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 22, 2019

 

                        

 

Commission File Number: 001-32827

 

                        

 

MACRO BANK INC.

(Translation of registrant’s name into English)

 

                        

 

Av. Eduardo Madero 1182

Buenos Aires C1106ACY

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.

 

Condensed interim financial statements as of June 30, 2019 together with the reports on review of interim financial statements.

 

CONTENT

 

· Cover Sheet
· Condensed consolidated interim statement of financial position
· Condensed consolidated interim statement of income
· Condensed consolidated interim statement of other comprehensive income
· Condensed consolidated interim statement of changes in shareholders’ equity
· Condensed consolidated interim statement of cash flows
· Notes to the condensed consolidated interim financial statements
· Consolidated exhibits
· Condensed separate interim statement of financial position
· Condensed separate interim statement of income
· Condensed separate interim statement of other comprehensive income
· Condensed separate interim statement of changes in shareholders’ equity
· Condensed separate interim statement of cash flows
· Notes to the condensed separate interim financial statements
· Separate exhibits
· Review report on condensed consolidated interim financial statements
· Review report on condensed separate interim financial statements

 

 

 

CONDENSED CONSOLIDATED INTERIM

FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

 

CORPORATE NAME: Banco Macro SA

 

REGISTERED OFFICE: Avenida Eduardo Madero 1182 – 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, July 15, 2019.

 

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
AS OF JUNE 30, 2019 AND DECEMBER 31, 2018
(Translation of the Financial statements originally issued in Spanish – See Note 38)
(Figures expressed in thousands of Pesos)

 

Items   Notes     Exhibits   06/30/2019     12/31/2018  
ASSETS                            
Cash and Deposits in Banks                 96,426,815       74,766,039  
Cash                 9,246,664       10,696,465  
Central Bank of Argentina                 70,115,962       50,212,127  
Other Local and Foreign Entities                 17,061,534       13,401,648  
Other                 2,655       455,799  
Debt Securities at fair value through profit or loss     35           1,979,681       2,635,247  
Derivative Financial Instruments                 17,199       17,293  
Other financial assets     7           4,100,452       2,999,584  
Loans and other financing           B, C, D and R     178,851,248       178,874,755  
Non financial Public Sector                 1,104,547       1,775,507  
Other Financial Entities                 4,024,374       5,573,806  
Non financial Private Sector and Foreign Residents                 173,722,327       171,525,442  
Other Debt Securities     35           97,381,248       64,584,759  
Financial Assets delivered as guarantee     25           7,157,006       6,756,220  
Equity Instruments at fair value through profit or loss     9 and 35           1,510,031       51,518  
Investment in associates and joint arrangements     6           123,784       108,823  
Property, Plant and Equipment           F     10,111,674       9,002,694  
Intangible Assets           G     1,869,038       1,401,017  
Deferred Income Tax Assets                 77,476       46,559  
Other Non financial Assets     7           985,786       834,069  
Non current assets held for sale     9           440,795       804,017  
TOTAL ASSETS                 401,032,233       342,882,594  

 

Delfín Jorge Ezequiel Carballo
Chairperson

 

- 1 -

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION  
AS OF JUNE 30, 2019 AND DECEMBER 31,2018
(Translation of the Financial statements originally issued in Spanish – See Note 38)
(Figures expressed in thousands of Pesos)

 

 

Items   Notes     Exhibits     06/30/2019     12/31/2018  
                         
LIABILITIES                  
Deposits             H and I       284,259,137       237,954,419  
Non financial Public Sector                     23,564,628       19,354,087  
Financial Sector                     243,587       148,275  
Non financial Private Sector and Foreign Residents                     260,450,922       218,452,057  
Derivative Financial Instruments             I       11,395       1,369  
Repo Transactions             I       277,594       164,469  
Other Financial Liabilities     11       I       14,833,230       15,318,513  
Financing received from the Central Bank of Argentina and other financial entities             I       2,198,014       2,998,010  
Issued Corporate Bonds     30       I       6,193,414       6,377,311  
Current Income Tax Liabilities     14. a)               4,148,554       2,946,479  
Subordinated Corporate Bonds     30       I       17,191,816       15,288,390  
Provisions     10       J       1,026,480       1,045,894  
Deferred Income Tax Liabilities                     475,333       274,671  
Other Non-financial Liabilities     11               7,681,298       5,875,117  
TOTAL LIABILITIES                     338,296,265       288,244,642  
SHAREHOLDERS’ EQUITY                                
Capital Stock     22               669,663       669,663  
Non capital contributions                     12,428,461       12,428,461  
Adjustments to Shareholders’ Equity                     4,511       4,511  
Earnings Reserved                     34,806,871       21,995,937  
Unappropriated Retained Earnings                     (210,927 )     3,264,742  
Other Comprehensive Income                     658,908       543,086  
Net Income for the period/ fiscal year                     14,375,739       15,729,243  
Net Shareholders’ Equity attributable to controlling interest                     62,733,226       54,635,643  
Net Shareholders’ Equity attributable to non-controlling interests                     2,742       2,309  
TOTAL SHAREHOLDERS’ EQUITY                     62,735,968       54,637,952  
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES                     401,032,233       342,882,594  

 

The notes 1 to 38 to the condensed consolidated interim financial statements and the exhibits B to D, F to J, L, Q and R are an integral part of the condensed consolidated interim financial statements.  
 

 

Delfín Jorge Ezequiel Carballo
Chairperson

 

- 2 -

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF INCOME
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2019 AND 2018
(Translation of the Financial statements originally issued in Spanish – See Note 38)
(Figures expressed in thousands of Pesos)

 

Items     Notes     Exhibits     Quarter
ended
06/30/2019
      Accumulated
from
beginning of
year up to
06/30/2019
      Quarter
ended
06/30/2018
      Accumulated
from
beginning of
year up to
06/30/2018
 
Interest income           Q     31,334,187       55,728,901       13,616,528       24,954,299  
Interest expense           Q     (14,548,689 )     (26,013,035 )     (4,524,040 )     (7,919,719 )
Net Interest income                 16,785,498       29,715,866       9,092,488       17,034,580  
Commissions income     15     Q     3,669,928       7,221,331       2,890,944       5,434,333  
Commissions expense           Q     (278,237 )     (519,621 )     (209,558 )     (394,483 )
Net Commissions income                 3,391,691       6,701,710       2,681,386       5,039,850  
Subtotal (Net Interest income +Net Commissions income)                 20,177,189       36,417,576       11,773,874       22,074,430  
Net Income/ (Loss) from measurement of financial instruments at fair value through profit or loss           Q     132,663       2,106,504       (46,356 )     202,893  
Profit/ (Loss) from sold assets at amortized cost                 (624 )     (17,419 )     75       (2,870 )
Differences in quoted prices of gold and foreign currency     16           332,846       282,223       (1,012,280 )     (861,688 )
Other operating income     17           984,180       4,096,808       601,238       1,196,378  
Allowances for loan losses                 (848,522 )     (3,002,317 )     (571,331 )     (1,138,143 )
Net Operating Income                 20,777,732       39,883,375       10,745,220       21,471,000  
Employee benefits     18           (4,916,496 )     (8,049,080 )     (2,443,087 )     (4,460,833 )
Administrative expenses     19           (2,301,509 )     (4,397,379 )     (1,549,524 )     (2,951,534 )
Depreciation of Property, plant and equipment           F and G     (317,663 )     (607,245 )     (172,629 )     (335,504 )
Other Operating Expenses     20           (3,949,062 )     (7,052,898 )     (2,317,585 )     (4,346,748 )
Operating Income                 9,293,002       19,776,773       4,262,395       9,376,381  
Income from associates and joint arrangements     6           613,196       639,195       145,134       220,497  
Income before tax on continuing operations                 9,906,198       20,415,968       4,407,529       9,596,878  
Income tax on continuing operations     14           (2,873,685 )     (6,039,791 )     (1,270,766 )     (2,895,579 )
Net Income from continuing operations                 7,032,513       14,376,177       3,136,763       6,701,299  
Net Income for the period                 7,032,513       14,376,177       3,136,763       6,701,299  
Net Income for the period attributable to controlling interest                 7,032,307       14,375,739       3,115,650       6,657,832  
Net Income for the period attributable to non-controlling interest                 206       438       21,113       43,467  

