Report of Foreign Issuer (6-k)

Date : 11/23/2018 @ 11:12AM
Source : Edgar (US Regulatory)
Stock : Banco Macro S.A. Adr (Representing Ten Class B ) (BMA)
Quote : 41.44  -0.4 (-0.96%) @ 3:45PM

Report of Foreign Issuer (6-k)

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

 

 

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

SECURITIES EXCHANGE ACT OF 1934

 

November 20, 2018

 

 

 

Commission File Number: 001-32827

 

 

 

MACRO BANK INC.

(Translation of registrant’s name into English)

 

 

 

Avenida Eduardo Madero 1182

Ciudad Autónoma de Buenos Aires C1106 ACY

Tel: 54 11 5222 6500

 

(Address of registrant’s principal executive offices)

 

 

 

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

 

Form 20-F x Form 40-F ¨

 

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

 

Yes ¨ No x

 

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

 

Yes ¨ No x

 

 

 

 

BANCO MACRO S.A.

 

Interim consolidated financial statements as of June 30, 2018 together with the Reports on review of consolidated interim financial statements.

 

CONTENT

 

· Cover Sheet  
· Condensed consolidated interim balance sheet 1
· Condensed consolidated interim statement of income 4
· Condensed consolidated interim statement of other comprehensive income 6
· Condensed consolidated interim statement of changes in shareholders’ equity 7
· Condensed consolidated interim statement of cash flows 8
· Notes to the condensed consolidated interim financial statements 10
· Consolidated Exhibits 45
· Condensed separate interim balance sheet 66
· Condensed separate interim statement of income 68
· Condensed separate interim statement of other comprehensive income 70
· Condensed separate interim statement of changes in shareholders’ equity 71
· Condensed separate interim statement of cash flows 72
· Notes to the condensed separate interim financial statements 74
· Separate Exhibits 93
· Review report on condensed consolidated interim –period financial statements 1
· Review report on condensed separate interim – period financial statements 1

 

 

 

 

CONDENSED CONSOLIDATED INTERIM

FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

 

CORPORATE NAME: Banco Macro SA

 

REGISTERED OFFICE: Sarmiento 447 – Autonomous City of Buenos Aires

 

CORPORATE PURPOSE AND MAIN ACTIVITY: Commercial Bank

 

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

 

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

 

BY-LAWS EXPIRY DATE: March 8, 2066

 

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

 

PERSONAL TAX IDENTIFICATION NUMBER: 30-50001008-4

 

REGISTRATION DATES OF AMENDMENTS TO BY-LAWS:

 

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

 

 

 

 

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

AS OF JUNE 30, 2018 AND DECEMBER 31, 2017 AND 2016

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

Items   Notes     06/30/2018     12/31/2017     12/31/2016  
                                 
ASSETS                                
Cash and Deposits in Banks             50,309,607       35,561,574       35,986,159  
Cash             6,588,011       6,761,426       4,871,152  
Financial Entities and Correspondent Banks                                
Central Bank of Argentina             38,529,485       23,703,476       28,482,100  
Other Local and Foreign Entities             5,151,805       3,781,451       2,631,916  
Other             40,306       1,315,221       991  
Debt Securities at fair value through profit or loss     33       1,339,702       1,086,028       332,481  
Derivative Financial Instruments             42,981       8,228       9,721  
Repo Transactions             156,158       1,419,808       19,124  
Other financial assets             2,515,379       2,272,679       1,105,513  
Loans and other financing             155,620,519       132,658,674       88,390,646  
Non-financial Public Sector             2,040,789       1,865,886       1,584,960  
Other Financial Entities             3,263,286       3,239,511       1,713,170  
Non-financial Private Sector and Foreign Residents             150,316,444       127,553,277       85,092,516  
Other Debt Securities     33       43,162,644       34,703,765       20,395,499  
Financial Assets delivered as guarantee     23       7,477,082       7,638,352       3,690,694  
Investments in Equity Instruments     33       50,009       282,659       406,868  
Investment in associates and joint arrangements     6       97,795       218,947       124,268  
Property, Plant and Equipment             7,591,240       7,040,152       6,066,706  
Intangible Assets             993,753       880,683       656,178  
Deferred Income Tax Assets     12       46,821       27,762          
Other Non-financial Assets             2,204,814       2,339,869       2,097,090  
Non-current assets held for sale     8       126,645       199,890       89,648  
TOTAL ASSETS             271,735,149       226,339,070       159,370,595  

 

 

Delfín Jorge Ezequiel Carballo
Chairperson

  1  

 

 

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

AS OF JUNE 30, 2018 AND DECEMBER 31, 2017 AND 2016

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

Items   Notes     06/30/2018     12/31/2017     12/31/2016  
                                 
LIABILITIES                                
Deposits             179,473,237       144,129,177       111,862,805  
Non-financial Public Sector             19,404,909       12,890,701       9,468,055  
Financial Sector             125,377       81,359       55,867  
Non-financial Private Sector and Foreign Residents             159,942,951       131,157,117       102,338,883  
Liabilities at fair value through profit or loss                     6,450          
Derivative Financial Instruments             34,151       23,107          
Repo Transactions             1,829,233       2,688,093       1,095,634  
Other Financial Liabilities             11,195,051       10,561,203       6,341,674  
Financing received from the Central Bank of Argentina and other financial entities             1,828,974       1,174,111       260,458  
Issued Corporate Bonds     28       8,125,300       4,712,216       1,684,636  
Current Income Tax Liabilities             1,781,074       3,975,320       1,749,800  
Subordinated Corporate Bonds     28       11,646,217       7,565,759       6,376,537  
Provisions     9       784,574       694,919       335,007  
Deferred Income Tax Liabilities     12       211,089       496,849       1,321,393  
Other Non-financial Liabilities             4,436,136       3,576,001       3,164,158  
TOTAL LIABILITIES             221,345,036       179,603,205       134,192,102  

 

 

Delfín Jorge Ezequiel Carballo
Chairperson

  2  

 

 

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

AS OF JUNE 30, 2018 AND DECEMBER 31, 2017 AND 2016

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

Items   Notes     06/30/2018     12/31/2017     12/31/2016  
                                 
SHAREHOLDERS’ EQUITY                                
Capital Stock             669,663       669,663       584,563  
Non-capital contributions             12,428,461       12,428,461       399,499  
Adjustments to Shareholders’ Equity             4,511       4,511       4,511  
Earnings Reserved             26,403,844       20,363,386       14,384,820  
Unappropiated Retained Earnings             3,475,669       2,799,085       2,990,757  
Other Comprehensive Income             505,872       204,560       65,711  
Net Income for the period / fiscal year             6,657,832       10,065,357       6,540,832  
Net Shareholders’ Equity attributable to the owners of parent company (*)             50,145,852       46,535,023       24,970,693  
Net Shareholders’ Equity  attributable to non-controlling interests             244,261       200,842       207,800  
                                 
TOTAL SHAREHOLDERS’ EQUITY             50,390,113       46,735,865       25,178,493  

 

(*) Total Shareholders´ Equity for Consolidated and Separate Interim Balance sheet

 

 

Delfín Jorge Ezequiel Carballo
Chairperson

  3  

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF INCOME

FOR THE THREE AND SIX MONTHS PERIODS ENDED JUNE 30, 2018 AND 2017

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

Items   Notes     Quarter
ended
06/30/2018
    Quarter
ended
06/30/2017
    Accumulated
from beginning
of year up to
06/30/2018
    Accumulated
from beginning
of year up to
06/30/2017
 
                               
Interest income             13,616,824       7,820,242       24,953,595       15,278,652  
Interest expense             (4,524,040 )     (2,350,374 )     (7,919,719 )     (4,626,960 )
Net interest income             9,092,784       5,469,868       17,033,876       10,651,692  
Commissions income     13       2,116,172       1,659,698       3,951,671       3,084,744  
Commissions expense             (209,558 )     (165,347 )     (394,483 )     (319,791 )
Net commissions income             1,906,614       1,494,351       3,557,188       2,764,953  
Subtotal (Net interest income + Net commissions income)             10,999,398       6,964,219       20,591,064       13,416,645  
Net Income from measurement of financial instruments at fair value through profit or loss             (46,356 )     124,524       202,893       153,865  
Loss from sold assets at amortized cost             75       31,977       (2,870 )     18,294  
Difference in quoted prices of gold and foreign currency     14       (1,012,280 )     365,253       (861,688 )     547,321  
Other operating income     15       1,375,713       1,068,177       2,679,744       2,131,560  
Provision for loan losses             (571,331 )     (466,643 )     (1,138,143 )     (829,593 )
Net Operating Income             10,745,219       8,087,507       21,471,000       15,438,092  
Employee benefits     16       (2,443,087 )     (1,861,052 )     (4,460,833 )     (3,581,467 )
Administrative expenses     17       (1,549,524 )     (1,100,488 )     (2,951,534 )     (2,113,951 )
Depreciation of Property, Plant and Equipment             (172,629 )     (131,664 )     (335,504 )     (261,710 )
Other Operating Expenses     18       (2,317,585 )     (1,587,840 )     (4,346,748 )     (2,996,648 )
Operating Income             4,262,394       3,406,463       9,376,381       6,484,316  
Income from associates and joint arrangements             145,134       29,685       220,497       70,672  
Income before tax on continuing operations             4,407,528       3,436,148       9,596,878       6,554,988  
Income tax on continuing operations     12       (1,270,766 )     (1,192,878 )     (2,895,579 )     (2,289,106 )
Net Income from continuing operations             3,136,762       2,243,270       6,701,299       4,265,882  
Net Income for the period             3,136,762       2,243,270       6,701,299       4,265,882  
Net Income for the period attributable to the owners of the Parent Company             3,115,649       2,223,509       6,657,832       4,228,757  
Net Income for the period attributable to non-controlling interests             21,113       19,761       43,467       37,125  

 

 

Delfín Jorge Ezequiel Carballo
Chairperson

  4  

 

 

CONDENSED CONSOLIDATED INTERIM EARNINGS PER SHARE

FOR THE THREE AND SIX MONTHS PERIODS ENDED JUNE 30, 2018 AND 2017

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

Items  

Quarter

ended
06/30/2018

    Quarter
ended
06/30/2017
    Accumulated
from beginning
of year up to
06/30/2018
   

Accumulated
from beginning

of year up to
06/30/2017

 
                         
Net Profit attributable to Parent’s shareholders     3,115,649       2,223,509       6,657,832       4,228,757  
PLUS: Potential diluted earnings per common share                                
Net Profit attributable to Parent’s shareholders adjusted as per diluted earnings     3,115,649       2,223,509       6,657,832       4,228,757  
Weighted average of outstanding common shares for the period     669,663       594,321       669,663       589,469  
PLUS: Weighted average of the number of additional common shares with dilution effects                                
Weighted average of outstanding common shares for the period adjusted as per dilution effect     669,663       594,321       669,663       589,469  
Basic earnings per share     4.6526       3.7413       9.9421       7.1738  

 

 

Delfín Jorge Ezequiel Carballo
Chairperson

  5  

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF OTHER COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS PERIODS ENDED JUNE 30, 2018 AND 2017

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

Items   Notes    

Quarter

ended
06/30/2018

    Quarter
ended
06/30/2017
    Accumulated
from
beginning of
year up to
06/30/2018
   

Accumulated
from
beginning

of year up to
06/30/2017

 
                               
