(1)     Associates and other related parties  
    Maximum balances
as of 12/31/2017
    Balance as of
12/31/2017
    Maximum balances
as of 12/31/2017
    Balance as of
12/31/2017
 
Documents                 147,763       147,733  
Overdraft                     25,301       7,831  
Credit cards     397       389       35,203       35,203  
Leases     6,973       6,973       2,204       2,157  
Personal loans                     786       785  
Mortgage loans                     14,015       13,968  
Other loans     1,202,336       952,148       390,893       140,449  
Guarantees granted     443       443       15,462       15,417  
Total assistance     1,210,149       959,953       631,627       363,543  
Deposits             108,606               2,796,027  

 

    Subsidiaries(1)     Associates and other related parties  
    Maximum balances
as of 12/31/2016
    Balance as of
12/31/2016
    Maximum balances
as of 12/31/2016
    Balance as of
12/31/2016
 
Documents                 103,927       103,336  
Overdraft                     17,804       7,459  
Credit cards     191       191       22,057       19,573  
Leases     8,036       8,036       1,189       1,168  
Personal loans                     1,388       1,362  
Mortgage loans                     10,862       10,858  
Other loans     300,187               475,957       161,287  
Guarantees granted     885       885       374       374  
Total assistance     309,299       9,112       633,558       305,417  
Deposits             134,911               2,337,840  

 

(1) These transactions are eliminated during the consolidation process.

 

Transactions generated by the Bank with its subsidiaries and other related parties to it for transactions arranged within the scope of the usual and ordinary course of business, were performed in normal market conditions, both as to interest rates and prices and as to the required guarantees.

 

As of March 31, 2018, December 31, 2017 and 2016, the income from loan transactions totaled 7,114, 54,157 and 12,617, respectively, while expense generated from deposit transactions totaled 15,798, 163,814 and 141,184, respectively.

 

The Bank does not have loans granted to Directors and other key management personnel secured with shares.

 

  - 41 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Total remunerations received as salary and bonus by the key management personnel as of March 31, 2018 and December 31, 2017 and 2016, totaled 23,019, 79,905 and 41,592 respectively.

 

In addition, fees received by the Directors as of March 31, 2018 and December 31, 2017 and 2016 amounted to 140,708, 468,623 and 243,704 respectively.

 

Additionally, the composition of the Board of Directors and key management personnel is as follows:

 

    03/31/2018     12/31/2017     12/31/2016  
Board of Directors     22       22       21  
SeniorManagement members of the key management personnel     15       14       14  
      37       36       35  

 

13. PROPERTY, PLANT AND EQUIPMENT

 

This accounting item includes all tangible assets owned by the Bank and used for its specific business.

 

Changes in these assets as of March 31, 2018 and December 31, 2017 are disclosed in Exhibit F “Changes in Property, Plant and Equipment”.

 

In addition, as of December 31, 2016 and as a result of applying the deemed cost to the Bank´s real properties, the balance of such assets amounts to 6,874,656.

 

14. INVESTMENT PROPERTY

 

Changes in these assets as of March 31, 2018 and December 31, 2017 are disclosed in Exhibit F “Changes in Property, Plant and Equipment”.

 

In addition, as of December 31, 2016 and as a result of applying the deemed cost to the Bank´s real properties, the balance of such assets amounts to 1,754,087.

 

15. INTANGIBLE ASSETS

 

Changes in these assets as of March 31, 2018 and December 31, 2017 are disclosed in Exhibit G “Changes in Intangible Assets”. As of December 31, 2016, the balance of such assets amounts to 656,178.

 

16. BORROWING COSTS

 

The Bank capitalizes borrowing costs attributable to the construction of the new corporate building.

 

As of March 31, 2018 and December 31, 2017, borrowing costs eligible for capitalization of the expenditures on such qualifying asset to such dates total 37,063 and 30,587, respectively. The weight average capitalization rate was 10.46%.

 

17. PROVISIONS

 

This item includes the amounts estimated to face a liability of probable occurrence, which in case it occurs, would originate a loss for the Bank.