 

Delfín Jorge Ezequiel Carballo
Chairperson

 

- 3 -

 

 

CONSOLIDATED EARNINGS PER SHARE
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2019 AND 2018
 (Translation of Financial statements originally issued in Spanish – See Note 38)
(Figures expressed in thousands of Pesos)

 

Items   Quarter
ended
06/30/2019
    Accumulated
from beginning
of year up to
06/30/2019
    Quarter
ended
06/30/2018
    Accumulated
from
beginning of
year up to
06/30/2018
 
Net Profit attributable to Parent’s shareholders     7,032,307       14,375,739       3,115,650       6,657,832  
PLUS: Potential diluted earnings per common share                                
Net Profit attributable to Parent’s shareholders adjusted as per diluted earnings     7,032,307       14,375,739       3,115,650       6,657,832  
                                 
Weighted average of outstanding common shares for the period     639,398       639,406       669,663       669,663  
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     639,398       639,406       669,663       669,663  
Basic earnings per share     10.9983       22.4830       4.6526       9.9421  

 

Delfín Jorge Ezequiel Carballo
Chairperson

 

- 4 -

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF OTHER COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2019 AND 2018

(Translation of the Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos) 

 

Items   Notes   Exhibits   Quarter
ended
06/30/2019
    Accumulated
from
beginning of
year up to
06/30/2019
    Quarter
ended
06/30/2018
    Accumulated
from
beginning of
year up to
06/30/2018
 
Net Income for the period             7,032,513       14,376,177       3,136,763       6,701,299  
Foreign currency translation differences in financial statements conversion             (34,318 )     176,449       344,455       398,114  
Foreign currency translation differences for the period             (34,318 )     176,449       344,455       398,114  
Profit or losses for financial instruments measured at fair value through other comprehensive income (FVOCI) (IFRS 9(4.1.2)(a))             43,885       (60,632 )     (51,654 )     (96,824 )
Profit or losses for the period from financial instruments at fair value through OCI       Q     66,463       (82,771 )     (61,725 )     (123,475 )
Income tax   14         (22,578 )     22,139       10,071       26,651  
Total Other Comprehensive Income that will be reclassified to profit or loss of the period             9,567       115,817       292,801       301,290  
Total Other Comprehensive Income             9,567       115,817       292,801       301,290  
Total Comprehensive Income for the period             7,042,080       14,491,994       3,429,564       7,002,589  
Total Comprehensive Income attributable to controlling interest             7,041,871       14,491,561       3,408,453       6,959,144  
Total Comprehensive Income attributable to non controlling interest             209       433       21,111       43,445  

 

The notes 1 to 38 to the condensed consolidated interim financial statements and the exhibits B to D, F to L, Q and R, are an integral part of the condensed consolidated interim financial statements.

 

Delfín Jorge Ezequiel Carballo
Chairperson

 

- 5 -

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

          Capital stock     Non capital
contributions
          Other comprehensive
income
    Earnings Reserved                          
Changes   Notes     Outstanding
shares
    In
portfolio
    Additional
paid-in
capital
    Adjustments
to
Shareholders’
Equity
    Accumulative
foreign currency
translation
difference in
financial
statements
conversion
    Other     Legal     Other     Unappropriated
Retained Earnings
    Total
Controlling
Interests
    Total Non
Controlling
Interests
    Total
Equity
 
Amount at the beginning of the fiscal year             640,715       28,948       12,428,461       4,511       869,961       (326,875 )     6,872,687       15,123,250       18,993,985       54,635,643       2,309       54,637,952  
Total comprehensive income for the period                                                                                     0               0  
- Net income for the period                                                                             14,375,739       14,375,739       438       14,376,177  
- Other comprehensive income for the period                                             176,449       (60,627 )                             115,822       (5 )     115,817  
Own shares in portfolio     22       (1,317 )     1,317                                                                                  
Distribution of unappropied retained earnings as approved by Shareholders´ Meeting held on April 30, 2019                                                                                                        
Legal Reserve                                                             3,145,849               (3,145,849 )                        
Normative Reserve                                                                     3,475,669       (3,475,669 )                        
Cash Dividends     23                                                               (6,393,978 )             (6,393,978 )             (6,393,978 )
Other                                                                     12,583,394       (12,583,394 )                        
Amount at the end of the period             639,398       30,265       12,428,461       4,511       1,046,410       (387,502 )     10,018,536       24,788,335       14,164,812       62,733,226       2,742       62,735,968  

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

          Capital stock     Non capital
contributions
          Other comprehensive
income
    Earnings Reserved                          
Changes   Notes     Outstanding
shares
    In
portfolio
    Additional
paid-in
capital
    Adjustments
to
Shareholders’
Equity
    Accumulative
foreign currency
translation
difference in
financial
statements
conversion
    Other     Legal     Other     Unappropriated
Retained
Earnings
    Total
Controlling
Interests
    Total Non
Controlling
Interests
    Total
Equity
 
Amount at the beginning of the fiscal year           669,663               12,428,461       4,511       137,148       67,412       4,994,932       15,368,454       12,864,442       46,535,023       200,842       46,735,865  
Total comprehensive income for the period                                                                                     0               0  
- Net income for the period                                                                             6,657,832       6,657,832       43,467       6,701,299  
- Other comprehensive income for the period                                             398,114       (96,802 )                             301,312       (22 )     301,290  
Distribution of unappropied retained earnings as approved by Shareholders´ Meeting held on April 27, 2018                                                                                                        
Legal Reserve                                                             1,877,755               (1,877,755 )                        
Cash Dividends                                                                     (3,348,315 )             (3,348,315 )     (26 )     (3,348,341 )
Other                                                                     7,511,018       (7,511,018 )                        
Amount at the end of the period             669,663               12,428,461       4,511       535,262       (29,390 )     6,872,687       19,531,157       10,133,501       50,145,852       244,261       50,390,113  

 

The notes 1 to 38 to the condensed consolidated interim financial statements and the exhibits B to D, F to J, L, Q and R are an integral part of the condensed consolidated interim financial statements.    