Net Income for the period             3,136,762       2,243,270       6,701,299       4,265,882  
Foreign currency translation differences in financial statements conversion             344,455       58,793       398,114       36,267  
Foreign currency translation differences for the period             344,455       58,793       398,114       36,267  
Profits or losses for financial instruments measured at fair value through other comprehensive income (FVOCI)  (IFRS 9(4.1.2)(a)             (51,654 )     (10,889 )     (96,824 )     (13,827 )
Income for the period from financial instruments at fair value through other comprehensive income (FVOCI)             (61,725 )     (16,733 )     (123,475 )     (15,119 )
Income tax             10,071       5,844       26,651       1,292  
Total other comprehensive income that is subsequently reclassified to profit or loss             292,801       47,904       301,290       22,440  
Total Other Comprehensive Income             292,801       47,904       301,290       22,440  
Total Comprehensive Income for the period             3,429,563       2,291,174       7,002,589       4,288,322  
Total Comprehensive Income attributable to the owners of the parent Company             3,408,452       2,271,549       6,959,144       4,251,678  
Total Comprehensive Income attributable to non-controlling interests             21,111       19,625       43,445       36,644  

 

 

Delfín Jorge Ezequiel Carballo
Chairperson

  6  

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS PERIOD ENDED JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

    Capital Stock     Non-capital
Contributions
          Other Comprehensive 
Income
    Earnings Reserved                          
Changes   Outstanding 
shares
    Stock
issuance
Premium
    Adjustments
to
Shareholders´
Equity
    Accumulat. 
foreign 
currency 
translation 
difference 
in Financial 
statement 
convertion
    Other     Legal     Other     Unappropiated
Retained
Earnings
    Total Equity 
net of
Controlling
Interests
    Total Equity 
net of Non-
controlling
Interests
    Total 
Equity
 
                                                                                         
Balance at the beginning of the fiscal year     669,663       12,428,461       4,511       137,148       67,412       4,994,932       15,368,454       12,864,442       46,535,023       200,842       46,735,865  
Total comprehensive income for the period                                                                                        
- 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 )                        
Balance 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  

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS PERIOD ENDED JUNE 30, 2017

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

    Capital Stock     Non-capital
Contributions
          Other Comprehensive
Income
    Earnings Reserved                          
Changes   Outstanding 
shares
    Stock
issuance
Premium
    Adjustments
 to 
Shareholders´
Equity
    Accumulat. 
foreign 
currency 
translation 
difference in
Financial 
statement 
convertion
    Other     Legal     Other     Unappropiated
Retained
Earnings
    Total Equity
net of
Controlling
Interests
    Total Equity
net of Non-
controlling
Interests
    Total 
Equity
 
                                                                   
Balance at the beginning of the fiscal year     584,563       399,499       4,511               65,711       3,686,472       10,698,348       9,531,589       24,970,693       207,800       25,178,493  
Total comprehensive income for the period                                                                                        
- Net income for the period                                                             4,228,757       4,228,757       37,125       4,265,882  
- Other comprehensive income for the period                             36,267       (13,346 )                             22,921       (481 )     22,440  
Distribution of unappropied retained earnings as approved by Shareholders´ Meeting held on April 28, 2017                                                                                        
Legal Reserve                                             1,308,460               (1,308,460 )                        
Cash dividends                                                     (701,476 )             (701,476 )     (92.991 )     (794,467 )
- Other                                                     5,371,582       (5,424,045 )     (52,463 )             (52,463 )
Increase of Capital Stock as approved by Shareholders´ Meeting held on April 28, 2017     74,000       10,387,724                                                       10,461,724       ,       10,461,724  
Balance at the end of the period     658,563       10,787,223       4,511       36,267       52,365       4,994,932       15,368,454       7,027,841       38,930,156       151,453       39,081,609  

 

 

Delfín Jorge Ezequiel Carballo
Chairperson

  7  

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS PERIODS ENDED JUNE 30, 2018 AND 2017

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos) 

 

Items   Notes     06/30/2018     06/30/2017  
                   
CASH FLOWS FROM OPERATING ACTIVITIES                        
Income for the period before Income Tax             9,596,878       6,554,988  
Adjustments to obtain cash flows from operating activities:                        
Amortization and depreciation             335,504       261,710  
Provision for loan losses             1,138,143       829,593  
Other adjustments             (2,722,482 )     592,675  
Net increase/ decrease from operating assets:                        
Debt Securities at fair value though profit and loss             (253,718 )     (493,071 )
Derivative financial instruments             (34,753 )     7,885  
Repo transactions             1,263,650       (2,033,671 )
Loans and other financing                        
Non-financial public sector             (174,905 )     1,039,760  
Other financial entities             (23,775 )     (517,962 )
Non-financial private sector and foreign residents             (23,850,184 )     (18,883,472 )
Other debt securities             24,030,305       (7,929,655 )
Financial assets delivered as guarantee             161,270       1,043,517  
Investments in equity instruments             232,650       258,595  
Other assets             (1,148,269 )     (1,519,174 )
Net increase/ decrease from operating liabilities:                        
Deposits                        
Non-financial public sector             6,514,208       1,335,928  
Financial sector             44,018       1,490  
Non-financial private sector and foreign residents             28,785,834       10,242,602  
Liabilities at fair value through profit or loss             (6,450 )        
Derivative financial instruments             11,044       217  
Repo transactions             (858,860 )     (1,095,634 )
Other liabilities             1,603,982       1,658,414  
Payments for Income Tax             (4,409,702 )     (2,551,146 )
TOTAL CASH FROM /(USED IN) OPERATING ACTIVITIES (A)             40,234,388       (11,196,411 )

 

 

Delfín Jorge Ezequiel Carballo
Chairperson

  8  

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS PERIODS ENDED JUNE 30, 2018 AND 2017

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos) 

 

Items   Notes     06/30/2018     06/30/2017  
                   
CASH FLOWS FROM INVESTING ACTIVITIES                        
Payments:                        
Acquisition of PPE, intangible assets and other assets             (659,919 )     (604,048 )
TOTAL CASH USED IN INVESTING ACTIVITIES (B)             (659,919 )     (604,048 )
CASH FLOWS FROM FINANCING ACTIVITIES                        
Payments:                        
Dividends             (3,348,315 )     (794,166 )
Non-subordinated corporate bonds             (242,604 )     (1,766,904 )
Central Bank of Argentina                     (98 )
Financing from local financial entities             (124,671 )     (331,595 )
Subordinated corporate bonds                     (206,280 )
Proceeds:                        
Issued Equity instruments                     10,461,724  
Non Subordinated Corporate Bonds             3,206,999       4,604,398  
Central Bank of Argentina             4,591       2,070  
Financing to local financial entities             174       748,697  
Other proceeds related to financing activities                     213,379  
TOTAL CASH (USED IN)/ FROM FINANCING ACTIVITIES (C)             (503,826 )     12,931,225  
EFFECT OF EXCHANGE RATE FLUCTUATIONS (D)             8,216,967       511,441  
TOTAL CHANGES IN CASH FLOWS                        
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C+D)             47,287,610       1,642,207  
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FISCAL YEAR     19       41,203,545       52,070,153  
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD     19       88,491,155       53,712,360  

 

 

Delfín Jorge Ezequiel Carballo
Chairperson

  9  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

1. CORPORATE INFORMATION

 

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

 

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

 

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

 

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

 

On August 22, 2018, the Board of Directors approved the issuance of these condensed consolidated interim Financial Statements.

 

2. OPERATIONS OF THE BANK

 

2.1. Agreement with the Misiones Provincial Government

 

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

 

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

 

As of June 30, 2018 and December 31, 2017 and 2016, the deposits held by the Misiones Provincial Government with the Bank amounted to 4,711,719, 3,255,353 and 2,495,781(including 357,883, 333,032 and 139,610 related to court deposits), respectively.

 

2.2. Agreement with the Salta Provincial Government

 

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

 

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

 

As of June 30, 2018 and December 31, 2017 and 2016, the deposits held by the Salta Provincial Government with the Bank amounted to 2,816,581, 908,270 and 1,340,738 (including 552,288, 458,550 and 370,154 related to court deposits), respectively.

 

2.3. Agreement with the Jujuy Provincial Government

 

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

 

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

 

 

 

  10  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

As of June 30, 2018 and December 31, 2017 and 2016, the deposits held by the Jujuy Provincial Government with the Bank amounted to 3,261,660, 4,649,184 and 1,580,312 (including 376,544, 320,825 and 253,622 related to court deposits), respectively.

 

2.4. Banco del Tucumán SA

 

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

 

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

 

In addition, the legislative body of the province of Tucumán, converted into law a project issued by the provincial executive power in which it was authorized the sale of the shares held by the province of Tucumán in Banco de Tucumán SA to Banco Macro SA and also 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 shares, with a face value of Ps. 100 each one and entitled to one vote of Banco del Tucumán SA, which is equivalent to 10% of its common stock and votes. For this transaction, the Bank paid 456,462 which will be registred in the consolidated Financial Statements in the Shareholders equity at the carrying amount while in the Separate financial statements will be registered at the purchase price method.

 

As of June 30, 2018 and December 31, 2017 and 2016, the deposits held by the Tucumán Provincial Government and the Municipality of San Miguel de Tucumán with Banco del Tucumán SA amounted to 4,416,138, 1,913,801 and 2,450,436 (including 1,500,429, 1,225,993 and 943,683 related to court deposits), respectively.

 

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

 

Presentation basis

 

Applicable Accounting Standards

 

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

 

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

 

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

 

 

 

  11  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

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

 

In the preparation of this Financial statements, the Bank further contemplated the exceptions and exemptions provided for in IFRS 1 “First-time Adoption of International Financial Reporting Standards” and those applied for the preparation of the accompanying condensed consolidated interim Financial Statements are described in the section “First-time Adoption of International Financial Reporting Standards in accordance with Communiqué “A” 6114 of the Central Bank” of this Note.

 

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

 

The accounting policies comply with the IFRS as currently approved and are applicable to the preparation of the first annual consolidated Financial Statements (December 31, 2018). in accordance with the IFRS adopted by the Central Bank though Communique “A” 6114. Notwithstanding the above, these accounting policies might change if, at the time of preparing those first annual Financial Statements in accordance with the IFRS adopted by the Central Bank though Communique “A” 6114, new standards are issued or the existing ones are modified, or the compulsory application to that date is modified, or if the Bank chooses to change its choice of any of the exemptions under IFRS 1. Generally, the Central Bank does not allow the anticipated application of any IFRS, unless it expressly states the contrary.

 

Basis for the preparation and consolidation

 

These condensed consolidated interim Financial Statements for the six-month period ended on June 30, 2018, have been prepared in accordance with the framework set forth by the Central Bank as mentioned in the previous seccion “ Applicabe accouting standards”, for which this condensed consolidated interim Financial Statements, is based on IAS 34 “Interim Financial Reporting”.

 

For the preparation of these condensed consolidated interim Financial Statements 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 condensed consolidated interim Financial Statements for the three months period ended on March 31, 2018, already issued. In this sense, the Bank has applied the same accounting policies adopoted at the transition date.