 

Exhibit J “Changes in Provisions” presents the changes in provisions during the three-month period ended March 31, 2018.

 

The expected terms to settle these obligations are as follows:

 

  - 42 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

    03/31/2018                    
    Within 12
months
    Beyond 12
months
    03/31/2018     12/31/2017     12/31/2016  
For administrative, disciplinary and criminal penalties             718       718       718       9,110  
Others     340,319       393,595       733,914       694,201       325,897  
      340,319       394,313       734,632       694,919       335,007  

 

In the opinion of the Management of the Bank and its legal advisors, there are no other significant effects than those disclosed in the accompanying Financial Statements, the amounts and settlement terms of which have been recognized based on the current value of such estimates, considering the probable settlement date thereof.

 

18. EMPLOYEE BENEFITS PAYABLE

 

The table below presents the amounts of employee benefits payable as of March 31, 2018 and December 31, 2017 and 2016:

 

Short-term employee benefits   03/31/2018     12/31/2017     12/31/2016  
Salaries, gratifications and social security contributions     477,610       710,091       431,657  
Vacation accrual     367,833       548,275       439,793  
Thirteenth salary provision     133,128                  
Total short-term employee benefits     978,571       1,258,366       871,450  

 

The Bank has not long-term employee benefits or post-employment benefits as of March 31, 2018 and December 31, 2017 and 2016.

 

19. ANALYSIS OF FINANCIAL ASSETS TO BE RECOVERED AND FINANCIAL LIABILITIES TO BE SETTLED

 

The following tables show the analysis of the balance of financial asset and liabilities the Bank expects to recover and settle as of March 31, 2018 and December 31, 2017 and 2016:

 

03/31/2018   Without
due date
    Up to
1 month
    Over 1
month and
up to
3 months
    Over 3
months and
up to
6 months
    Over 6
months and
up to
12 months
    Total
up to
12 months
    Over 12
months and
up to
24 months
    Over
24 months
    Total over
12 months
 
Assets                                                                        
Cash and deposits in Banks           29,440,799                         29,440,799                    
Debt securities at fair value through profit or loss     992       38,919       16,929       4,476       15,623       75,947       31,654       496,602       528,256  
Derivative instruments             633       492       3,437               4,562                          
Repo transactions             587,283                               587,283                          
Other financial assets     1,305,346       1,378,517       7,396       102,459       201,149       1,689,521       8,173       51,920       60,093  
Loans and other financing     82,996       43,685,678       16,093,124       13,574,063       14,547,098       87,899,963       19,411,394       40,224,451       59,635,845  
Other debt securities             14,543,825       18,716,283       949,561       6,575       34,216,244       51,016       478,423       529,439  
Financial assets delivered as guarantee     4,718,832                               10,325       10,325                          
Investment in equity instruments     110,231                                                                  
Total assets     6,218,397       89,675,654       34,834,224       14,633,996       14,780,770       153,924,644       19,502,237       41,251,396       60,753,633  

 

  - 43 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

03/31/2018   Without
due date
    Up to
1 month
    Over 1
month and
up to
3 months
    Over 3
months and
up to
6 months
    Over 6
months and
up to
12 months
   

Total
up to

12 months

    Over 12
months and
up to
24 months
    Over
24 months
   

Total over
12 months

 
Liabilities                                                                        
Deposits           123,836,897       22,325,557       2,210,588       1,021,543       149,394,585       87,305       6,203       93,508  
Liabilities at fair value to profit or loss             12,755                               12,755                          
Derivative instruments             13,656                               13,656                          
Repo transactions             9,245                               9,245                          
Other financial liabilities             8,892,230       23,943       7,404       11,999       8,935,576       19,748       138,574       158,322  
Financing received from Central Bank and other financial entities             21,154       274,609       7,599       21,184       324,546       45,860       116,589       162,449  
Issued corporate bonds                     292,474                       292,474               4,620,570       4,620,570  
Subordinated corporate bonds                     200,434                       200,434               8,057,320       8,057,320  
Total Liabilities             132,785,937       23,117,017       2,225,591       1,054,726       159,183,271       152,913       12,939,256       13,092,169  

 