 

Delfín Jorge Ezequiel Carballo
Chairperson

 

- 6 -

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2019 AND 2018

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

Items   Notes   06/30/2019     06/30/2018  
CASH FLOWS FROM OPERATING ACTIVITIES                    
Income for the period before Income Tax         20,415,968       9,596,878  
Adjustments to obtain cash flows from operating activities:         -       -  
Amortization and depreciation         607,245       335,504  
Allowance for loan losses         3,002,317       1,138,143  
Difference in quoted prices of foreign currency         (3,814,466 )     (4,157,021 )
Other adjustments         (156,876 )     1,023,222  
Net increase/ (decrease) from operating assets:         -       -  
Debt Securities at fair value though profit and loss         925,857       (274,089 )
Derivative financial instruments         94       (34,753 )
Repo transactions         -       1,263,650  
Loans and other financing         -       -  
Non-financial public sector         670,960       (157,208 )
Other financial entities         1,549,432       (23,772 )
Non-financial private sector and foreign residents         (5,176,002 )     (23,868,571 )
Other debt securities         (453,725 )     9,568,696  
Financial assets delivered as guarantee         (400,786 )     161,270  
Equity instruments at fair value through profit or loss         (37,817 )     232,650  
Other assets         (669,887 )     (139,175 )
Net increase/ (decrease) from operating liabilities:         -       -  
Deposits         -       -  
Non-financial public sector         4,210,541       6,514,208  
Financial sector         95,312       44,018  
Non-financial private sector and foreign residents         41,998,865       28,785,834  
Liabilities at fair value through profit or loss         -       (6,450 )
Derivative financial instruments         10,026       11,044  
Repo transactions         113,125       (858,860 )
Other liabilities         206,974       1,722,281  
Payments for Income Tax         (4,487,939 )     (4,409,702 )
TOTAL CASH FROM OPERATING ACTIVITIES (A)         58,609,218       26,467,797  

 

Delfín Jorge Ezequiel Carballo

Chairperson

 

- 7 -

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2019 AND 2018

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

Items   Notes     06/30/2019     06/30/2018  
CASH FLOWS FROM INVESTING ACTIVITIES                        
Payments:                        
Acquisition of PPE, intangible assets and other assets             (1,599,955 )     (660,310 )
TOTAL CASH USED IN INVESTING ACTIVITIES (B)             (1,599,955 )     (660,310 )
CASH FLOWS FROM FINANCING ACTIVITIES                        
Payments:                        
Dividends             (6,393,978 )     (3,348,315 )
Acquisition or redemption of equity instruments             (199,843 )     -  
Non subordinated corporate bonds             (1,048,284 )     (404,300 )
Central Bank of Argentina             (547 )     -  
Financing from local financial entities             (47,751 )     (374,784 )
Subordinated Corporate Bonds             (606,105 )     (303,015 )
Other payments related to financing activities             (148,520 )     -  
Proceeds:             -       -  
Financing to local financial entities             -       3,206,999  
Central Bank of Argentina             -       4,591  
TOTAL CASH USED IN FINANCING ACTIVITIES (C)             (8,445,028 )     (1,218,824 )
EFFECT OF EXCHANGE RATE FLUCTUATIONS (D)             5,732,796       8,216,967  
TOTAL CHANGES IN CASH FLOWS                        
NET INCREASE IN CASH AND CASH EQUIVALENTS (A+B+C+D)             54,297,031       32,805,630  
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FISCAL YEAR     21       130,629,755       55,685,525  
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD     21       184,926,786       88,491,155  

 

The notes 1 to 38 to the condensed consolidated interim financial statements and the exhibits B to D, F to L, Q and R, are an integral part of the condensed consolidated interim financial statements.

 

Delfín Jorge Ezequiel Carballo

Chairperson

  

- 8 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(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, thus strengthening its goal to be a multiservice bank. In addition, through its subsidiaries, the Bank performs transactions as a trustee agent, manager and administrator of mutual funds and renders 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 Bolsas y Mercados Argentinos (BYMA) since November 1994; and as from March 24, 2006 they are listed on the New York Stock Exchange (NYSE). Additionally, on October 15, 2015, they were authorized to be listed 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 21, 2019, the Bank acquired 100% of Argenpay SAU for an amount of 100 conformed by 100,000 common, registered shares, with a face value of Ps. 1 each one and entitled to one vote. The Entity’s purpose is the development of its own network or the incorporation into other networks so that it can operate with individuals or companies, in-person or remotely, by using information and communication technologies, grant, offer or accept electronic payments online or offline, digital and virtual wallets and electronic commerce in general. As of the date of issuance of these condensed consolidated interim financial statements, this subsidiary has not started to develop its principal activities.

 

On August 7, 2019, 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. Additionally, on October 1, 2018, the above-mentioned agreement was extended for a ten-year term beginning on January 1, 2020, and being effective through December 31, 2029.

 

As of June 30, 2019 and December 31, 2018, the deposits held by the Misiones Provincial Government with the Bank amounted to 7,584,997 and 5,540,994 (including 491,785 and 430,545 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.

 

- 9 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

As of June 30, 2019 and December 31, 2018, the deposits held by the Salta Provincial Government with the Bank amounted to 4,327,421 and 2,630,532 (including 752,491 and 644,863 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.

 

As of June 30, 2019 and December 31, 2018, the deposits held by the Jujuy Provincial Government with the Bank amounted to 3,186,756 and 1,387,236 (including 723,003 and 436,972 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, the Municipality of San Miguel de Tucumán and the Municipality of Yerba Buena. The services agreements with the Provincial and Municipalities Governments are effective through years 2031, 2023 and 2020, respectively.

 

On July 4, 2018 the legislative body of the province of Tucumán enacted, into law a bill issued by the provincial executive, authorizing the sale of the shares held by such province in Banco de Tucumán SA to Banco Macro SA as well as the continuity as a provincial finance agent for an additional period of ten years from the expiration of the contract, and if applicable, the possibility of merging both entities.

 

On August 10, 2018, the province of Tucumán transferred to Banco Macro SA, 43,960 Class B common registered nonendorsable shares, with a face value of Ps. 100 each one and entitled to one vote, which is equivalent to 10% of its common stock and votes. For this transaction, the Bank paid 456,462. In addition, the Bank acquired from an individual shareholder 59 shares for an amount of 295.

 

This transaction was registered in the Bank’s shareholders´ equity, derecognizing, at the carrying amount, the non-controlling interest. The difference between the adjustment of the controlling and non-controlling interests and the fair value of the consideration paid was registered in retained earnings. In the condensed separate interim financial statements this transaction was registered by the acquisition method (see additionally note 2 to the condensed separate interim financial statements).

 

On April 30, and July 19, 2019, the Shareholders' Meeting of Banco Macro SA and the Shareholders' Meeting of Banco del Tucumán SA, respectively, decided, among other issues, to approve a preliminary merger agreement, the special consolidated financial statement of merger as of December 31, 2018, the exchange relationship of shares, the legal feasibility Report and technical, economic and financial feasibility Report of the merger between Banco Macro SA and Banco del Tucumán SA - Consolidation of technical relationships regarding liquidity and solvency. Once the regulatory authorities approve the merger, Banco Macro SA will incorporate with retroactive effect as of January 1, 2019 Banco del Tucumán SA on the basis of the separate financial statements of each of the companies as of December 31, 2018 and of the special consolidated financial statement of merger status as of same date.

 

The exchange ratio has been agreed at 0.65258 ordinary shares of Banco Macro SA for each face value $ 1 of common share of Banco del Tucumán SA. Therefore, the minority shareholders of Banco del Tucumán SA will be entitled to receive at 0.65258 common shares of Banco Macro SA, for each face value $ 1 of ordinary shares they hold in the capital of Banco del Tucumán SA. Consequently, Banco Macro will issue 15,662 Class B common, registered shares, with a face value of Ps. 1 each one and entitled to one vote, to be delivered to minority Shareholders’ of Banco del Tucumán SA.

 

As of the date of issuance of these condensed consolidated interim financial statements, the merger has not been approved by the regulatory authorities. 

 

- 10 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

As of June 30, 2019 and December 31, 2018, the deposits held by the Tucumán Provincial Government, the Municipality of San Miguel de Tucumán and the Municipality of Yerba Buena with Banco del Tucumán SA amounted to 4,065,531 and 6,047,312 (including 2,145,901 and 1,890,398 related to court deposits), respectively.