 

These condensed consolidated interim Financial Statements include all the necessary information for an appropriate understanding, by the users thereof, of the basis for the preparation and disclosure used therein, as well as the relevant events and transactions occurred after the issuance of the last annual consolidated Financial Statements for the fiscal year ended December 31, 2017 and condensed consolidated interim Financial Statements for the three-month period ended on March 31, 2018. Nevertheless, the present condensed consolidated interim Financial Statements do not include all the information or all the disclosures required for the annual consolidated Financial Statements prepared in accordance with the IAS 1 “Presentation of Financial Statements”. Therefore, the accompanying condensed consolidated interim Financial Statements must be read together with the annual consolidated financial statements for the fiscal year ended December 31, 2017 and condensed consolidated interim Financial Statements for the three-month period ended on March 31, 2018.

 

As of June 30, 2018 and December 31, 2017 and 2016, the Bank has consolidated its Financial Statements with the Financial Statements of the following companies:

 

 

 

  12  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

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

 

(a) Consolidates with Macro Fondos SGFCI SA (80.90% Participating and Voting Interest).

 

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

 

(c) Consolidates with Sud Asesores (ROU) SA (100% Voting Interest–Equity interest 2,220).

 

The table below shows the Bank’s participating interest in the companies it consolidates as of June 30, 2018 and December 31, 2017 and 2016:

 

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

 

Total assets, liabilities and net equity of the Bank and each of its subsidiaries as of June 30, 2018 and December 31, 2017 and 2016 are as follows:

 

As of 06/30/2018   Banco Macro
SA
    Banco del
Tucumán SA
    Other
Subsidiaries
    Eliminations     Consolidated  
                               
Assets     255,311,664       18,192,290       3,813,042       (5,581,847 )     271,735,149  
Liabilities     205,165,812       15,775,848       1,685,548       (1,282,172 )     221,345,036  
Equity attributable to the owners of the Bank                                     50,145,852  
Equity attributable to non-controlling interests                                     244,261  

 

As of 12/31/2017   Banco Macro
SA
    Banco del
Tucumán SA
    Other
Subsidiaries
    Eliminations     Consolidated  
                               
Assets     213,157,890       14,789,934       2,922,315       (4,531,069 )     226,339,070  
Liabilities     166,622,867       12,802,725       1,259,906       (1,082,293 )     179,603,205  
Equity attributable to the owners of the Bank                                     46,535,023  
Equity attributable to non-controlling interests                                     200,842  

 

 

 

  13  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

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

 

Transcription in the Books of Accounts

 

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

 

Figures expressed in thousands of Pesos

 

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

 

Comparative information

 

The present condensed consolidated interim Balance sheet as of June 30, 2018, is presented comparatively with year-end data of the immediately preceding fiscal year, while the Statement of income and Other comprehensive income for the three-month and six-month periods ended June 30, 2018, the Statement of changes in shareholders’ equity and the Statement of cash flows and Cash equivalents for the six-month period ended June 30, 2018, are presented comparatively with data as of same period of the immediately preceding fiscal year.

 

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

 

Unit of measure

 

IFRS require the restatement in functional currency of an entity’s financial statements when the functional currency used is that of an economy considered to be a high-inflation or a hyperinflationary economy. To achieve consistency in identifying an economic environment requiring the restatement of financial statements, IAS 29 “ Financial Reporting in Hyperinflationary Economies” establishes certain qualitative indicators and a quantitative factor, which is considered to be relevant by international practices; and it arises when the three-year cumulative inflation rate is around 100% or more; this also requires assessing whether it is not the result of a circumstantial event that may be reversed in the short term. To quantify the inflation rate, IAS 29 requires the use of a general price index reflecting the changes in the currency’s general purchasing power. In Argentina, the certified professional accountants and corporate regulators agree that the most appropriate index to such end is the internal wholesale price index (WPI) prepared by the Instituto Nacional de Estadísticas y Censos (INDEC). This consensus is driven by the fact that the WPI combines several specific indexes that altogether cover a wider basket than the remaining price indicators, and also its geographic scope includes the data gathered in different areas across the country. The three-year cumulative inflation measured based on the WPI maintained in 2017 a downward trend as compared to 2016, and the three-year cumulative inflation rate was below 100%. However, this trend was reversed during the first half of 2018 due to factors such as the exchange rate devaluation and the continuity of the public services tariffs adjustment process, as well as the unfavorable international context in terms of financing. In this scenario, the three-year cumulative inflation rate as of June 30, 2018, exceeds 100%; and the new goals reviewed by the Argentine government and other available projections indicate that this trend will not be reversed in the short term. Therefore, under IAS 29, the Argentine economy should be considered hyperinflationary as of June 30, 2018. Consequently, the entities under the Central Bank control that are required to apply the IFRSs adopted by the Central Bank through Communiqué “A” 6114 and the functional currency of which is the Argentine peso should restate their financial statements as from the first applicable period, which in the case of the Bank is July 1, 2018. However, the requirements of IAS 29 will be met provided that certain changes are made to the BCRA’s regulations on the impossibility of using the method for restating the financial statements in constant currency, pursuant to the Central Bank Communiqué “A” 3921, which resulted from Presidential Decree No. 664/2003.

 

 

 

  14  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

The requirements of IAS 29 consist in restating the financial statements so that they consider the changes in the general purchasing power of the currency to ensure they are stated in the current unit of measure as of the end of the reported period. These requirements also comprise the comparative information of the financial statements.

 

To sum up, the restating mechanism provided by IAS 29 establishes that monetary assets and liabilities will not be restated, as they are already stated in terms of the current unit of measure as of the end of the reporting period. Assets and liabilities subject to adjustments based on specific agreements will be adjusted in accordance with such agreements. There is no need to restate the non-monetary items measured at their market values as of the end of the reporting period, such as the net realization value, among others. The remaining non-monetary assets and liabilities will be restated using a general price index. Gains or losses resulting from the net monetary position will be included in net income (loss) for the reporting period.

 

As of the date of issuance of these condensed consolidated interim Financial Statements, the Bank´s Management is analyzing the requirements under IAS 29.

 

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

 

According with Central Bank Communiqué “A” 6324, below are presented reconciliations of the consolidated equity as of June 30, 2017 and the consolidated net income for the six-month and three-month periods ended on that date. The consolidated equity and the consolidated net income reconciliations for the fiscal year ended December 31, 2016 (date of transition) and 2017, were included in the condensed consolidated interim Financial Statements for the three-month period ended on March 31, 2018, already issued.

 

In preparing these reconciliations, the Bank’s Management has considered the applicable IFRSs to the presentation of the first annual consolidated Financial Statements that are the first consolidated Financial Statements presented in accordance with Central Bank Communiqué “A” 6114, for the fiscal year ending on December 31, 2018. However, items and figures included in these reconciliations could be amended. The items and figures included in these reconciliations could be amended to the extent that, upon the preparation of those first annual financial statements in accordance with IFRS adopted by the Central Bank through Communique “A” 6114, new standards are issued or current standards are amended, with mandatory or early application as of that date, or it is opted to change the selection of any of the exemptions under IFRS 1 “First-time adoption of International Financial Reporting Standards”. As a general rule, the Central Bank does not admit early application of any IFRS, unless it is specified otherwise.

 

The optional exemptios and the obligatory exceptions, chosen by the Bank, related with the non-retroactive application of certain IFRS and the main transitions adjustments, have been disclosed, in detail, in the condensed consolidated Financial Statement for the three-month period ended on March 31, 2018, already issued.

 

Reconciliations required

 

·        Reconciliation of consolidated equity as of June 30, 2017.

 

    Previous
Central Bank
Standards
    Adjustments and
Reclassifications
    Balances according
Central Bank
Communiqué “A”
6114
 
Total Assets     187,767,925       1,245,817       189,013,742  
Total Liabilities     151,940,385       (2,008,252 )     149,932,133  
Equity     35,827,540       3,254,069       39,081,609  
Net Shareholders’ Equity attributable to non-controlling interests                     151,453  
Net Shareholders´ Equity attributable to the owners of the Parent Company                     38,930,156  

 

Item   Balances as of
06/30/2017
 
According to previous Central Bank Standards     35,827,540  
Adjustments and Reclassifications:        
Debt securities and investment in equity instruments     152,662  
Loans and other financing     (310,945 )
Property, plant and equipment and investment property     4,566,397  

 

 

 

  15  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

Item   Balances as of
06/30/2017
 
Adjustments and Reclassifications (contd.):        
Deferred income tax assets and liabilities     (1,097,486 )
Other non-financial assets     69,746  
Corporate bonds     59,698  
Other non-financial liabilities     (318,622 )
Other adjustments     (18,834 )
Non-controlling interest     151,453  
Total adjustments and reclassifications     3,254,069  
Net Shareholders equity according to Central Bank Communiqué “A” 6114     39,081,609  
Net Shareholders´ Equity attributable to the owners of the Parent Company     38,930,156  
Net Shareholders’ Equity attributable to non-controlling interests     151,453  

 

· Reconciliation of consolidated income and other comprehensive income for the six-month and three-month periods ended June 30, 2017,

 

Reconciliation of income for the six-month
period as of 06/30/2017
  Net income
for the
period
    Other
comprehensive
income
    Comprehensive
Income
 
According to previous Central Bank Standards     3,779,312                  
Interest income     (26,447 )                
Commisions income     28,752                  
Interest expense     28,138                  
Other operating expenses     (49,154 )                
Reclasifications of Issuance cost of shares     234,545                  
Income Tax     223,906                  
Foreign currency translation differences             36,267          
Loss from financial instruments at fair value through OCI             (13,827 )        
Other adjustment     46,830                  
Total adjustments and reclassifications     486,570       22,440          
Balance according to Central BankCommuniqué “A” 6114     4,265,882       22,440       4,288,322  
Attributable to parent company     4,228,757       22,921       4,251,678  
Attributable to non-controlling interests     37,125       (481 )     36,644  

 

Reconciliation of income for the three-month
period as of 06/30/2017
  Net income
for the
period
    Other
comprehensive
income
    Comprehensive
Income
 
According to previous Central Bank Standards     2,015,267                  
Interest income     (38,209 )                
Commissions income     (2,769 )                
Interest expense     34,548                  
Other operating expenses     (41,273 )                
Reclasifications of Issuance cost of shares     234,545                  
Income Tax     120,987                  
Foreign currency translation differences             58,793          
Loss from financial instruments at fair value through OCI             (10,889 )        
Other adjustment     (79,826 )                
Total adjustments and reclassifications     228,003       47,904          
Balance according to Central BankCommuniqué “A” 6114     2,243,270       47,904       2,291,174  
Attributable to parent company     2,223,509       48,040       2,271,549  
Attributable to non-controlling interests     19,761       (136 )     19,625  

 

 

 

  16  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

New pronouncements

 

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

 

· IFRS 16 “Leases”: such standard eliminates the dual accounting method for lessees that distinguishes between finance leases recognized within the Financial statements and operating leases for which future lease payments are not required to be recognized, Instead, it develops a single model, within the balance sheet, which is similar to the present finance lease, As to lessor, the standard maintains the present practice –i,e,, lessors keep on classifying leases as finance and operating leases.

 

· IFRIC 12 “Uncertainty over income tax treatments”. This interpretation clarifies how to apply the recongnition and measurement requirements in IAS 12 “Income tax” when there is uncertainty over income tax treatments.