12/31/2017   Without due date     Total up to 12
months
    Total over 12
months
 
Assets                        
Cash and deposits in Banks           35,561,574        
Debt securities at fair value through profit or loss             138,068       947,960  
Derivative instruments             8,228          
Repo transactions             1,419,808          
Other financial assets             1,269,085       1,003,594  
Loans and other financing             73,767,208       58,891,466  
Other debt securities             34,704,765          
Financial assets delivered as guarantee     4,644,633       2,993,719          
Investment in equity instruments     282,659                  
Total Assets     4,927,292       149,861,455       60,843,020  
                         
Liabilities                        
Deposits             143,567,831       561,346  
Liabilities at fair value to profit or loss             6,450          
Derivative instruments             23,107          
Repo transactions             2,688,093          
Other financial liabilities             10,372,665       188,538  
Financing received from Central Bank and other financial entities             1,087,979       86,132  
Issued corporate bonds             118,356       4,593,860  
Subordinated corporate bonds             80,004       7,485,755  
Total Liabilities             157,944,485       12,915,631  

 

12/31/2016   Without due date     Total up to 12
months
    Total over 12
months
 
Assets                        
Cash and deposits in Banks           35,986,159        
Debt securities at fair value through profit or loss             42,269       290,212  
Derivative instruments             9,721          
Repo transactions             19,124          
Other financial assets             1,098,092       7,421  
Loans and other financing             53,059,987       35,330,659  
Other debt securities             20,395,499          
Financial assets delivered as guarantee     2,489,700       1,200,994          
Investment in equity instruments     406,868                  
Total Assets     2,896,568       111,811,845       35,628,292  

 

  - 44 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

12/31/2016   Without due date     Total up to 12
months
    Total over 12
months
 
Liabilities                        
Deposits                   111,555,317       307,488  
Liabilities at fair value to profit or loss                        
Derivative instruments                        
Repo transactions             1,095,634          
Other financial liabilities             6,227,348       114,326  
Financing received from Central Bank and other financial entities             193,845       66,613  
Issued corporate bonds             1,684,636          
Subordinated corporate bonds             67,429       6,309,108  
Total Liabilities             120,824,209       6,797,535  

 

20. DISCLOSURES BY OPERATING SEGMENT

 

For management purposes the Bank’s Management has determined that it has only one operating segment related to banking business. In this sense, the Bank supervises the operating segment results for the period, in order to make decisions about resources to be allocated to the segment and assess its performance, which is measured in a consistent basis with the profit or loss in the financial statements.

 

21. INCOME TAX

 

This tax shall be recognized following the liability method, recognizing (as credit or debt) the tax effect of temporary differences between the carrying amount of an asset or liability and its tax base, and its subsequent recognition in profit or loss for the fiscal year in which the reversal of such differences occurs, considering as well the possibility of using tax losses in the future.

 

Deferred tax assets and deferred tax liabilities in the Balance sheet are as follows:

 

    03/31/2018     12/31/2017     12/31/2016  
Deferred tax assets                        
Debt securities     6,988       4,982          
Loans  and other financing     959,147       834,029       437,724  
Other financial assets     11,957       13,166       7,518  
Allowances for contingencies     227,779       208,475       117,252  
Provisions and employee benefits     137,680       181,834       157,704  
Total deferred tax assets     1,343,551       1,242,486       720,198  
                         
Deferred tax liabilities                        
Property, plant and equipment     1,187,578       1,191,529       1,614,419  
Intangible assets     260,496       245,326       222,185  
Investment in associates and joint ventures     121,253       167,918       84,333  
Other financial and non-financial liabilities     98,770       106,800       120,654  
Total deferred tax liabilities     1,668,097       1,711,573       2,041,591  
Net deferred tax liabilities     324,546       469,087       1,321,393  

 

Changes in net deferred tax liabilities as of March 31, 2018 and December 31, 2017 are summarized as follows:

 

    03/31/2018     12/31/2017  
Net deferred tax liabilities at beginning of year     469,087       1,321,393  
Profit for deferred taxes recognized in total comprehensive income (*)     144,541       852,306  
Net deferred tax liabilities at period /fiscal year end     324,546       469,087  

 

(*) For changes in fiscal year 2017, the Bank included the effect of the rate change, under the tax reform described in Note 3.13.a) to the accompanying condensed consolidated interim Financial Statements.