 

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

 

Presentation basis

 

Applicable Accounting Standards

 

On February 12, 2014, through Communiqué “A” 5541, the Central Bank of Argentina (BCRA, for its acronym in Spanish) 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 BCRA 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. If section 5.5 “Impairment”, mentioned in (i) above had applied, according to a global estimation performed by the Bank, as of June 30, 2019 and December 31, 2018, the shareholders’ equity would have increased by 1,422,382 and 280,978, respectively. The figures stated as of June 30, 2019 includes 1,183,817 generated by the allowance mentioned in note 9.

 

As of June 30, 2019 the conditions to apply inflation adjustment in the condensed consolidated interim financial statement for the six-month period ended on that date, as established by IAS 29 “Financial Reporting in Hyperinflationary Economy” were met. However, for the reasons described in section “measuring unit” of this note, financial institutions, transitorily, cannot apply the above-mentioned standard.

 

These condensed consolidated interim financial statements of the Bank were prepared pursuant with Conceptual Framework as established by BCRA based on IFRS (Communiqué “A” 6114 and supplementary rules of the BCRA), with the exceptions described in the preceding paragraphs. Taking into account these exceptions, the Conceptual 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).

 

Generally, the BCRA does not allow the anticipated application of any IFRS, unless otherwise expressly stated.

 

Basis for the preparation and consolidation

 

These condensed consolidated interim financial statements for the six-month period ended on June 30, 2019, have been prepared in accordance with the framework set forth by the BCRA as mentioned in the previous section “Applicable accounting standards” which, particularly for condensed consolidated interim financial statements, is based on IAS 34 “Interim Financial Reporting”.

 

For the preparation of these condensed consolidated interim financial statements, in addition to section “new standards adopted” of this note, the Bank has applied the basis for the preparation and consolidation, the accounting policies and the material accounting judgements, estimates and assumptions described in the consolidated financial statements for the fiscal year ended on December 31, 2018, already issued.

 

- 11 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

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 on December 31, 2018, already issued. 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, these condensed consolidated interim financial statements must be read together with the annual consolidated financial statements for the fiscal year ended December 31, 2018, already issued.

 

As of June 30, 2019 and December 31, 2018, 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)   Av. Eduardo Madero 1182 – Autonomous City of Buenos Aires     Argentina     Stock exchange services
Macro Fiducia SA   Av. Leandro N. Alem 1110– 1st floor. Autonomous City of Buenos Aires     Argentina     Services
Macro Fondos SGFCISA   Av. Eduardo Madero 1182– 24th floor, Office B–. Autonomous City of Buenos Aires     Argentina     Management and administration of mutual funds
Macro Bank Limited (c)   Caves Village, Building 8 Office 1 – West Bay St., Nassau     Bahamas     Banking entity
Argenpay SAU   Av. Eduardo Madero 1182 –. Autonomous City of Buenos Aires     Argentina     Electronic payments services

 

(a) Consolidated with Macro Fondos SGFCI SA (80.90% equity interest and voting rights).

 

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

 

(c)  Consolidated with Sud Asesores (ROU) SA (100% voting rights – Equity interest 7,539).

 

The table below shows the Bank’s equity interest and voting rights in the companies it consolidates as of June 30, 2019 and December 31, 2018:

 

    Shares     Bank’s interest     Noncontrolling interest  
Subsidiaries   Type     Number     Total capital
stock
    Voting
rights
    Total capital
stock
    Voting
rights
 
Banco del Tucumán SA     Common       439,360       99.945 %     99.945 %     0.055 %     0.055 %
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 %        
Argenpay SAU (a)     Common       100,000       100.00 %     100.00 %                

 

(a) Equity interest acquired on May 21, 2019.

 

- 12 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

Total assets, liabilities and net equity of the Bank and each of its subsidiaries as of June 30, 2019 and December 31, 2018, are as follows:

 

As of 06/30/2019   Banco Macro
SA
    Banco del
Tucumán SA
    Other
Subsidiaries
    Eliminations     Consolidated  
Assets     377,456,839       22,597,048       7,162,151       (6,183,805 )     401,032,233  
Liabilities     314,512,686       19,900,480       4,322,151       (439,052 )     338,296,265  
Equity attributable to the owners of the Bank                                     62,733,226  
Equity attributable to non-controlling interests                                     2,742  

 

As of 12/31/2018   Banco Macro
SA
    Banco del
Tucumán SA
    Other
Subsidiaries
    Eliminations     Consolidated  
Assets     323,268,073       21,329,507       4,081,903       (5,796,889 )     342,882,594  
Liabilities     268,421,503       18,883,250       1,739,951       (800,062 )     288,244,642  
Equity attributable to the owners of the Bank                                     54,635,643  
Equity attributable to non-controlling interests                                     2,309  

 

Transcription in the Books of Accounts

 

As of the date of these condensed consolidated interim financial statements, the same are in the process of being transcribed in the Books of Accounts of Banco Macro SA.

 

Figures expressed in thousands of pesos

 

These condensed consolidated interim financial statements disclose figures expressed in thousands of Argentine pesos and are rounded up to the nearest amount in thousands of pesos, unless otherwise expressly stated.

 

Comparative information

 

The present condensed consolidated interim statement of financial position as of June 30, 2019, is presented comparatively with year-end data of the immediately preceding fiscal year, while the statement of income and the statement of other comprehensive income for the three-month and six-month periods ended June 30, 2019, and the statement of changes in shareholders’ equity and the statement of cash flows and cash equivalents for the six-month period ended June 30, 2019, are presented comparatively with data as of the same period of the immediately preceding fiscal year.

 

Measuring unit

 

IFRS require that the financial statements of an entity whose functional currency is the currency of a hyperinflationary economy be restated in terms of measuring unit current at the end of the reporting period. To achieve consistency in identifying an economic environment of that nature, IAS 29 establishes (i) certain qualitative indicators, not limited to, consisting of analyzing the general population behavior, prices, interest rates and wages with changes to a price index and the loss of purchasing power, and (ii) a quantitative indicator which is the most common in practice, consisting of a three-year cumulative inflation rate of 100% or above. Whilst in the recent years there was an important increase in the general level of prices, the three-year cumulative inflation had maintained in Argentina below 100%. However, due to miscellaneous macroeconomic factors the three-year inflation rate exceeds that figure, and, also the Argentine government goals and other available estimates indicate that this trend will not be reversed in the short term.

 

- 13 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

Consequently, the Argentine economy is currently considered hyperinflationary under IAS 29 and the Argentine financial entities that are required to apply the IFRSs adopted by the BCRA through Communiqué “A” 6114 and the functional currency of which is the Argentine peso should restate their financial statements. Such restatement should be applied as if the economy had always been hyperinflationary, using a general price index that reflects changes in general purchasing power. To apply the restatement, a series of indexes will be used, as prepared and published on a monthly basis by the Argentine Federation of Professionals Councils in Economic Sciences (FACPCE, for its acronym in Spanish), which combines consumer price index (CPI) on a monthly basis published by the Argentine Institute of Statistics and Censuses (INDEC, for its acronym in Spanish) since January 2017 (baseline month: December 2016) with the wholesale prices indexes published by the INDEC until that date. For the months of November and December 2015, for which the INDEC did not publish the wholesale price index (WPI) variation, the CPI variation for the CABA is used.

 

Considering the abovementioned indexes, the inflation rate was 22.40% and 16.03% for the six-month periods ended on June 30, 2019 and 2018, respectively, and 47.64% for the fiscal year ended on December 31, 2018.