 

These standards are applicable to fiscal years beginning as of January 1, 2019. The Bank does not expect the above described standards 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 balance sheet, since they imply a possible obligation or liability for the Bank, they expose the Bank to additional credit risk to those recognized in the balance sheet and are, therefore, an integral part of the total risk of the Bank.

 

As of June 30, 2018 and December 31, 2017 and 2016, the Bank maintains the following contingent transactions:

 

    06/30/2018     12/31/2017     12/31/2016  
                   
Overdraft and unused agreed credits     839,311       255,710       191,007  
Guarantees granted     697,621       253,350       287,497  
Liabilities for foreign trade transactions     203,399       90,274       163,308  
      1,740,331       599,334       641,812  

 

Risks related to the contingent transactions described above have been evaluated and are controlled within the framework of the Bank’s credit risk policy described in Note 41 to the condensed consolidated interim Financial Statemetns as of March 31, 2018, already issued.

 

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 most advantageous market) duly informed and willing to transact in an orderly and current transaction, at the measurement date in the current market conditions whether the price is directly observable or estimated using a valuation technique under the assumption that the Bank is an ongoing business.

 

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

 

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

 

 

 

  17  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

Fair value hierarchy

 

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

 

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

 

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

 

- 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.

 

Description   Financial assets and finacial liabilities measured at fair value on a
recurring basis as of June 30, 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     1,339,702       878,223       308,436       153,043  
Derivative Financial Instruments     42,981       8,059       34,922          
Other financial assets     226,540       164,334               62,206  
Financial Assets delivered as guarantee     72,585               72,585          
Investments in Equity Instruments     50,009       7,107               42,902  
                                 
At fair value through OCI                                
Other debt securities     39,353,988       39,353,988                  
Financial Assets delivered as guarantee     1,961,931       1,961,931                  
                                 
Total     43,047,736       42,373,642       415,943       258,151  
Financial liabilities                                
                                 
At fair value through profit or loss                                
Derivative Financial Instruments     34,151       3,650       30,501          
Total     34,151       3,650       30,501          

 

Description   Financial assets and finacial liabilities measured at fair value on a
recurring basis as of December 31, 2017
 
    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     1,086,028       422,868       627,319       35,841  
Derivative Financial Instruments     8,228       800       7,428          
Other financial assets     483,246       321,495               161,751  
Financial Assets delivered as guarantee     4,308               4,308          
Investments in Equity Instruments     282,659       246,885               35,774  
At fair value through OCI                                
Other financial assets                                
Other debt securities     33,766,052       33,590,407       175,645          
Financial assets delivered as guarantee     2,989,411       2,989,411                  
Investment in Equity instruments                                
                                 
Total     38,619,932       37,571,866       814,700       233,366  
                                 
Financial liabilities                                
                                 
At fair value through profit or loss                                
Liabilities at fair value through income or loss     6,450       6,450                  
Derivatives financial liabilities     23,107       7,169       15,938          
                                 
Total     29,557       13,619       15,938          

 

 

 

  18  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

Description of valuation process

 

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

 

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

 

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

 

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

 

As of June 30, 2018, December 31, 2017 and 2016, the Bank has neither changed the techniques nor the assumptions used to estimate the fair value of the financial instruments.

 

Below is presented the reconciliation between the balances at the beginning and the end of the period of the financial assets and liabilities recognized at fair value, using the valuation techniques based on the Bank’s own assumptions, as of June 30, 2018 and December 31, 2017:

 

    Fair values using valuation techniques based on the
Bank’s own assumptions (level 3)
June 30, 2018
 
Description   Debt Securities     Other Financial 
Assets
    Investments in 
Equity 
Instruments
 
Balance at the beginning     35,841       161,751       35,774  
Transfers to Level 3                        
Transfers from Level 3                        
Profit and Loss     (16,497 )     (28,208 )     7,128  
Purchases, sales, issuance and settlement     133,699       (71,337 )        
Balance at end of period     153,043       62,206       42,902  

 

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

 

 

 

  19  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

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

 

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

 

Changes in fair value levels

 

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

 

As of June 30, 2018, December 31, 2017 and 2016, the Bank has not recognized any transfers between levels 1, 2 and 3 of the fair value hierarchy.

 

Financial assets and liabilities not recognized at fair value

 

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

 

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

 

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

 

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

 

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

 

The following table shows a comparison between the fair value and the carrying amount of financial instruments not measured at fair value as of June 30, 2018 and December 31, 2017 and 2016:

  

    06/30/2018  
    Carrying
Amount
    Level 1     Level 2     Level 3     Fair
Value
 
Financial Assets                                        
Cash and deposits in Banks     50,309,607       50,309,607                       50,309,607  
Repo transactions     156,158       156,158                       156,158  
Other financial assets     2,288,839       2,288,839                       2,288,839  
Loans and other financing     155,620,519               166,204       144,656,424       144,822,628  
Other debt securities     3,808,656       116,506       3,375,965       291,658       3,784,129  
Financial assets delivered as guarantee     5,442,566       5,442,566                       5,442,566  
      217,626,345       58,313,676       3,542,169       144,948,082       206,803,927  
Financial Liabilities                              
Deposits     179,473,237       90,433,417       89,119,285               179,552,702  
Other repo transactions     1,829,233       1,829,233                       1,829,233  
Other financial liabilities     11,195,051       9,577,911       1,619,280               11,197,191  
Financing received from the Central Bank and other financial entities     1,828,974       1,176,005       627,365               1,803,370  
Issued corporate bonds     8,125,300               7,666,548               7,666,548  
Subordinated corporate bonds     11,646,217               10,829,371               10,829,371  
      214,098,012       103,016,566       109,861,849               212,878,415  

 

 

 

  20  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

    12/31/2017  
    Carrying
Amount
    Level 1     Level 2     Level 3     Fair
Value
 
Financial Assets                                        
Cash and deposits in Banks     35,561,574       35,561,574                       35,561,574  
Repo transactions     1,419,808       1,419,808                       1,419,808  
Other financial assets     1,789,433       1,789,433                       1,789,433  
Loans and other financing     132,658,674               485,347       129,472,430       129,957,777  
Other debt securities     937,713       944,876               7,916       952,792  
Financial assets delivered as guarantee     4,644,633       4,644,633                       4,644,633  
      177,011,835       44,360,324       485,347       129,480,346       174,326,017  
Financial Liabilities                                        
Deposits     144,129,177       77,959,810       66,265,387               144,225,197  
Other repo transactions     2,688,093       2,688,093                       2,688,093  
Other financial liabilities     10,561,203       9,175,314       1,391,699               10,567,013  
Financing received from the Central Bank and other financial entities     1,174,111               1,176,397               1,176,397  
Issued corporate bonds     4,712,216               4,432,977               4,432,977  
Subordinated corporate bonds     7,565,759               7,710,790               7,710,790  
      170,830,559       89,823,217       80,977,250               170,800,467  

 

    12/31/2016  
    Carrying Amount     Level 1     Level 2     Level 3     Fair
Value
 
Financial Assets                                        
Cash and deposits in Banks     35,986,159       35,986,159                       35,986,159  
Repo transactions     19,124       19,124                       19,124  
Other financial assets     941,219       941,219                       941,219  
Loans and other financing     88,390,646               481,628       87,807,196       88,288,824  
Other debt securities     855,832       843,708       3,223       11,677       858,608  
Financial assets delivered as guarantee     2,489,665       2,489,665                       2,489,665  
      128,682,645       40,279,875       484,851       87,818,873       128,583,599  
Financial Liabilities                                        
Deposits     111,862,805       58,773,034       53,175,424             111,948,458  
Other repo transactions     1,095,634       1,095,634                       1,095,634  
Other financial liabilities     6,341,674       5,192,168       1,152,196               6,344,364  
Financing received from the Central Bank and other financial entities     260,458               259,775               259,775  
Issued corporate bonds     1,684,636               1,622,802               1,622,802  
Subordinated corporate bonds     6,376,537               5,994,056               5,994,056  
      127,621,744       65,060,836       62,204,253               127,265,089  

 

6. INVESTMENTS IN ASSOCIATES AND JOINT ARRANGEMENTS

 

6.1 Associated entities

 

The Bank holds investments in the 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, 2018. Additionally, the Bank has considered, when applicable, the material transactions or events occurring between March 31, 2018 and June 30, 2018.

 

 

 

  21  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

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

 

· Macro Warrant SA

 

Summarized Balance sheet   06/30/2018     12/31/2017     12/31/2016  
Total Assets     18,994       19,798       17,110  
Total Liabilities     4,784       3,265       3,424  
Net Shareholders’ Equity     14,210       16,533       13,686  
Proportional Interest in the entity     5 %     5 %     5 %
Carrying Amount of Investment     711       827       684  

 

As of June 30, 2018, the investment in Prisma Medios de Pagos SA was reclassificated as non-current assets held for sale (see Note 8). The following table presents summarized financial information on the Bank´s investments as of December 31, 2017 and 2016:

 

Summarized Balance sheet   31/12/2017     31/12/2016  
Total Assets     14,366,838       9,703,861  
Total Liabilities     12,492,991       8,815,774  
Net Shareholders’ Equity     1,873,847       888,087  
Proportional Interest in the entity     7,61 %     7,61 %
Carrying Amount of Investment     142,600       67,583  

 

6.2 Joint Ventures in which the Bank participates

 

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

 

a) Banco Macro SA – Siemens Itron Business Services SA: 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.

 

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

 

On June 27, 2018, the Bank, the Ute and the tax authority of Misiones provincial government, entered into an agreement of “termination by mutual agreement” of the adaptation agreement, without implying or modyfing the Bank´s rights and obligations as a financial agent of the province for the services rendered established in the agreement.

 

· UTE WORDLINE

 

Summarized Balance sheet   06/30/2018     12/31/2017     12/31/2016  
Total Assets     218,707       195,826       133,188  
Total Liabilities     37,918       54,646       30,362  
Net Shareholders’ Equity     180,789       141,180       102,826  
Proportional interest in the entity     50 %     50 %     50 %
Carrying Amount of Investment     90,395       70,590       51,413  

 

· Gestiva SA

 

Summarized Balance sheet   06/30/2018     12/31/2017     12/31/2016  
Total Assets     153,459       116,885       107,376  
Total Liabilities     19,677       18,319       15,616  
Net Shareholders’ Equity     133,782       98,566       91,760  
Proportional interest in the entity     5 %     5 %     5 %
Carrying Amount of Investment     6,689       4,928       4,588  

 

 

 

  22  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

7. RELATED PARTIES

 

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

 

- has control or joint control of the Bank;

- has significant influence over the Bank;

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

- members of the same group;

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

 

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

 

As of June 30, 2018 and December 31, 2017 and 2016, there is a total amount of 762,866, 363,543 and 305,417, respectively, as unpaid financial assistance granted by the Bank to its associates and related parties and deposits of its associates and related parties of 2,506,971, 2,796,027 and 2,337,840, respectively:

 

    Subsidiaries(1)     Associates and other related parties  
    Maximum balances
as of 06/30/2018
    Balance as of
06/30/2018
    Maximum balances 
as of 06/30/2018
    Balance as of
06/30/2018
 
Documents                     408,676       397,657  
Overdraft                     35,395       29,734  
Credit cards     567       377       48,791       43,809  
Leases     6,309       6,309       1,851       1,751  
Personal loans                     845       440  
Mortgage loans                     45,489       45,445  
Other loans     1,952,244       901,973       197,843       195,379  
Guarantees granted                     46,895       48,651  
Total assistance     1,959,120       908,659       785,785       762,866  
Deposits             345,317       2,506,971          

 

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

  

    Subsidiaries(1)     Associates and other related parties  
    Maximum balances
as of 12/31/2016
    Balance as of
12/31/2016
    Maximum balances
as of 12/31/2016
    Balance as of
12/31/2016
 
Documents                     103,927       103,336  
Overdraft                     17,804       7,459  
Credit cards     191       191       22,057       19,573  
Leases     8,036       8,036       1,189       1,168  

 

 

 

  23  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

    Subsidiaries(1)     Associates and other related parties  
    Maximum balances
as of 12/31/2016
    Balance as of
12/31/2016
    Maximum balances
as of 12/31/2016
    Balance as of
12/31/2016
 
Personal loans                     1,388       1,362  
Mortgage loans                     10,862       10,858  
Other loans     300,187               475,957       161,287  
Guarantees granted     885       885       374       374  
Total assistance     309,299       9,112       633,558       305,417  
Deposits             134,911               2,337,840  

 

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

 

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

 

As of June 30, 2018, December 31, 2017 and 2016, the income from loan transactions totaled 16,100, 54,157 and 12,617, respectively, while expense generated from deposit transactions totaled 62,489, 163,814 and 141,184, respectively.