 

  - 45 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

The income tax recognized in the Statement of Income and in the Statement of Other Comprehensive Income differs from the income tax to be recognized if all income were subject to the current tax rate.

 

The table below shows a reconciliation between income tax and the amounts obtained by applying the current tax rate in Argentina to the carrying amount of profit:

 

    03/31/2018     03/31/2017  
Carrying amount of profit before income tax     5,189,350       3,139,173  
Applicable income tax rate     30 %     35 %
Income tax on carrying amount of profit     1,556,805       1,098,711  
Net permanent differences and other tax effects     68,008       (2,483 )
Total income tax     1,624,813       1,096,228  

 

As of March 31, 2018 and 2017, the effective income tax rate is 31.3% and 34.9%, respectively.

 

In the Condensed consolidated interim financial statements, tax assets (current and deferred) of an entity of the Group shall not be offset with the tax liabilities (current and deferred) of other entity of the Group because they correspond to income tax applicable to different taxable subjects and also they are not legally entitled before the tax authority to pay or receive only one amount to settle the net position.

 

22. COMMISSIONS INCOME

 

Description   03/31/2018     03/31/2017  
Performance obligations satisfied in one act (1)     1,830,661       1,336,901  
Performance obligations satisfied over certain time period     4,838       88,145  
      1,835,499       1,425,046  

 

(1) Includes mainly account maintenance fees, agreements and credit card commissions.

 

23. DIFFERENCE IN QUOTED PRICES OF GOLD AND FOREIGN CURRENCY

 

Description   03/31/2018     03/31/2017  
Translation of foreign currency assets and liabilities to pesos     20,993       68,802  
Income from foreign currency Exchange     129,599       113,266  
      150,592       182,068  

 

24. OTHER OPERATING INCOME

 

Description   03/31/2018     03/31/2017  
Services     1,012,905       923,042  
Sale of investment property and other non-financial assets     109,921          
Other adjustments and interest from other receivables     39,914       10,580  
Initial recognition of loans     22,780          
Sale of property, plant and equipment     719       567  
Other     117,792       129,194  
      1,304,031       1,063,383  

 

25. EMPLOYEE BENEFITS

 

Description   03/31/2018     03/31/2017  
Remunerations     1,515,401       1,304,435  
Social Security Contributions     292,785       259,344  
Compensations and bonuses to employees     158,466       111,041  
Employee services     51,094       45,595  
      2,017,746       1,720,415  

 

  - 46 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

26. ADMINISTRATION EXPENSES

 

Description   03/31/2018     03/31/2017  
Taxes     226,188       161,752  
Maintenance, conservation and repair expenses     166,271       121,834  
Fees to Directors and Syndics     162,489       86,724  
Security services     147,297       121,951  
Electricity and communications     115,424       81,135  
Other fees     105,083       75,610  
Leases     64,179       51,900  
Advertising and publicity     32,252       43,485  
Representation, travel and transportation expenses     22,837       16,912  
Stationary and office supplies     12,876       10,259  
Insurance     10,686       10,947  
Hired administrative services     3,516       5,874  
Other     332,912       225,080  
      1,402,010       1,013,463  

 

27. OTHER OPERATING EXPENSES

 

Description   03/31/2018     03/31/2017  
Gross turnover tax     1,155,937       718,577  
Charges for other provisions     165,825       69,842  
Deposit Guarantee Fund contributions     63,954       101,908  
Donations     22,937       22,198  
Insurance claims     10,392       4,949  
Initial loan recognition             7,016  
Late charges and charges payable to Central Bank     42       18  
Other     610,076       484,300  
      2,029,163       1,408,808  

 

28. ADDITIONAL DISCLOSURES IN THE STATEMENT OF CASH FLOWS

 

The Statement of Cash Flows presents the changes in cash and cash equivalents derived from operating activities, investing activities and financing activities during the period. For the preparation of the Statement of Cash Flows the Bank adopted the indirect method for Operating Activities and the direct method for Investment Activities and Financing Activities.