 

Notwithstanding the above, as established by BCRA Communiqué “A” 6651, financial institutions shall start the inflation adjustment on its financial statements according to IAS 29, for the fiscal years beginning on January 1, 2020.

 

The nonrecognition of changes in the general purchasing power under hyperinflationary conditions, may distort accounting information and, therefore, this situation should be taken into account in the interpretation of the Bank’s information on these condensed consolidated interim financial statements over financial position, the result of its operations and its cash flows.

 

Below there is a description of the main impacts if IAS 29 were to be applied:

 

(a) Financial statements shall be restated considering the changes in the general purchasing power of the currency to ensure that they are stated in the current measuring unit at end of the reporting period.

 

(b) To sum up, the restating mechanism provided by IAS 29 is as follows:

 

(i) Monetary items (the ones that are already stated in terms of the current measuring unit) are not restated because they are already expressed in terms of the monetary unit current at the end of the reporting period. In an inflationary period, an entity holding monetary assets generates purchasing power loss and holding monetary liabilities generates purchasing power gain, provided that the assets and liabilities are not linked to an adjustment mechanism that offsets, in some extend such effects. The net gain or loss on a monetary basis shall be included in profit or loss for the period.

 

(ii) Assets and liabilities subject to adjustments based on specific agreements will be adjusted in accordance with such agreements.

 

(iii) Nonmonetary items stated at current cost at the end of the reporting period, are not restated for presentation purposes in the statement of financial position, but the adjustment process must be completed to determine, in terms of constant measurement unit, the income or loss produced by holding these nonmonetary items.

 

(iv) Nonmonetary items carried at historical cost or at current cost at some earlier date before the reporting date, shall be restated by an index that reflects the general level of price variation from the acquisition or revaluation date to the closing date, proceeding then to compare the restated amounts of those assets with their recoverable amounts. Income or loss for the period related to depreciation of property, plant and equipment and amortization of intangible assets and other nonmonetary cost shall be determined over the new restated amounts.

 

(v) When an entity capitalizes borrowing cost in the nonmonetary assets, the part of the borrowing cost that compensates for the inflation during the same period will not be capitalized.

 

(vi) The restatement of nonmonetary assets in terms of a current measurement unit at the end of the reporting period, without an equivalent adjustment for tax purposes generates a taxable temporary difference and a deferred income tax liability is recognized and the contra account is recognized as profit or loss for the period. When, beyond the restatement, there is a revaluation of nonmonetary assets, the deferred tax related to the restatement is recognized in profit or loss for the period and deferred tax related with the revaluation is recognized in other comprehensive income for the period.

 

- 14 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

(vii) Income and expenses are restated from the date the items were recorded, except for those income or loss items that reflect or include, in their determination, the consumption of assets measured at the currency purchasing power from a date prior to that when the consumption was recorded, which is restated using as a basis the acquisition date of the assets related to the item, and except for income or losses arising from comparing the two measurements at currency purchasing power of different dates, for which it requires to identify the compared amounts, to restate them separately and to repeat the comparison, with the restated amounts.

 

(viii) At the beginning of the first period of application of the restatement of financial statements in constant currency, the components of equity, except for the retained earnings, are restated according IAS 29, and the retained earning amount is determinated as a difference, once the equity items were restated.

 

If the Bank, according to a global estimation, had applied IAS 29 the Shareholders’ equity as of June 30, 2019 and December 31, 2018 would have increased by 9,853,086 and 19,919,763, respectively, including the effects for the application of section 5.5. “Impairment” of the IFRS 9 abovementioned; on the other hand, the comprehensive income for the six-month period would have decreased by 9,691,976.

 

New standards adopted

 

For the fiscal year beginning on January 1, 2019, the following IFRS amendments and interpretation (hereinafter, “IFRIC”) are applicable and they did not have a material impact over these condensed consolidated interim financial statements, as a whole.

 

IFRS 16 “Leases”

 

IFRS 16 replaced IAS 17 “Leases” and sets out the principles for the recognition, measurement, presentation and disclosure of leases, introducing significant changes when the Bank acts as lessee. When the Bank acts as a lessor, no significant changes were generated with respect to the preceding IAS.

 

When the Bank acts as a lessee, the lease contracts (and sub lease) are recognized under a single accounting model which eliminates the dual accounting method that distinguishes between operating leases and finance leases and implies the recognition of an asset for the right of use of the leased asset and a liability that represents the obligation to make future payments for the lease.

 

Additionally, on a separate basis, interest expenses on the lease liabilities and depreciation charges for the right of use of the asset are recognized.

 

The Bank adopted IFRS 16 under the modified retrospective approach from January 1, 2019, as the date of initial application.

 

The effect of adoption of IFRS 16 as of January 1, 2019 was an increase of the Bank’s assets and liabilities for the following amounts:

 

Assets  
Right-of-use assets 401,037
Liabilities  
Finance lease payable 401,037

 

The weighted average of the incremental borrowing rate applied to lease liabilities was 45.98% for leases in pesos and 4.63% for leases in US Dollars.

 

a) Nature of the effect of adoption of IFRS 16

 

The Bank has lease contracts for real property in the Item “Property, plant and equipment”. Before the adoption of IFRS 16, the Bank classified its leases (as lessee) at the inception date as either a finance lease or an operating lease. The Bank has neither acted nor acts as a leese in agreements classified as finance lease. In an operating lease, the leased property was not capitalised and the lease payments were recognised as rent expense in profit or loss on a straight-line basis over the lease term.

 

- 15 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

Since the adoption of IFRS 16, the Bank has applied a single accounting model for the recognition and measurement of all its leases. Additionally, the Bank applied the following practical expedients established by the standard:

 

·   Used a single discount rate to a portfolio of leases with reasonably similar characteristics.

 

·   Applied the short-term leases exemptions to leases with lease term that ends within 12 months at the date of initial application.

 

·   Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application.

 

b) New accounting policies

 

Set out below are the new accounting policies of the Bank upon adoption of IFRS 16, which have been applied from the date of initial application:

 

·    Right-of-use assets

 

The Bank recognises right-of-use assets at the commencement date of the lease. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. The right of use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.

 

·    Lease liabilities

 

At the commencement date of the lease, the Bank recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Bank and payments of penalties for terminating a lease, if the lease term reflects the Bank exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognized as expense in the period on which the event or condition that triggers the payment occurs.

 

In calculating the present value of lease payments, the Bank uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

 

c) Amounts recognized in the statement of financial position and in the statement of income

 

As of June 30, 2019, the carrying amount of assets recognized for the right-of-use assets identified in the lease contracts, depreciation expense for the period and the additions to right-of-use assets are disclosed in Exhibit F to these condensed consolidated interim financial statements. Additionally, the short term leases recognized as rent expense for the period amounted to 57,957.

 

On the other hand, the carrying amount of liabilities generated by lease contracts as of June 30, 2019, amounted to 560,365 and were recorded in the item “Other financial liabilities” (see additionally note 11 to these condensed consolidated interim financial statements). The accrued interests of such liabilities for the six-month period ended on June 30, 2019, amounted to 37,531 and are recognized in the Item “Other operating expenses”.

 

IFRIC 23 “Uncertainty over income tax treatment”

 

This interpretation clarifies how to apply the recognition and measurement requirements in IAS 12 “Income tax”. This interpretation addresses specifically the following:

 

- 16 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

·          whether an entity considers uncertain tax treatments separately;

·          the assumptions an entity makes about the examination of tax treatments by taxation authorities;

·          how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and

·          how an entity considers changes in facts and circumstances.

 

This interpretation did not have a material impact on these condensed consolidated interim financial statements since, currently, there are not material uncertainties over income tax treatments.