 

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, 2018 and December 31, 2017 and 2016, totaled 52,123, 79,905 and 41,592 respectively.

 

In addition, fees received by the Directors as of June 30, 2018 and December 31, 2017 and 2016 amounted to 315,616, 468,623 and 243,704 respectively.

 

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

 

    06/30/2018     12/31/2017     12/31/2016  
Board of Directors     24       22       21  
SeniorManagement members of the key management personnel     15       14       14  
      39       36       35  

 

8. NON-CURRENT ASSETS HELD FOR SALE

 

On June 30, 2018 the Bank recorded as non-current assets held for sale, its investment in Prisma Medios de Pago SA for an amount of 104,249, as the Bank intends to transfer all shares within a year. Therefore the investment was valued according with 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.

 

9. PROVISIONS

 

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

 

Exhibit J “Changes in Provisions” presents the changes in provisions during the six-month period ended June 30, 2018.

 

 

 

  24  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

The expected terms to settle these obligations are as follows:

 

    06/30/2018                    
    Within 12
months
    Beyond 12
months
    06/30/2018     12/31/2017     12/31/2016  
                               
For administrative, disciplinary and criminal penalties             718       718       718       9,110  
Others     371,613       412,243       783,856       694,201       325,897  
                                         
      371,613       412,961       784,574       694,919       335,007  

 

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

 

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

 

The following tables show the analysis of the balance of financial asset and liabilities the Bank expects to recover and settle as of June 30, 2018 and December 31, 2017 and 2016:

 

06/30/2018   Without due date     Total up to 12
months
    Total over 12
months
 
Assets                        
Cash and deposits in Banks     50,309,607                  
Debt securities at fair value through profit or loss     5,104       292,516       1,042,082  
Derivative instruments             42,981          
Repo transactions             156,158          
Other financial assets     1,107,370       1,357,466       50,543  
Loans and other financing     1,049,649       89,644,497       64,926,373  
Other debt securities             39,204,868       3,957,776  
Financial assets delivered as guarantee     5,439,431       2,037,651          
Investment in equity instruments     50,009                  
Total Assets     57,961,170       132,736,137       69,976,774  
Liabilities                        
Deposits     92,321,452       86,987,419       164,366  
Derivative instruments             34,151          
Repo transactions             1,829,233          
Other financial liabilities             11,041,096       153,955  
Financing received from Central Bank and other financial entities             1,629,153       199,821  
Issued Corporate bonds             307,910       7,817,390  
Subordinated corporate bonds             101,537       11,544,680  
Total Liabilities     92,321,452       101,930,499       19,880,212  

 

12/31/2017   Without due date     Total up to12
months
    Total over 12
months
 
Assets                        
Cash and deposits in Banks     35,561,574                  
Debt securities at fair value through profit or loss             138,068       947,960  
Derivative instruments             8,228          
Repo transactions             1,419,808          
Other financial assets             1,269,085       1,003,594  
Loans and other financing             73,767,208       58,891,466  
Other debt securities             34,704,765          
Financial assets delivered as guarantee     4,644,633       2,993,719          
Investment in equity instruments     282,659                  
Total Assets     40,488,866       114,300,881       60,843,020  

 

 

 

  25  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

12/31/2017   Without due date     Total up to12
months
    Total over 12
months
 
Liabilities                        
Deposits     74,499,451       69,068,373       561,346  
Liabilities at fair value to profit or loss             6,450          
Derivative instruments             23,107          
Repo transactions             2,688,093          
Other financial liabilities             10,372,665       188,538  
Financing received from Central Bank and other financial entities             1,087,979       86,132  
Issued Corporate bonds             118,356       4,593,860  
Subordinated corporate bonds             80,004       7,485,755  
Total Liabilities     74,499,451       83,445,027       12,915,631  

 

12/31/2016   Without due date     Total up to 12
months
    Total over 12
months
 
Assets                        
Cash and deposits in Banks     35,986,159                  
Debt securities at fair value through profit or loss             42,269       290,212  
Derivative instruments             9,721          
Repo transactions             19,124          
Other financial assets             1,098,092       7,421  
Loans and other financing             53,059,987       35,330,659  
Other debt securities             20,395,499          
Financial assets delivered as guarantee     2,489,700       1,200,994          
Investment in equity instruments     406,868                  
Total Assets     38,882,727       75,825,686       35,628,292  
Liabilities                        
Deposits     50,613,570       60,941,747       307,488  
Repo transactions             1,095,634          
Other financial liabilities             6,227,348       114,326  
Financing received from Central Bank and other financial entities             193,845       66,613  
Issued Corporate bonds             1,684,636          
Subordinated corporate bonds             67,429       6,309,108  
Total Liabilities     50,613,570       70,210,639       6,797,535  

 

11. DISCLOSURES BY OPERATING SEGMENT

 

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

 

12. INCOME TAX

 

The main items of income tax expense in the condensed consolidated interim Financial Statements are as follows:

 

    06/30/2018     06/30/2017  
    Accumulated
from beggining
year up to
06/30/2018
    Quarter
ended
06/30/2018
    Accumulated
from beggining
year up to
06/30/2017
    Quarter
ended
06/30/2017
 
Current income tax expense     3,200,398       1,431,044       2,511,566       1,290,979  
Gain for deferred income tax     (304,819 )     (160,278 )     (222,460 )     (98,101 )
Income tax expense recorded in the statement of income     2,895,579       1,270,766       2,289,106       1,192,878  
Income tax gain recorded in other comprehensive income     (26,651 )     (10,071 )     (1,292 )     (5,844 )
      2,868,928       1,260,695       2,287,814       1,187,034  

 

 

 

  26  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

13. COMMISSIONS INCOME

 

    06/30/2018     06/30/2017  
Description   Accumulated
from beggining
year up to
06/30/2018
    Quarter
ended
06/30/2018
    Accumulated
from beggining
year up to
06/30/2017
    Quarter
ended
06/30/2017
 
Performance obligations satisfied in one act (1)     3,941,446       2,110,785       3,076,762       1,557,039  
Performance obligations satisfied over certain time period     10,225       5,387       7,982       102,659  
      3,951,671       2,116,172       3,084,744       1,659,698  

 

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

 

14. DIFFERENCE IN QUOTED PRICES OF GOLD AND FOREIGN CURRENCY

 

    06/30/2018     06/30/2017  
Description   Accumulated
from beggining
year up to
06/30/2018
    Quarter
ended
06/30/2018
    Accumulated
from beggining
year up to
06/30/2017
    Quarter
ended
06/30/2017
 
Translation of foreign currency assets and liabilities to pesos     (1,315,530 )     (1,336,523 )     339,013       270,211  
Income from foreign currency Exchange     453,842       324,243       208,308       95,042  
      (861,688 )     (1,012,280 )     547,321       365,253  

 

15. OTHER OPERATING INCOME

 

    06/30/2018     06/30/2017  
Description   Accumulated
from beggining
year up to
06/30/2018
    Quarter
ended
06/30/2018
    Accumulated
from beggining
year up to
06/30/2017
    Quarter
ended
06/30/2017
 
Services     2,108,343       1,095,438       1,759,784       836,742  
Sale of investment property and other non-financial assets     137,123       27,202       10,313       10,313  
Adjustments and interest from other receivables     80,095       40,181       26,373       15,793  
Initial recognition of loans     56,530       33,750                  
Sale of property, plant and equipment     1,450       731       1,388       821  
Other     296,203       178,411       333,702       204,508  
      2,679,744       1,375,713       2,131,560       1,068,177  

 

16. EMPLOYEE BENEFITS

 

    06/30/2018     06/30/2017  
Description   Accumulated
from beggining
year up to
06/30/2018
    Quarter
ended
06/30/2018
    Accumulated
from beggining
year up to
06/30/2017
    Quarter
ended
06/30/2017
 
Remunerations     3,354,242       1,838,841       2,737,092       1,432,657  
Social Security Contributions     657,121       364,336       530,168       270,824  
Compensations and bonuses to employees     343,392       184,926       211,276       100,235  
Employee services     106,078       54,984       102,931       57,336  
      4,460,833       2,443,087       3,581,467       1,861,052  

 

 

 

  27  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

17. ADMINISTRATION EXPENSES

 

    06/30/2018     06/30/2017  
Description   Accumulated
from beggining
year up to
06/30/2018
    Quarter
ended
06/30/2018
    Accumulated 
from beggining
year up to
06/30/2017
    Quarter
ended
06/30/2017
 
Taxes     449,841       223,653       339,340       177,588  
Maintenance, conservation and repair expenses     374,072       207,801       254,223       132,389  
Security services     314,847       167,550       244,188       122,237  
Fees to Directors and Syndics     309,878       147,389       185,266       98,542  
Electricity and communications     237,298       121,874       165,032       83,897  
Other fees     229,507       124,424       160,039       84,429  
Leases     137,875       73,696       105,564       53,664  
Advertising and publicity     87,564       55,312       81,841       38,356  
Representation, travel and transportation expenses     53,260       30,423       36,979       20,067  
Stationary and office supplies     26,127       13,251       20,929       10,670  
Insurance     24,014       13,328       23,473       12,526  
Hired administrative services     8,043       4,527       8,473       2,599  
Other     699,208       366,296       488,604       263,524  
      2,951,534       1,549,524       2,113,951       1,100,488  

  

18. OTHER OPERATING EXPENSES

 

    06/30/2018     06/30/2017  
Description   Accumulated
from beggining
year up to
06/30/2018
    Quarter
ended
06/30/2018
    Accumulated
from beggining
year up to
06/30/2017
    Quarter
ended
06/30/2017
 
                         
Gross turnover tax     2,465,221       1,309,284       1,586,261       815,229  
Charges for other provisions     353,418       187,593       204,642       134,800  
Deposits Guarantee Fund contributions     132,926       68,972       99,899       50,471  
Donations     47,584       24,647       45,905       23,707  
Insurance claims     22,080       11,688       13,001       8,052  
Initial loan recognition                     48,951       41,935  
Other     1,325,519       715,401       997,989       513,646  
      4,346,748       2,317,585       2,996,648       1,587,840  