 

The Bank considers as “Cash and cash equivalents” the item Cash and deposits in banks and those financial assets that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

 

For the preparation of the Statement of Cash Flows the Bank considered the following:

 

- Operating activities: are the normal revenue-producing activities of the Bank as well as other activities that cannot be qualified as investing or financing activities.

 

- Investing activities: are the acquisition, sale and disposal by other means of long-term assets and other investments not included in cash and cash equivalents.

 

- Financing activities: are activities that result in changes in the size and composition of the Shareholders equity and liabilities of the Bank and that are not part of the operating or investing activities.

 

  - 47 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

The table below presents the reconciliation between the item “Cash and cash equivalents” in the Statement of Cash Flows and the relevant accounting items of the Balance sheet:

 

    03/31/2018     12/31/2017     03/31/2017     12/31/2016  
Cash and deposits in banks     29,440,799       35,561,574       28,931,872       35,986,159  
Debt securities at fair value             44       124,281       9,585  
Other debt securities     14,699,992       5,548,056       1,029,476       16,074,409  
Loans and other financing     100,716       93,871       76,909          
      44,241,507       41,203,545       30,162,538       52,070,153  

 

29. CAPITAL STOCK

 

The Bank’s subscribed and paid-in capital as of March 31, 2018, amounted to 669,663. Since December 31, 2014, the Bank’s capital stock has changed as follows:

 

As of December 31, 2014     594,563  
Capital stock decrease as provided by Art, 67 of Law No, 26,831 (1)     (10,000 )
Capital stock increase as approved by Shareholders´ Meeting held on April 28, 2017 (2)     85,100  
As of March 31, 2018     669,663  

 

(1) Related to capital stock decrease resulting from the lapse of three years from acquisition from September through December 2011, involving 10,000,000 own registered Class B shares of common stock for a total amount of 92,919. These shares have not been sold and the shareholders’ meeting has issued no resolution as to the application thereof. On June 25, 2015, the capital stock decrease was registered in the Public Registry of Commerce.

 

(2) Related to capital stock increase arising from i) the issue of 74,000,000 new, common, registered, Class “B” shares with a face value of Ps. 1, each one entitled to one vote, and entitled to dividends under the same conditions as common, registered, Class “B” shares, outstanding upon issuance, formalized on June 19, 2017 and (ii) additionally, as established by the abovementioned Meeting, the international underwriters exercised the option to oversubscribed 15% of the capital stock which was formalized on July 13, 2017 through the issuance of 11,099,993 new, common, registered, Class “B” shares each one entitled to one vote and with a face value of Ps.1. On August 14, 2017, such capital increases were registered with the Public Registry of Commerce.

 

The public offering of the new shares was authorized by CNV Resolution No. 18,716 dated on May 24, 2017 and by the BCBA on May 26, 2017. As required by CNV regulations, it is advised that the funds arising from the public subscription of shares shall be used to finance its general business operations, to increase its borrowing capacity and leverage the potential acquisitions opportunities in the Argentine financial system.

 

As of the date of issuance of these Condensed interim consolidated financial statements, the capital increase up to 74,000,000 new shares was fully subscribed and paid-in and registered on the public registry of commerce. The capital increase up to 11,099,993 new shares was fully subscribed, paid-in and registered on the public registry of commerce.

 

Additionally, on May 10, the Board of Directors of Banco Macro SA, has established the terms and conditions for the acquisition of its own shares, in accordance with section 64 of Law 26,831 and CNV rules, under the following conditions:

 

(1) Maximum amount to invest: up to 4,500,000

 

(2) Maximum number of shares for own acquisition: up to 4.5% of the capital stock

 

(3) Maximum price to pay for shares: up to Ps. 158 per share

 

(4) Terms in which the acquisition will take place: 40 business days in the República Argentina, beginning from the following day in which the information is published in the Bulletin of the Buenos Aires Stock Exchange, subject to renewal or extension of the term, which will be informed to investors

 

  - 48 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

For further information about the composition of the Bank’s capital stock, see exhibit K “Composition of capital stock” to the condensed separate interim Financial Statements.