 

New pronouncements

 

Pursuant to Communiqué “A” 6114 of the BCRA, as new IFRS are approved and existing IFRS are amended or revoked and, once these changes are approved through the notices of approval issued by FACPCA, the BCRA shall issue a statement on the approval thereof for financial entities. Generally, financial institutions shall not apply any IFRS in advance, except as specifically authorized at the time of the adoption thereof. In this case, the Bank shall adopt the following standards:

 

· IFRS 3 “Business Combination” – amendments in definition of a business: the amendments will help entities determine whether an acquisition made is a business or the purchase of a group of assets. The new amended definition emphasizes that the output of a business is to provide goods and services to customers, whereas the previous definition focused on returns in the form of dividends, lower costs or other economic benefits. This standard is applicable to fiscal years beginning on January 1, 2020. The Bank does not expect this standard to have a material impact on the consolidated financial statements.

 

· IAS 1 “Presentation of Financial Statements” and IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” – amendments to definition of material: the new definition states that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The amendments clarify that materiality will depend on the nature or magnitude of information or both. These amendments replaced the threshold “could influence” with “could reasonably be expected to influence”. This implies that the materiality assessment will need to take into account how primary users could reasonably be expected to be influenced in making economic decisions. This standard is applicable to fiscal years beginning on January 1, 2020. The Bank does not expect this standard to have a material impact on the consolidated financial statements.

 

4. 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 statement of financial position, since they imply a possible liability for the Bank, they expose the Bank to credit risks other than those recognized in statement of financial position and they are, therefore, an integral part of the total risk of the Bank.

 

As of June 30, 2019 and December 31, 2018, the Bank maintains the following contingent transactions:

 

    06/30/2019     12/31/2018  
Overdraft and unused agreed commitments (*)     1,677,392       634,288  
Guarantees granted (*)     693,067       940,990  
Letters of credit     99,438       256,788  
      2,469,897       1,832,066  

 

(*) Includes transactions not covered by BCRA debtor classification standards. For overdraft and unused agreed commitments, it includes an amount of 405,623 and 221,220, as of June 30, 2019 and December 31, 2018, respectively. For Guarantees granted it includes the amount of 190,954 and 166,650, as of June 30, 2019 and December 31, 2018, respectively.

 

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 39 to consolidated financial statements as of December 31, 2018, already issued.

 

- 17 -

 

 

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

5. 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 the most advantageous market) who are duly informed and willing to transact in an orderly and current transaction, at the measurement date under 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.

 

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.

 

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 that the Bank accesses to at the measurement day for identical assets or liabilities. The Bank considers markets as active only if there are sufficient trading activities with regards to the volume and liquidity of the identical assets or liabilities and when there are binding and exercisable price quotes available at each reporting period.

 

- 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. Such inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical instruments in inactive markets and observable inputs other than quoted prices such as interest rates and yield curves, implied volatilities, and credit spreads. In addition, adjustments to level 2 inputs may be required for the condition or location of the asset or the extent to which it relates to items that are comparable to the valued instrument. However, if such adjustments are based on unobservable inputs which are significant to the entire measurement, the Bank will classify the instruments as Level 3.

 

- 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.

 

The following tables show the hierarchy in the Bank’s financial asset and liability at fair value measurement, as of June 30, 2019 and December 31, 2018:

 

Description   Financial assets and financial liabilities measured at fair value on
a recurring basis as of June 30, 2019
 
    Total     Level 1     Level 2     Level 3  
Financial assets                                
                                 
At fair value through profit or loss                                
Debt Securities at fair value through profit or loss     1,979,681       828,725       130,847       1,020,109  
Derivative Financial Instruments     17,199       9,242       7,957          
Other financial assets     485,296       460,452               24,844  
Financial assets delivered as guarantee     123,867       123,867                  
Equity instruments at fair value through profit or loss     1,510,031       6,555               1,503,476  
                                 
At fair value through OCI                                
Other debt securities     88,635,012       88,635,012                  
Total     92,751,086       90,063,853       138,804       2,548,429  
                                 
Financial liabilities                                
                                 
At fair value through profit or loss                                
Derivatives financial instruments     11,395       1,936       9,459          
Total     11,395       1,936       9,459          

 

- 18 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

Description   Financial assets and financial liabilities measured at fair value on
a recurring basis as of December 31, 2018
 
    Total     Level 1     Level 2     Level 3  
Financial assets                                
                                 
At fair value through profit or loss                                
Debt Securities at fair value through profit or loss     2,635,247       982,116       362,079       1,291,052  
Derivative Financial Instruments     17,293       13,732       3,561          
Other financial assets     413,136       321,968               91,168  
Financial Assets delivered as guarantee     150,456       150,456                  
Equity instruments at fair value through profit or loss     51,518       6,110               45,408  
                                 
At fair value through OCI                                
Other debt securities     56,433,583       42,646,037       13,787,546          
Total     59,701,233       44,120,419       14,153,186       1,427,628  
                                 
Financial liabilities                                
                                 
At fair value through profit or loss                                
Derivatives financial instruments     1,369       593       776          
Total     1,369       593       776          

 

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 period or fiscal year, as applicable, in active markets for identical assets or liabilities, if representative. Currently, for government and private securities, there are two principal markets in which the Bank operates: 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 that they are available, as well as references to the current fair value of another 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 category were valued using 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. For this approach, the Bank mainly used the cash flow discount model.

 

As of June 30, 2019 and December 31, 2018, the Bank has neither changed the techniques nor the assumptions used to estimate the fair value of the financial instruments.

 

Below there is the reconciliation between the amounts at the beginning and at the end of the period or fiscal year, as applicable, of the financial instruments recognized at fair value, using the valuation technique based on the Bank’s own assumptions, as of June 30, 2019 and December 31, 2018:

 

- 19 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

    Fair values using valuation techniques based on the
Bank’s own assumptions (level 3)
June 30, 2019
 
Description   Debt securities     Other financial assets     Equity instruments
at fair value
through profit or
loss
 
Amount at the beginning     1,291,052       91,168       45,408  
Transfers to Level 3                        
Transfers from Level 3                        
Profit and loss     218,246       4,606       37,372  
Purchases, sales, issuance and settlement     (489,189 )     (70,930 )     1,420,696 (*)
Amount at end of the period     1,020,109       24,844       1,503,476  

 

(*) It is related to the reclassification from non current assets held for sale. Additionally, see note 9 to these condensed consolidated interim financial statements.

 

    Fair values using valuation techniques based on the
Bank’s own assumptions (level 3)
December 31, 2018
 
Description   Debt securities     Other financial
assets
    Equity
instruments at fair
value through
profit or loss
 
Amount at the beginning     35,841       161,751       35,774  
Transfers to Level 3                        
Transfers from Level 3                        
Profit and loss     (200,279 )     (92,022 )     9,634  
Purchases, sales, issuance and settlement     1,455,490       21,439          
Amount at end of the fiscal year     1,291,052       91,168       45,408  

 

Instruments measured as level 3 include mainly Equity instruments at fair value through profit or loss and debt securities, for which the construction of fair values was obtained based on the Bank’s own assumptions that are not easily available in the market.

 

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 June 30, 2019 and December 31, 2018, 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 of the methods and assumptions used to determine the fair values of financial instruments not recognized at their fair value in these condensed consolidated interim financial statements:

 

- Instruments 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 period or fiscal year, as applicable, for financial instruments of similar characteristics. The estimated fair value of fixed-interest rate deposits and liabilities was assessed discounting future cash flows by using estimated interest rates for deposits or placings with similar maturities to those of the Bank’s portfolio.