 

19. ADDITIONAL DISCLOSURES IN THE STATEMENT OF CASH FLOWS

 

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

 

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

 

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

 

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

 

 

 

  28  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

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

 

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

 

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

 

    06/30/2018     12/31/2017     06/30/2017     12/31/2016  
Cash and deposits in banks     50,309,607       35,561,574       36,414,841       35,986,159  
Debt securities at fair value             44               9,585  
Other debt securities     38,037,240       5,548,056       17,214,527       16,074,409  
Loans and other financing     144,308       93,871       82,992          
      88,491,155       41,203,545       53,712,360       52,070,153  

 

20. CAPITAL STOCK

 

The Bank’s subscribed and paid-in capital as of June 30, 2018, amounted to 669,663. Since December 31, 2014, the Bank’s capital stock has changed as follows:

 

As of December 31, 2014     594,563  
Capital stock decrease as provided by Art, 67 of Law No, 26,831 (1)     (10,000 )
Capital stock increase as approved by Shareholders´ Meeting held on April 28, 2017 (2)     85,100  
As of June 30, 2018     669,663  

 

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

 

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

 

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

 

Additionally, on August 8, 2018 the Board of Directors of Banco Macro SA, has established the terms and conditions for the acquisition of its own shares, in accordance with section 64 of Law 26,831 and CNV rules, under the following conditions:

 

(1) Maximum amount to invest: up to 5,000,000

 

(2) Maximum number of shares for own acquisition: up to 5% of the capital stock

 

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

 

 

 

  29  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

(4) Terms in which the acquisition will take place: 30 business days, beginning from the following day in which the information is published in the Bulletin of the Buenos Aires Stock Exchange, subject to renewal or extension of the term, which will be informed to investors.

 

As mention in the preceding paragraph, until the date of issuance of these condensed consolidated interim Financial Statements, the Bank has adquired 7,149,035 common shares Class B for a face value Ps.1 for an amount of 1,030,754.

 

21. EARNINGS PER SHARE

 

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

 

To determine the weighted average number of ordinary shares outstanding during the period the Bank used the number of ordinary shares outstanding at the beginning of the period adjusted, if applicable, by the number of ordinary shares bought back or issued during the period multiplied by the number of days that the shares were outstanding in the period, Note 19 provides a detail of the changes in the Bank’s capital stock.

 

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

 

Dividends paid and proposed

 

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

 

The Shareholders’ Meeting held on April 27, 2018 resolved to distribute cash dividends for 3,348,315, which considering the number of shares outstanding at the date of such resolution, represented 5 pesos per share. These cash dividends were paid on May 15, 2018.

 

22. DEPOSIT GUARANTEE INSURANCE

 

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

 

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

 

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

 

 

 

  30  

 

   

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

23. RESTRICTED ASSETS

 

As of June 30, 2018 and December 31, 2017, the followings Bank´s assets are restricted:

 

Item   06/30/2018     12/31/2017  
Debt securities at fair value through profit or loss and other debt securities                
·       Central Bank of Argentina Internal Bills in pesos, maturity 09-19-2018 as of June 30, 2018 and maturing 02-21-2018 as of December 31, 2017, for the performance of forward foreign currency transactions.     156,990       53,059  
·      Discount bonds in pesos regulated by Argentinean legislation, maturing 2033 used as security in favor of Sedesa (1).     121,368       117,454  
·      Discount bonds in pesos regulated by Argentinean legislation, maturing 2033 securing the regional economies Competitiveness Program – BID loan No. 3174/OC-AR.     86,851       98,541  

·      Central Bank of Argentina Internal Bills in pesos, maturing 09-19-2018 as of June 30, 2018 and maturity 02-21-2018 as of December 31, 2017, securing the operation through negotiation secured transaction Segment as the main counterparty of the MAE.

 

    50,407       9,647  
Discount bonds in pesos regulated by Argentinian legislation, maturing 2033, for minimum counterpart required for Agents to act in the new categories contemplated under Resolution No. 622/13 of the CNV.     11,580       13,139  
·      Discount bonds in pesos regulated by Argentinean legislation, maturing 2033 securing a BID loan of Province of San Juan No. 2763/OC-AR.     7,817       8,869  
·      Discount bonds in pesos regulated by Argentinian legislation, maturing 2033 securing the sectorial Credit Program of the Province of San Juan, Production investment financing fund.     7,672       8,704  
·      Secured bonds under Presidential Decree No, 1579/2002 as security for a loan received from Banco de Inversión y Comercio Exterior SA (Bice).             4,270  
·      Other public and private securities.     26,309       26,490  
Subtotal debt securities at fair value through profit or loss and other debt securities     468,994       340,173  
                 
Other financial assets                
·      Sundry debtors – foreclosure within the scope of the claim filed by the DGR against the City of Buenos Aires for differences on gross turnover tax. Subtotal Other financial assets     827       827  
      827       827  
Loans and other financing – non financial private sector and foreign residents                
·      Interests derived from contributions made as protector (2)     113,998       113,998  
Subtotal loans and other financing – non-financial private sector and foreign residents     113,998       110,848  
                 
Financial assets delivered as a guarantee                
·      Special guarantee checking accounts opened in Central Bank for transactions related to the electronic clearing houses and similar entities.     4,821,479       4,005,730  
·      Forward purchase for repo transactions.     2,034,516       2,993,719  
·      Guarantee deposits related to credit and debit card transactions.     605,485       623,491  
·      Other guarantee deposits.     15,602       15,412  
Subtotal Financial assets delivered as a guarantee     7,477,082       7,638,352  
Other non financial assets                
·      Real property related to a call option sold.     115,888       222,023  
Subtotal Other non-financial assets     115,888       222,023  
Total     8,176,789       8,312,223  

 

 

 

  31  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

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

 

(2) In order to keep tax benefits related to these contributions, they must be maintained between two and three years from the date they were made. The same correspond to the following risk funds: Risk fund of Garantizar SGR, Risk fund of Los Grobo SGR and Risk fund of Avaluar SGR as of June 30, 2018 and December 31, 2017.

 

Additionally, as of December 31, 2016, the amount of restricted assets was 4,191,090.

 

24. TRUST ACTIVITIES

 

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

 

24.1. Financial trusts for investment purposes

 

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

 

As of June 30, 2018 and December 31, 2017 and 2016, debt securities and certificates of participation in financial trusts administrated by the Bank for investment purpose, total to 1,029,235, 1,011,828 and 730,672, respectively.

 

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

 

24.2. Trusts created using financial assets transferred by the Bank

 

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

 

As of June 30, 2018 and December 31, 2017 and 2016, considering the latest available accounting information as of the date of the accompanying condensed consolidated interim Financial Statements, the assets managed through Macro Fiducia SA (subsidiary) of this type of trusts amounted to 69,806, 116,697 and 59,128, respectively.

 

24.3. Trusts guaranteeing loans granted by the Bank

 

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

 

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

 

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

 

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

 

 

 

  32  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

As of June 30, 2018 and December 31, 2017 and 2016, considering the latest available accounting information as of the date of the accompanying condensed consolidated interim Financial Statements, the assets managed by the Bank amounted to 490,300, 328,268 and 451,569, respectively.

 

24.4. Trusts in which the Bank acts as trustee (management)

 

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

 

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

 

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

 

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

 

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

 

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

 

As of June 30, 2018 and December 31, 2017 and 2016, considering the latest available accounting information as of the accompanying condensed consolidated interim Financial Statements, the assets managed by the Bank amounted to 3,200,292, 2,200,840 and 2,117,959, respectively.

 

25. COMPLIANCE WITH CNV STANDARDS

 

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

 

25.1.1 Operations of Banco Macro SA

 

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

 

Additionally, the Bank’s shareholders’ equity exceeds the minimum amount required by this regulation, amounting to 32,000, as well as the minimum counterpart required of 11,000, which the Bank paid-in with government securities as described in Note 22 to the accompanying condensed consolidated interim Financial Statements.

 

25.1.2 Operations of Banco del Tucumán SA

 

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

 

Additionally, the shareholders’ equity of this Subsidiary exceeds the minimum amount required by this regulation, amounting to 3,500, as well as the minimum counterpart required of 1,750, which the subsidiary paid-in with government securities.

 

 

 

  33  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

25.1.3 Operations of Macro Securities SA

 

Considering the current operations of this Subsidiary, and according to the provisions established by CNV effective as of the approval of the General Resolution No. 622/2013 issued by such agency, the Company is registered with this agency CNV under the following categories: clearing and settlement agent, trading agent, comprehensive trading agent and mutual investment funds placement and distribution agent (ALyC, AN, AN – comprehensive and ACyD FCI).

 

Additionally, the shareholders’ equity of this Company exceeds the minimum amount required by this regulation, amounting to 18,125 as well as the minimum counterpart required of 9,000, which the Company paid-in with mutual fund units or shares.

 

25.1.4 Operations of Macro Fondos Sociedad Gerente de Fondos Comunes de Inversión SA

 

Considering the current operations of this Subsidiary and according to the provisions established by CNV effective as of the approval of the General Resolution No. 622/2013 issued by such agency, the Company is registered with the CNV as agent for the Administration of Collective Investment Products of Mutual Funds.

 

Additionally, the shareholders’ equity of this Company exceeds the minimum amount required by this regulation, amounting to 500 plus 100 per each additional Mutual Fund it administers, and the minimum countpart amounting to 1,100 and is paid-in with mutual fund units or shares.

 

25.1.5 Operations of Macro Fiducia SA

 

Considering the current operations of this Subsidiary, and according to the provisions established by CNV effective as of the approval of the General Resolution 622 issued by such agency, the Company is registered with the CNV as Financial Trustee agent and Non-Financial Trustee agent.

 

Additionally, the shareholders’ equity of this Company exceeds the minimum amount required by this regulation, amounting to 6,000, and the minimum countpart amounting to 3,000 and is paid-in with mutual fund units or shares.

 

25.2 Documents in custody

 

As a general policy, the Bank delivers for custody to third parties, the documentary support of its aged accounting and management operations, i.e. those whose date is prior to the last fiscal year-end, except for the Inventory Book, in which aging is deemed to include those with a date prior to the two fiscal years ended. In compliance with CNV General Resolution No. 629 requirements, the Bank has placed (i) the Inventory Books for fiscal years ended through December 31, 2015 included, and (ii) certain documentation supporting the economic transactions for fiscal years ended through December 31, 2017, included, under the custody of the following companies: AdeA Administradora de Archivos SA (warehouse located at Ruta 36, km 31.5, Florencio Varela, Province of Buenos Aires) and ADDOC Administración de Documentos SA (warehouse located at Avenida Circunvalación Agustín Tosco with no number, Colectora Sur, between Puente San Carlos and Puente 60 blocks, Province of Córdoba and Avenida Luis Lagomarsino 1750, formerly Ruta 8 Km 51.200, Pilar, Province of Buenos Aires).