 

30. EARNINGS PER SHARE

 

Basic earnings per share were calculated by dividing net profit attributable to ordinary equity holders of the Bank by the weighted average number of ordinary shares outstanding during the period.

 

To determine the weighted average number of ordinary shares outstanding during the period the Bank used the number of ordinary shares outstanding at the beginning of the period adjusted, if applicable, by the number of ordinary shares bought back or issued during the period multiplied by the number of days that the shares were outstanding in the period. Note 29 provides a detail of the changes in the Bank’s capital stock.

 

The calculation of basic earnings per share is disclosed in the table of Earnings per share included in the consolidated Statement of Income.

 

Dividends paid and proposed

 

Cash dividends paid during the fiscal years 2017 and 2016 to the shareholders of the Bank amount to 701,476 and 596,254, respectively, which considering the number of shares outstanding to the date of effective payment represented 1.20 and 1.10 pesos per share, respectively.

 

The Shareholders’ Meeting held on April 27, 2018 resolved to distribute cash dividends for 3,348,315, which considering the number of shares outstanding at the date of such resolution, represented 5 pesos per share.

 

31. DEPOSIT GUARANTEE INSURANCE

 

Law No. 24485 and Decree No. 540/1995 created the Deposit Guarantee Insurance System, which was featured as a limited, compulsory and onerous system, aimed at covering the risks of bank deposits, as subsidiary and supplementary to the deposit privilege and protection system established under the Financial Entities Act. The above mentioned legislation also provided for the organization of Sedesa with the exclusive purpose of managing the Deposit Guarantee Fund (DGF). Sedesa was organized in August 1995.

 

Banco Macro SA holds an 8.4020% interest in the capital stock of Sedesa according to the percentages disclosed by Central Bank Communiqué “B” 11681 on March 20, 2018.

 

According to the above mentioned law and decree, all deposits in pesos and foreign currency placed in participating entities in the form of checking accounts, savings accounts, fixed-term deposits or other forms of deposit that the Central Bank may determine from time to time shall be subject to the above described Deposit Guaratee Insurance System, up to the amount of 450 and that meet the requirements provided for in the Decree 540/1995 and other requirements that the regulatory Authority may from time to time determine. On the other hand, the Central Bank provided for the exclusion of the guarantee system, among others, of any deposits made by other financial entities, deposits made by persons related to the Bank and security deposits.

 

32. RESTRICTED ASSETS

 

As of March 31, 2018 and December 31, 2017, the followings Bank´s assets are restricted:

 

Item   03/31/2018     12/31/2017  
Debt securities at fair value through profit or loss and other debt securities                
·  Discount bonds in pesos regulated by Argentinean legislation, maturing 2033 used as security in favor of Sedesa (1).     116,908       117,454  
·  Discount bonds in pesos regulated by Argentinean legislation, maturing 2033 securing the regional economies Competitiveness Program – BID loan No. 3174/OC-AR.     104,640       98,541  

·  Central Bank of Argentina Internal Bills in pesos, maturity 06-21-2018 as of March 31, 2018 and maturing 02-21-2018 as of December 31, 2017, for the performance of forward foreign currency transactions.

    48,029       53,059  

 

  - 49 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Item (contd.)   03/31/2018     12/31/2017  
Debt securities at fair value through profit or loss and other debt securities (contd.)                

·  Discount bonds in pesos regulated by Argentinian legislation, maturing 2033, for minimum counterpart required for Agents to act in the new categories contemplated under Resolution No. 622/13 of the CNV.