 

- 20 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

- For public listed assets and liabilities, or prices reported by certain renowned suppliers of prices, the fair value was determined based on such prices.

 

The following table shows a comparison between the fair value and the carrying amount of financial instruments not measured at fair value as of June 30, 2019 and December 31, 2018:

 

      06/30/2019  
      Carrying
amount
      Level 1       Level 2       Level 3     Fair value  
Financial assets                                      
Cash and deposits in banks     96,426,815       96,426,815                     96,426,815  
Other financial assets     3,615,156       3,615,156                     3,615,156  
Loans and other financing     178,851,248               134,303       160,296,868     160,431,171  
Other debt securities     8,746,236       146,837       8,587,579             8,734,416  
Financial assets delivered as guarantee     7,033,139       6,840,307       192,832             7,033,139  
      294,672,594       107,029,115       8,914,714       160,296,868     276,240,697  

 

Financial liabilities                                      
Deposits     284,259,137       124,406,753               160,288,332     284,695,085  
Repo transactions     277,594       277,594                     277,594  
Other financial liabilities     14,833,230       14,070,103       834,283             14,904,386  
Financing received from the BCRA and other financial entities     2,198,014       1,743,294       419,505             2,162,799  
Issued corporate bonds     6,193,414               4,669,286             4,669,286  
Subordinated corporate bonds     17,191,816               14,658,078             14,658,078  
      324,953,205       140,497,744       20,581,152       160,288,332     321,367,228  

 

      12/31/2018  
      Carrying amount       Level 1       Level 2       Level 3      

Fair

value

 
Financial assets                                        
Cash and deposits in banks     74,766,039       74,766,039                       74,766,039  
Other financial assets     2,586,448       2,586,448                       2,586,448  
Loans and other financing     178,874,755               186,951       162,375,447       162,562,398  
Other debt securities     8,151,176       173,337       7,165,102       2,749       7,341,188  
Financial assets delivered as guarantee     6,605,764       6,573,772       31,992               6,605,764  
      270,984,182       84,099,596       7,384,045       162,378,196       253,861,837  

 

Financial liabilities                                      
Deposits     237,954,419       106,273,098               131,778,797     238,051,895  
Repo transactions     164,469       164,469                     164,469  
Other financial liabilities     15,318,513       15,152,415       166,522             15,318,937  
Financing received from the BCRA and other financial entities     2,998,010       2,532,284       432,346             2,964,630  
Issued corporate bonds     6,377,311               4,981,686             4,981,686  
Subordinated corporate bonds     15,288,390               12,260,778             12,260,778  
      278,101,112       124,122,266       17,841,332       131,778,797     273,742,395  

 

- 21 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

6. INVESTMENTS IN ASSOCIATES AND JOINT ARRANGEMENTS

 

6.1 Associates entities

 

The Bank holds an investment in the associate 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 March 31, 2019. Additionally, the Bank has considered, when applicable, the material transactions or events occurring between April 1, 2019, and June 30, 2019.

 

The following table presents the summarized financial information on the Bank’s investment in the associate:

 

Summarized statement of financial position   06/30/2019     12/31/2018  
Total assets     24,638       18,111  
Total liabilities     7,240       2,269  
Shareholders’ equity     17,398       15,842  
Proportional Bank’s interest     5 %     5 %
Investment carrying amount     870       792  

 

As of June 30, 2019 and 2018 the investment carrying amount in the net income amounted to 243 and 84, respectively.

 

6.2. Joint ventures

 

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

 

a) Banco Macro SA – Wordline Argentina SA Unión transitoria: on April 7, 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.

 

The following table presents the summarized financial information on the Bank’s investment in the UTE:

 

Summarized statement of financial position   06/30/2019     12/31/2018  
Total assets     302,455       270,287  
Total liabilities     59,995       59,639  
Shareholders’ equity     242,460       210,648  
Proportional Bank’s interest     50 %     50 %
Investment carrying amount     121,230       105,324  

 

As of June 30, 2019 and 2018 the investment carrying amount in the net income amounted to 48,174 and 24,425, respectively.

 

b) Banco Macro SA – Gestiva SA Unión transitoria: 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 is to render 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.

 

On June 27, 2018, the Bank, the UTE and the tax authorities of the Misiones provincial government entered into an agreement of “termination by mutual agreement” of the adaptation agreement, without implying or modifying the Bank’s rights and obligations as a financial agent of the province for the services provision established in the agreement. As of June 30, 2019 and December 31, 2018, according to the abovementioned, the remaining investment amounted to 1,684 and 2,707, respectively. Additionally, as of June 30, 2018, the investment carrying amount in the net income for Banco Macro SA – Gestiva SA Unión transitoria de empresas, amounted to 15,639.

 

- 22 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

7. OTHER FINANCIAL AND NON FINANCIAL ASSETS

 

The breakdown of other financial and non financial assets as of June 30, 2019 and December 31, 2018 is as follows:

 

Other financial assets   06/30/2019     12/31/2018  
Sundry debtors (note 9)     3,427,854       1,808,232  
Receivables from spot sales of foreign currency pending settlement     689,019       235,643  
Receivables from other spot sales pending settlement     622,040       421,261  
Private securities     485,296       413,136  
Receivables from spot sales of government securities pending settlement     23,853       111,699  
Other     41,616       14,628  
Allowances (note 9)     (1,189,226 )     (5,015 )
      4,100,452       2,999,584  
                 

 

Other non financial assets     06/30/2019       12/31/2018  
Advanced prepayments     350,819       157,835  
Investments in property (Exhibit F)     303,845       273,604  
Prepayments for the purchase of assets     159,398       159,231  
Tax advances     59,820       147,091  
Other     111,904       96,308  
      985,786       834,069  

 

8. 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 the 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 members of the Risk Management Committee, the Assets and Liabilities Committee and the Senior Credit Committee.

 

As of June 30, 2019 and December 31, 2018, amounts related to transactions generated with related parties are as follows:

 

- 23 -

 

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

    Information as of June 30, 2019  
    Main subsidiaries (1)                          
    Banco del
Tucumán SA
    Macro Bank
Limited
    Macro
Securities SA
    Associates     Key
management
personnel
    Other related
parties
    Total  
ASSETS                                                        
Cash and deposits in banks             340                                       340  
Derivative financial instruments                                             3,096       3,096  
Other financial assets     82                                               82  
Loans and other financing (2)                                                        
Documents                                             392,177       392,177  
Overdrafts                                     250       1,190,613       1,190,863  
Credit cards                                     21,628       90,702       112,330  
Leases                     4,516                       5,794       10,310  
Personal loans                                     332               332  
Mortgage loans                                     64,328       309       64,637  
Other loans                                     76,071       203,074       279,145  
Guarantees granted                                             272,908       272,908  
Other non financial assets     3,128                                               3,128  
                                                         
Total assets     3,210       340       4,516               162,609       2,158,673       2,329,348  
                                                         
LIABILITIES                                                        
                                                         
Deposits             12       397,078       12,252       1,591,648       4,444,720       6,445,710  
Other financial liabilities     21,495                               49       304       21,848  
Issued corporate bonds                     10,785                               10,785  
Total liabilities     21,495       12       407,863       12,252       1,591,697       4,445,024       6,478,343  

 

(1) These transactions are eliminated during the consolidation process.
(2) The maximum financing amount for loans and other financing as of June 30, 2019 for Banco de Tucumán SA, Macro Securities SA, Key management personnel and other related parties amounted to 2,980,000, 5,188, 195,372 and 2,955,515, respectively.