 

25.3 As depositary of Mutual Funds

 

As of June 30, 2018 Banco Macro SA, in its capacity as Depositary Company, holds in custody the shares in Mutual Funds subscribed by third parties and assets from the following mutual funds:

 

 

 

  34  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

Fund   Number of shares     Equity  
Pionero Pesos     1,264,531,571       4,994,823  
Pionero Renta Ahorro     1,524,811,495       11,329,957  
Pionero F F     140,720,374       839,993  
Pionero Renta     9,575,695       151,691  
Pionero Acciones     21,260,560       415,217  
Pionero Renta Plus     82,805,233       1,468,883  
Pionero Empresas FCI Abierto PYMES     196,578,848       526,126  
Pionero Pesos Plus     224,633,209       533,296  
Pionero Renta Ahorro Plus     642,792,339       1,095,645  
Pionero Renta Mixta I     119,555,896       164,496  
Pionero Renta Mixta II     494,755,103       742,491  
Pionero Renta Estratégico     422,791,472       421,901  
Pionero Renta Capital     50,000       50  
Pionero Argentina Bicentenario     50,000       50  
Pionero Ahorro Dólares     276,964,256       8,319,382  
Pionero Renta Global     50,000       1,443  
Pionero Renta Fija Dólares     28,233,767       816,353  
Argenfunds Renta Pesos     455,725,857       1,100,176  
Argenfunds Renta Argentina     111,145,931       361,384  
Argenfunds Ahorro Pesos     371,626,423       1,448,983  
Argenfunds Renta Privada FCI     157,163,807       704,456  
Argenfunds Abierto Pymes     98,771,168       85,691  
Argenfunds Renta Total     1,041,548,885       1,915,919  
Argenfunds Renta Flexible     446,637,628       658,134  
Argenfunds Renta Dinámica     150,250,705       203,776  
Argenfunds Renta Mixta     77,935,608       128,458  
Argenfunds Renta Global     138,538,228       200,176  
Argenfunds Renta Capital     7,234,449       215,120  
Argenfunds Renta Balanceada     208,789,752       290,291  
Argenfunds Renta Crecimiento     8,785,320       261,934  

 

26. ACCOUNTING ITEMS THAT IDENTIFY THE COMPLIANCE WITH MINIMUM CASH REQUIREMENTS

 

The items recognized by the Bank to constitute the minimum cash requirement effective for June 2018 are listed below, indicating the balances as of month-end of the related items:

 

Description   Banco Macro
SA
    Banco del
Tucumán SA
 
Cash and deposits in banks                
Amounts in Central Bank accounts     35,343,995       3,185,490  
Other debt securities                
Government securities computable for the minimum cash requierements     3,373,000          
Financial assets delivered as guarantee                
Special guarantee accounts with the Central bank     4,520,583       300,896  
Total     43,237,578       3,486,386  

 

 

 

  35  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

27. PENALTIES APPLIED TO THE FINANCIAL ENTITY AND SUMMARY PROCEEDINGS INITIATED BY THE CENTRAL BANK

 

The Central Bank Communiqué “A” 5689 requires banks to disclose in their financial statements certain information regarding summaries and sanctions received from certain regulatory authorities, regardless of the amounts involved and the final conclusions of each cause.

 

Next follows a description of the situation of Banco Macro SA and Banco del Tucumán SA as of June 30, 2018:

 

Banco Macro SA

 

Summary proceedings filed by the Central Bank

 

Criminal foreign exchange regime summary proceedings : No. 6545 dated 09/03/2015.

Reason: Alleged breach of article No, 1 subsections e) and f) of the CFEL and the Central Bank Communiqué “A” 5264, as amended and supplemented, for foreign exchange transactions with a customer without the documentation to support the genuineness of the transaction.

Proceeding filed against : Banco Macro SA and the officer responsible for Foreign Trade and Foreign Exchange (Susana Lerman, José Luis Vejo, Jorge Francisco Scarinci and Horacio Ricardo Javier Sistac, Carlos Daniel Gomez and Oscar Luis Romero).

Status : On 11/11/2015 Banco Macro SA and the individuals accused under the summary proceedings filed their defenses offering evidence and requesting their acquittal. Furthermore, through resolution dated 05/23/2016, the Central Bank decided to dismiss the motion to declare the criminal action no longer enforceable under the statute of limitations filed by Banco Macro SA and the above mentioned individuals. On 05/31/2016 the Bank filed a motion for annulment with a supplementary appeal. On 07/11/2016 the Central bank decided to dismiss such motion for annulment. Against such decision, the Bank filed a motion on 07/15/2016 reserving the right to re-edit the motion to declare the criminal action no longer enforceable under the statute of limitations before the relevant competent National Court of First Instance in Criminal Economic Matters under the situation provided for in section 9 of the CFEL. On 08/09/2016 the Bank filed its memorial due to the closing of the evidentiary stage and on 08/18/2016, filed a motion requesting the retroactive application of the more benign foreign exchange rule. On 04/12/2018 the Bank was served notice of the decision of the Central Bank which, based on the application of the more benign foreign exchange rule, declared its accusation against the individuals involved in the summary proceedings null and void and therefore ordered the closing of the proceedings.

 

Financial Summary proceedings: No. 1496 dated 02/24/2016.

Reason: deficiencies on the consolidated supervision exercised by the Bank regarding its subsidiaries, with non-compliance of internal controls.

Proceeding filed against : Banco Macro SA and the Members of the Board of Directors (Jorge Horacio Brito, Delfín Jorge Ezequiel Carballo, Jorge Pablo Brito, Marcos Brito, Juan Pablo Brito Devoto, Luis Carlos Cerolini, Carlos Enrique Videla, Alejandro Macfarlane, Guillermo Eduardo Stanley, Constanza Brito and Emanuel Antonio Alvarez Agis).

Status : pending resolution before the Central Bank. On 04/07/2016, we filed the defenses and evidence. On 05/18/2016 we requested on behalf of the accused Delfin Jorge Ezequiel Carballo the resolution of the motion for lack of standing to be sued. To date this motion is still pending resolution.

 

Penalties imposed by the Central Bank

 

Financial Summary proceedings: No. 1380 dated 03/11/2013.

Reason: Alleged excess in the assets used for guarantee purposes which should have been used for related statutory operation ratios; failure to fulfill with the limitations of deposit increase, lack of veracity in book records, neglect to present the corresponding accounting disclosure of such excess and failures according to Central Bank’s requirements. Penalty amount: 2,000.

Proceeding filed against : former Banco Privado de Inversiones SA, Directors, Supervisory Committee and Corporate Services Manager (Alejandro Manuel Estrada, Raúl Fernandez, Alejandro Carlos Estrada, Eduardo Guillermo Castro, Jorge Norberto Cerrotta, Armando Rogelio Pomar, Carlos Soulé and Baruki Luis Alberto Gonzalez).

 

 

 

  36  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

Status : On 06/12/2015 the Central Bank passed Judgment No. 527, imposing fines to those responsible. On 06/25/2015 the fine was paid. On 07/10/2015 a direct appeal was filed against such resolution to CNACAF (Court of Appeals in Contentious Administrative Matters). On December 2015, the penalty amount was recovered by the Bank as a result of the guarantee provided by the sellers at the moment of acquisition of the shares of former BPI SA. On September 2015, the appeals were filed with Courtroom II, under case No. 48607/2015 of CNACAF. On 05/10/2016, Courtroom II decided to confirm the penalties imposed by the Central Bank. Upon such decision, the Bank filed an extraordinary appeal that was dismissed by the Courtroom II of the CNACAF on 08/02/2016, On 08/16/2016 a motion for reconsideration of dismissal of appeal was lodged on behalf of the Bank and of Mr. Carlos Soulé before the Argentine Supreme Court of Justice (CSJN) upon rejection of the federal extraordinary appeal, which is still pending to date.

 

Financial Summary proceedings: No. 1401 dated 08/14/2013.

Reason: alleged failure in financing to the non-financial public sector, for temporary overdrafts through checking accounts of the Municipality of Córdoba and Reconquista. Penalty amount: 2,400.

Proceeding filed against : Banco Macro SA and the members of the Board (Jorge Horacio Brito, Jorge Pablo Brito and Marcos Brito).

Status : On 03/02/2015 the Central Bank passed Resolution No. 183/15 imposing fines to the Bank, which were debited from the Bank´s account 00285 on 03/12/2015. On 03/30/2015 a direct appeal was filed with the CNACAF against such resolution. On April 2015 the appeal was presented at Courtroom IV of the CNACAF under No. 19,971/2015. On 06/23/2015 the Court informed the Central Bank about the appeal lodged by Banco Macro. On 07/13/2016 Courtroom IV of the CNACAF sustained the appeal filed by the Bank and annulled the decision imposing the fines to the Bank. The Central Bank filed an extraordinary appeal, which was answered by the Bank on 08/29/2016. On 09/06/2016 Courtroom IV of the CNACAF dismissed Central Bank’s extraordinary appeal. On 09/14/2016 the Central Bank lodged a motion for reconsideration of dismissal of the extraordinary appeal with the CSJN (Argentine Supreme Court of Justice), which is still pending resolution.

 

Penalties imposed by the Financial Information Unit (UIF)

 

File : No. 62/2009 dated 01/16/2009.

Reason : Purchase of foreign currency from April 2006 through August 2007. Penalty amount: 718.

Penalty imposed on : Banco Macro SA and those in charge of Anti-money laundering regulation compliance (Juan Pablo Brito Devoto and Luis Carlos Cerolini).

Status : The UIF passed Resolution No. 72/2011 on 06/09/2011, imposing fines to those responsible. An appeal was lodged with the CNACAF. On 10/31/2016 the Courtroom III decided the following: (i) on the one hand, as to the transactions carried out between 10/11/2006 and 08/22/2007, to declare that the punitive power of the UIF had expired at the time of the summary proceedings, rendering UIF`s Resolution 72/2011 invalid, (ii) on the other hand, as to the transactions performed from 03/05/2007 and from 04/17/2007 through 08/22/2007, to refer these proceedings again to the UIF for a new resolution readjusting the fines imposed on the Bank and Messrs. Juan Pablo Brito Devoto and Luis Carlos Cerolini. Upon such court order, both the UIF and the Bank lodged an extraordinary appeal. Such appeals were rejected by the Court on April 25, 2017. On May 10, 2017 both the Bank and the UIF filed a motion for reconsideration of dismissal of appeal before the Argentine Supreme Court which is still pending resolution.

 

File : No. 248/2014 (UIF Note Presidency 245/2013 11/26/2013) dated 07/30/2014.

Reason : Alleged deficiencies in preparing certain “Reports on suspicious transactions (ROS)” due to cases of infringement detected in certain customer files. Penalty amount: 330.

Penalty imposed on : Banco Macro SA, the members of the Board and those in charge of Anti-money laundering regulation compliance (Luis Carlos Cerolini – both as Compliance Officer and Director - and Jorge Horacio Brito, Delfín Jorge Ezequiel Carballo, Juan Pablo Brito Devoto, Jorge Pablo Brito, Alejandro Macfarlane, Carlos Enrique Videla, Guillermo Eduardo Stanley, Constanza Brito, Emanuel Antonio Alvarez Agis, Marcos Brito and Rafael Magnanini –as Directors of Banco Macro SA-).