    13,952       13,139  
·  Central Bank of Argentina Internal Bills in pesos, maturing 06-21-2018 as of March 31, 2018 and maturity 02-21-2018 as of December 31, 2017, securing the operation through negotiation secured transaction Segment as the main counterparty of the MAE.     9,467       9,647  
·  Discount bonds in pesos regulated by Argentinean legislation, maturing 2033 securing a BID loan of Province of San Juan No. 2763/OC-AR.     9,418       8,869  
·  Discount bonds in pesos regulated by Argentinian legislation, maturing 2033 securing the sectorial Credit Program of the Province of San Juan. Production investment financing fund.     9,243       8,704  
·  Secured bonds under Presidential Decree No. 1579/2002 as security for a loan received from Banco de Inversión y Comercio Exterior SA (Bice).             4,270  
·  Other public and private securities.     25,531       24,160  
Subtotal debt securities at fair value through profit or loss and other debt securities     337,188       337,843  
                 
Other financial assets            
·  Sundry debtors – foreclosure within the scope of the claim filed by the DGR against the City of Buenos Aires for differences on gross turnover tax.     827       827  
Subtotal Other financial assets     827       827  
                 
Loans and other financing – non-financial private sector and foreign residents                
                 
·   Interests derived from contributions made as protector    (2)     114,332       110,848  
Subtotal loans and other financing – non-financial private sector and foreign residents     114,332       110,848  
                 
Financial assets delivered as a guarantee                
·  Special guarantee checking accounts opened in Central Bank for transactions related to the electronic clearing houses and similar entities.     4,141,476       4,005,730  
·  Guarantee deposits related to credit and debit card transactions.     564,319       623,491  
·  Other guarantee deposits     11,120       13,662  
Subtotal Financial assets delivered as a guarantee     4,716,735       4,642,883  
                 
Other non financial assets                
                 
·  Real property related to a call option sold     115,888       222,023  
Subtotal Other non-financial assets     115,888       222,023  
Total     5,285,150       5,316,754  

 

(1) As replacement for the preferred shares of former Nuevo Banco Bisel SA to secure to Sedesa the price payment and the fulfillment of all the obligations assumed in the purchase and sale agreement dated May 28, 2007, maturing on August 11, 2021.

 

(2) In order to keep tax benefits related to these contributions, they must be maintained between two and three years from the date they were made. The same correspond to the following risk funds: Risk fund of Garantizar SGR and Risk fund of Los Grobo SGR as of March 31, 2018 and December 31, 2017 and Risk fund of Intergarantías SGR and Risk fund of Avaluar SGR as of December 31, 2017.

 

  - 50 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

Additionally, as of December 31, 2016, the amount of restricted assets was 2,987,809.

 

33. TRUST ACTIVITIES

 

The Bank is related to several types of trusts. The different trust agreements according to the business purpose sought by the Bank, are disclosed below:

 

33.1 Financial trusts for investment purposes

 

Debt securities include mainly prepayments towards the placement price of trust securities of the financial trusts under public offerings, made by the Bank through underwriting agreements (Consubond, Garbarino, Accicom, Secubono, Mila, Credicuotas Consumo, Credimas, Pvcred, Naldo Lombardi and Agrocap 1). The assets managed for these trusts are mainly related to securitizations of consumer loans. Trust securities are placed once the public offering is authorized by the CNV. Upon expiry of the placement period, once all trust securities have been placed on the market, the Bank recovers the disbursements made, plus an agreed-upon compensation (“underwriting Price”). If after making the best efforts, such trust securities cannot be placed, the Bank (“Underwriter”) will retain the securities subject to underwriting.

 

As of March 31, 2018 and December 31, 2017 and 2016, debt securities and certificates of participation in financial trusts administrated by the Bank for investment purpose, total to 1,047,643, 1,011,828 and 730,672, respectively.

 

According to the latest accounting information available as of the date of issuance of these condensed consolidated interim financial statements, the corpus assets of the trusts exceed the carrying amount in the related proportions.

 

33.2 Trusts created using financial assets transferred by the Bank

 

The Bank transferred financial assets (loans) to trusts for the purpose of issuing and selling securities for which collection is guaranteed by the cash flow resulting from such assets or group of assets. This way the funds that were originally used to finance the loans are obtained earlier.

 

As of March 31, 2018 and December 31, 2017 and 2016, considering the latest available accounting information as of the date of the accompanying condensed consolidated interim financial statements, the assets managed through Macro Fiducia SA (subsidiary) of this type of trusts amounted to 69,806, 116,697 and 59,128, respectively.