 

    Information as of December 31, 2018  
    Main subsidiaries (1)                          
    Banco del
Tucumán SA
    Macro Bank
Limited
    Macro
Securities SA
    Associates     Key
management
personnel
    Other related
parties
    Total  
ASSETS                                                        
Cash and deposits in banks             583                                       583  
Other financial assets     2,504               25,276       20,660                       48,440  
Loans and other financing (2)                                                        
Documents                                             331,699       331,699  
Overdrafts                     6               3,505       161,905       165,416  
Credit cards                     286               19,011       51,424       70,721  
Leases                     5,746                       1,407       7,153  
Personal loans                                     1,388               1,388  
Mortgage loans                                     54,824       356       55,180  
Other loans                                             232,670       232,670  
Guarantees granted                                             391,699       391,699  
Other nonfinancial assets                     83,178                               83,178  
Total assets     2,504       583       114,492       20,660       78,728       1,171,160       1,388,127  
                                                         
LIABILITIES                                                        
                                                         
Deposits             13       311,073       1,774,149       4,890,280       984,659       7,960,174  
Other financial liabilities                             101,232       31       514       101,777  
Financing received from the BCRA and other financial entities     301,742                                               301,742  
Issued corporate bonds                     11,231                               11,231  
Subordinated corporate bonds                                             46,605       46,605  
Other nonfinancial liabilities                                             119       119  
Total liabilities     301,742       13       322,304       1,875,381       4,890,311       1,031,897       8,421,648  

 

(1) These transactions are eliminated during the consolidation process.
(2) The maximum financing amount for loans and other financing as of December 31, 2018 for Banco del Tucumán SA, Macro Bank Limited, Macro Securities SA, associates, Key management personnel and other related parties amounted to 2,550,000, 0, 7,216, 0, 82,297 and 1,551,047, respectively.

 

- 24 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

As of June 30, 2019 and 2018, income (loss) related to transactions generated with related parties are as follows:

 

    Information as of June 30, 2019  
    Main subsidiaries (1)                          
    Banco del
Tucumán
SA
    Macro Bank
Limited
    Macro
Securities
SA
    Associates     Key
management
personnel
    Other related
parties
    Total  
INCOME / (LOSS)                                                        
                                                         
Interest income     33,844               2,155               2,049       79,420       117,468  
Interest expense     (65,981 )                     (1,275 )     (367,890 )     (155,231 )     (590,377 )
Commissions income     4               285       81       21       2,028       2,419  
Net income from measurement of financial instruments at fair value through profit or loss                                             3,096       3,096  
Other operating income     17,028       1                               5       17,034  
Administrative expenses                                             (11,271 )     (11,271 )
Other operating expenses                                             (31,962 )     (31,962 )
(Loss) / income     (15,105 )     1       2,440       (1,194 )     (365,820 )     (113,915 )     (493,593 )

 

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

 

    Information as of June 30, 2018  
    Main subsidiaries (1)                          
    Banco del
Tucumán SA
    Macro Bank
Limited
    Macro
Securities
SA
    Associates     Key
management
personnel
    Other related
parties
    Total  
INCOME / (LOSS)                                                        
                                                         
Interest income     185,047               1,069               1,266       21,107       208,489  
Interest expense                             (92,890 )     (69,810 )     (390 )     (163,090 )
Commissions income     5               141       54       7       2,520       2,727  
Other operating income     11,693       1                               7       11,701  
Administrative expenses     (4 )                                     (4,568 )     (4,572 )
Other operating expenses                     (1 )     (473,715 )(2)             (11,051 )     (484,767 )
Income / (loss)     196,741       1       1,209       (566,551 )     (68,537 )     7,625       (429,512 )

 

(1) These transactions are eliminated during the consolidation process.
(2) These losses were mainly generated by debit and credit cards processing expenses billed by Prisma Medios de Pago SA (see note 9).

 

Transactions generated by the Bank with its related parties for transactions arranged 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.

 

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

 

Total remunerations received as salary and bonus by the key management personnel as of June 30, 2019 and 2018, totaled 93,601 and 52,123 respectively.

 

In addition, fees received by the Directors as June 30, 2019 and 2018 amounted to 558,108 and 315,616 respectively.

 

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

 

    06/30/2019     12/31/2018  
Board of Directors     23       24  
Senior managers  of the key management personnel     15       15  
      38       39  

 

- 25 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

9. NONCURRENT ASSETS HELD FOR SALE – PRISMA MEDIOS DE PAGO SA

 

As of December 31, 2018, the Bank maintained recorded its investment in Prisma Medios de Pago SA (“Prisma”), under noncurrent assets held for sale, due to the obligation to transfer all its shares within the scope of the Divestment obligation undertaken with the Argentine Antitrust Commission. Therefore, the investment was valued according to IFRS 5 “Non-current assets held for sale and discontinued operations”, at the lowest of its carrying amount and the best estimation of the fair value less costs until its sale. As of December 31, 2018 the investment amount, included in this item, amounted to 105,287.

 

On January 21, 2019, the Bank, together with the other shareholders, accepted a purchase offer made by AI ZENITH (Netherlands) B.V. (a company related to Advent International Corporation) for the acquisition of 1,933,051 common shares of par value Ps.1 each and entitled to one vote, representing 4.6775 % of its share capital, equivalent to 51% of the Bank’s capital stock in such company.

 

On February 1, 2019, the Bank completed the transfer of such shares for a total purchase price of (in thousands) USD 64,542 out of which the Bank received on the date hereof (in thousands) USD 38,311 and the payment of the balance for an amount of (in thousands) USD 26,231 shall be deferred during the next 5 years as follows: (i) 30% of such amount in Pesos adjusted by UVA at a 15% nominal annual rate; and (ii) 70% in US Dollars at a 10% nominal annual rate. The purchase price is guaranteed by the issuance of notes in favor of the Bank and pledges of the transferred shares.

 

During July 2019, the process to determine the final selling price of the shares of Prisma Medios de Pago SA was completed and the final price was (in thousands) USD 63,456. The difference arising from a final price lower than the estimated price was deducted from the price balance, and therefore there was no need for the Bank to return any amounts received. All other payment conditions were not modified and remain in full force and effect under the terms described in this note.

 

Profits generated by the sale were recorded in the item “Other operating income” (see note 17). The amounts receivable, in pesos and US dollars, are recorded in the item “Other financial assets” and for such amounts an allowance was recorded, according to BCRA rules (see note 7).

 

The remaining of the Bank holding in Prisma Medios de Pago SA (equivalent to 49%), is recorded in “Equity instruments at fair value through profit or loss” determined from valuations performed by independent experts and taking into account parameters established by BCRA on this subject.

 

In addition, sellers retained the usufruct (dividends) of the shares sold to be reported by Prisma for the year ended December 31, 2018, which were collected on April 26, 2019. Besides, the proportion applicable to the buyer of the dividends to be reported for the following fiscal years –with the buyer’s commitment to voting in favor of the distribution of certain minimum percentages– will be used to create a guarantee trust to repay the deferred price amount through the concession by the buyer and Prisma of a usufruct over the economic rights of the shares in favor of such trust.

 

10. PROVISIONS

 

This item includes the amounts estimated to face a liability of probable occurrence, which if occurring, would originate a loss for the Bank.

 

Exhibit J “Changes in Provisions” presents the changes in provisions as of June 30, 2019 and December 31, 2018.

 

The expected terms to settle these obligations are as follows:

  

- 26 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

(Translation of Financial statements originally issued in Spanish – See Note 38)

(Figures expressed in thousands of Pesos)

 

    06/30/2019              
    Within 12
months
    Beyond 12
months
    06/30/2019