 

33.3 Trusts guaranteeing loans granted by the Bank

 

As it is common in the Argentine banking market, the Bank requires, in some cases, that the debtors present certain assets or entitlements to receive assets in a trust as a guarantee for the loans granted. This way, the risk of losses is minimized and access to the security is guaranteed in case of the debtor's noncompliance.

 

Trusts usually act as conduits to collect cash from the debtor’s flow of operations and send it to the bank for the payment of the debtor’s loans and thus ensure compliance with the obligations assumed by the trustor and guaranteed through the trust.

 

Additionally, other guarantee trusts manage specific assets, mainly real property.

 

Provided there is no noncompliance or delays by debtor in the obligations assumed with the beneficiary, the Trustee shall not execute the guaranty and all excess amounts as to the value of the obligations are reimbursed by the Trustee to the debtor.

 

As of March 31, 2018 and December 31, 2017 and 2016, considering the latest available accounting information as of the date of the accompanying condensed consolidated interim financial statements, the assets managed by the Bank amounted to 325,089, 328,268 and 451,569, respectively.

 

  - 51 -  

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2018

(Translation of Financial statements originally issued in Spanish – See Note 45)

(Figures expressed in thousands of Pesos)

 

33.4 Trusts in which the Bank acts as trustee (management)

 

The Bank, through its subsidiaries, performs management duties of the corpus assets directly according to the agreements, performing only trustee duties and has no other interests in the trust.

 

In no case shall the Trustee be liable with its own assets or for any obligation deriving from the performance as trustee. Such obligations do not imply any type of indebtedness or commitment for the trustee and they will be fulfilled only through trust assets. In addition, the trustee will not encumber the corpus assets or dispose of them beyond the limits established in the related trust agreements. The fees earned by the Bank from its role as trustee are calculated according to the terms and conditions of the agreements.

 

Trusts usually manage funds derived from the activities performed by trustors, for the following main purposes:

 

- Guaranteeing, in favor of the beneficiary the existence of the resources required to finance and/or pay certain obligations, such as the payment of amortization installments regarding work or service certificates, and the payment of invoices and fees stipulated in the related agreements.

 

- Promoting the production development of the private economic sector at a provincial level.

 

- Being a party to public work concession agreements granting road exploitation, management, keeping and maintenance.

 

As of March 31, 2018 and December 31, 2017 and 2016, considering the latest available accounting information as of the accompanying condensed consolidated interim financial statements, the assets managed by the Bank amounted to 3,212,642, 2,200,840 and 2,117,959, respectively.

 

34. COMPLIANCE WITH CNV STANDARDS

 

34.1 Compliance with CNV standards to act in the different agent categories defined by the CNV:

 

34.1.1 Operations of Banco Macro SA

 

Considering Banco Macro SA’s current operations, and according to the different categories of agents established by CNV General Resolution No. 622, the Bank is registered with this agency as agent for the custody of collective investment products of mutual funds (AC PIC FCI for their acronyms in Spanish language), comprehensive clearing and settlement agent and trading agent (ALyC and AN – comprehensive, for their acronyms in Spanish language), financial trustee Agent (FF for its acronym in Spanish language ) and Guarantee Entity (in the process of being registered).

 

Additionally, the Bank’s shareholders’ equity exceeds the minimum amount required by this regulation, amounting to 32,000, as well as the minimum counterpart required of 11,000, which the Bank paid-in with government securities as described in Note 32 to the accompanying condensed consolidated interim Financial Statements.

 

34.1.2 Operations of Banco del Tucumán SA

 

Considering Banco del Tucumán SA’s current operations, and according to the different categories of agents established by CNV General Resolution No. 622, the Bank is registered with this agency under the following agent categories: mutual investment funds placement and distribution agent (ACyD FCI), financial trustee agent (FF) and clearing and settlement agent and trading agent (ALyC and AN – Individual).

 

Additionally, the shareholders’ equity of this Subsidiary exceeds the minimum amount required by this regulation, amounting to 7,875, as well as the minimum counterpart required of 4,750, which the subsidiary paid-in with government securities.