Status : upon notice of the summary proceedings, on 05/08/2015 the Bank filed its defense, offering evidence and requesting its acquittal. On 12/26/2016 the UIF passed Resolution 164/16 imposing fines on those responsible and issuing a favorable decision on the plea of lack of locus standi lodged by Messrs. Carballo and Magnanini. On 01/30/2017 the Bank paid the fine imposed by the UIF, due to the the non-staying effect thereof. On 03/13/2017 a Direct Appeal was filed against such resolution, and the legal action it be decided at Room III of the CNACAF, entitled “Banco Macro SA et al vs, UIF on Criminal Code – Law 25246 – Decree 290/07 sect. 25” (Court File No. 13500/2017). This court file is pending resolution.

 

 

 

  37  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

Although the above described penalties do not involve material amounts, as of the date of issuance of the accompanying consolidated Financial Statements, the total amount of monetary penalties received, pending payment due to any appeal lodged by the Bank, amounts to 718 and was recognized according to the Central Bank’s Communiqués “A” 5689 and 5940, as amended and supplemented.

 

Additionally, there are pending summary proceedings before the CNV and the UIF, as described below:

 

File : No. 1480/2011 (CNV Resolution No. 17529) dated 09/26/2014.

Reason : Potential non-compliance with the obligation to inform a “Significant Event”.

Persons subject to summary proceedings : Banco Macro SA, the members of the Board, the regular members of the Supervisory Committee and the person/s responsible for Market Relations (Jorge Horacio Brito, Delfín Jorge Ezequiel Carballo, Juan Pablo Brito Devoto, Jorge Pablo Brito, Luis Carlos Cerolini, Roberto Julio Eilbaum, Alejandro Macfarlane, Carlos Enrique Videla, Guillermo Eduardo Stanley, Constanza Brito, Daniel Hugo Violatti, Ladislao Szekely, Santiago Marcelo Maidana and Herman Fernando Aner).

Status : on 10/28/2014 the Bank and the persons involved filed their defenses offering evidence and requesting their acquittal. On 08/03/2015 the term to produce evidence was closed and on 08/19/2015 the defendants lodged their memorials. To the date hereof this action is still pending resolution.

 

File : 2577/2014 (CNV Resolution No. 18863) dated 07/20/2017.

Reason : potential non-compliance with de provisions of section 59 of Law 19550 and paragraph 1 of Chapter 6 Section 19 of Article IV of Chapter II of CNV Rules (Revised 2013, as amended) in force at the time of the issues under analysis.

Persons subject to summary proceedings : Banco Macro SA, in its capacity as Custody Agent of Collective Investment Products of Mutual Funds, regular Directors and regular members of the Supervisory Committee (Jorge Horacio Brito, Delfín Jorge Ezequiel Carballo, Jorge Pablo Brito, Marcos Brito, Juan Pablo Brito Devoto, Luis Carlos Cerolini, Federico Pastrana, Carlos Enrique Videla, Alejandro Macfarlane, Guillermo Eduardo Stanley, Constanza Brito, Emmanuel Antonio Alvarez Agis, Alejandro Almarza, Carlos Javier Piazza and Vivian Haydee Stenghele).

Status : on 07/28/2017 the Bank and the persons subject to these summary proceedings were given notice of this action and were given 10 business days to make the relevant filing. On August 11, 2017, the Bank filed its defense requesting the nullity of the accusation, the expiration of the time limit to file the administrative criminal actions and the lack of responsibility of the people subject to these summary proceedings for the acts subject matter of this action since such supervisory obligation is not in accordance with the role of the Custody Agent. On 12/06/2017 the court held the firs preliminary hearing and the summary proceedings turned to be under the analysis of the CNV, who shall decide whether it allows for the production of evidence or directly decides on the merits of the case.

 

File : No. 137/2015 (UIF Resolution No, 136/2017) dated 12/19/2017.

Reason : alleged breach to the contents of the Code of Procedure applicable to Anti-money Laundering and Terrorism Financing as Settlement and Clearing Agent at the time of an inspection of the CNV and to the Internal Audit Process referred to in its capacity as Settlement and Clearing Agent (UIF Resolution No. 229/2011, as amended).

Persons subject to summary proceedings : Banco Macro SA, members of the management body during the period subject-matter of these summary proceedings (Jorge Horacio Brito, Jorge Pablo Brito, Juan Pablo Brito Devoto, Constanza Brito, Marcos Brito, Delfín Jorge Ezequiel Carballo, Delfín Federico Ezequiel Carballo, Carlos Enrique Videla, Alejandro Macfarlane, Guillermo Eduardo Stanley, Emmanuel Antonio Alvarez Agis, Nicolás Alejandro Todesca, Carlos Alberto Giovanelli, José Alfredo Sanchez, Martín Estanislao Gorosito, Roberto Julio Eilbaum, Mario Luis Vicens, Nelson Damián Pozzoli, Luis María Blaquier, Ariel Marcelo Sigal, Alejandro Eduardo Fargosi, Juan Martin Monge Varela and Luis Cerolini in his double capacity as compliance officer and member of the management body).

Status : on 03/08/2018 the Bank and the persons subject to these summary proceedings filed their defenses. Additionally, the UIF ordered the production of evidence and therefore on 03/28/2018 and 04/03/2018 official information written notices were given to the Central Bank and CNV. The evidence offered was provided; therefore, on May 21, 2018, the UIF declared that the trial stage was concluded and set the case for the closing arguments. On June 8, 2018, the Bank, the directors and the compliance officer provided their closing arguments. To date, the UIF is analyzing the file in order to issue a resolution.

 

File : No. 1208/2014 (UIF Resolution No. 13/2016) dated January 15, 2016.

Reason : Alleged failure to comply with the Anti-Money Laundering Law, as amended, and UIF Resolution No. 121/11.

 

 

 

  38  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

Persons subject to the summary proceedings : Banco Macro SA, Jorge Horacio Brito, Delfín Jorge Ezequiel Carballo, Juan Pablo Brito Devoto, Jorge Pablo Brito, Luis Carlos Cerolini, Alejandro Macfarlane, Carlos Enrique Videla, Guillermo Eduardo Stanley, Constanza Brito, Marcos Brito and Emmanuel Antonio Álvarez Agis.

Status : On May 17, 2018, the Bank and the individuals were notified about Resolution No. 13/2016, whereby the summary proceedings were opened. The proceedings began due to the Central Bank submission on May 12, 2014, of the background related to the overall inspection performed in Banco Macro SA from November 26, 2013, through January 17, 2014, by the Special Operations Oversight Management in order to evaluate the measures adopted by the Bank for the prevention of money laundering and terrorism financing. The UIF stated in the resolution that summary proceedings should be filed “to discharge any responsability that may be borne by Banco Macro SA, its Board of Directors and/or compliance officers that were holding office during the term of the alleged infringements described in the recitals hereof, so as to determine whether they committed the crime punished under section 24(1) and (2), Law No. 25,246, as amended”. On May 17, 2018, the Bank was notified about such case file. On June 15, 2018, Banco Macro SA, the members of the Board of Directors and the compliance officer filed their defense briefs. On July 2, 2018, the UIF sustained the lack of capacity to be sued of Delfín Jorge Ezequiel Carballo, discarding his responsability in this summary proceeding.

 

Banco del Tucumán SA

 

Summary proceedings filed by the Central Bank

 

Criminal Foreign Exchange Regime Summary Proceedings : No. 3078 dated 06/24/2008.

Reason : Alleged breach of Section 8 of the Criminal Foreign Exchange Regime Act, for irregularities in US dollar sale transactions of the financial intermediary established in Communiqué “B” 7174.

Proceedings filed against : Banco del Tucumán SA, manager and responsible for Operations, Treasurer and Cashiers (Francisco Carlos Bustamante, Juan Ramón Lemoine, Héctor Gaspar Taranto, Héctor Arnaldo Brito, Ana Carolina De Genova Palomar, Jorge Marcelo Albertinetti, Sergio Fabián Intile, Lorena Natalia Frías and Carla Andrea Rocha).

Status : On 12/29/2011 the Federal Judge No. 1 of Tucumán decided to declare the criminal action expired under the statute of limitations. This decision was appealed on 02/01/2012 by the District Attorney No, 1 of Tucumán. On 07/31/2013 the relevant Court of Appeals sustained such decision and the case was subsequently sent to Room I of the Court of Criminal Appeals in Cassation as a result of a Cassation Appeal filed by the District Attorney. On 05/26/2016 Room I sustained the Cassation Appeal, revoking the decision of the Federal Judge No. 1 in the case in which a new decision shall have to be issued in accordance with the ruling of Room I of the Court of Criminal Appeals in Cassation. As of June 30, 2018, (i) on June 27, 2018, the law firm became aware of Criminal Foreign Exchange Regime Summary Proceedings No. 3078 of the Central bank and was notified that, on October 22, 2012, Federal Court No. 1 of Tucumán declared the criminal action to be extinguished due to the lapse of the statute of limitations in relation to the facts punished by the foreign exchange criminal regime that gave rise to the summary proceedings; and (ii) as to the main charged person, former employee of the Bank, Francisco Carlos Bustamante, on May 24, 2018, Federal Court No. 2 decided to declare the criminal action to be barred by the statute of limitations pursuant to section 59(3) of the Criminal Code and, consequently, acquit such person. This resolution is final.

 

Penalties imposed by the Central Bank

 

Financial Summary Proceedings : No. 1349 dated 09/07/2012.

Reason : Alleged breach of the provisions of Communiqué “A” 3054, OPRAC 1-476, Exhibit, Article 2, section 2.1 and Article 3, section 3.1.2.; and Communiqué “A” 4798, OPRAC 1-613, Exhibit, Article 4, section 41., regarding the financing to the Non-Financial Public Sector, for the acquisition of secured loans without the appropriate authorization by the Central Bank. Penalty amount: 1,440.

Proceedings filed against : Banco del Tucumán SA and the members of the Board of Directors (Jorge Horacio Brito, Luis Carlos Cerolini, Delfín Jorge Ezequiel Carballo, Jorge Pablo Brito, Claudio Alejandro Cerezo and Waldo Camilo López).

Status : On 03/12/2014 the Central Bank issued Res, 149/14 applying the fine. On 03/19/2014 such fine was debited from the account number 00060 of the Bank. On 04/08/2014 the Bank filed a direct appeal against the resolution of the SEFyC, on behalf of the Bank and of the individuals involved in the summary proceedings, before the CNACAF, who sustained Resolution 149/14. On 11/14/2014 the Bank filed an extraordinary appeal for arbitrariness of the decision issued by the Court of Appeals. On 02/18/2015 Room III of the National and Federal Court of Appeals (CNAF for its acronym in Spanish language) dismissed the Extraordinary Appeal filed by the Bank with court costs. On 02/26/2015 the Bank lodged a motion for reconsideration of dismissal of the Extraordinary Appeal, which is still pending to date.

 

 

 

  39  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

The Bank Management and its legal advisors consider no further significant accounting effects could arise from the final outcome of the above mentioned judicial proceedings,

 

28. CORPORATE BONDS ISSUANCE

 

The corporate bond liabilities recorded by Banco Macro SA in the accompanying condensed consolidated interim Financial Statements amount to:

 

Corporate Bonds   Original value     Residual face
value as of
06/30/2018
    06/30/2018     12/31/2017  
                         
Subordinated Resettable – Class A   USD 400,000,000 (a.1)   USD 400,000,000       11,646,217       7,565,759  
Non-subordinated – Class B   Ps. 4,620,570,000 (a.2)   Ps. 4,620,570,000       4,710,409       4,712,216  
Non-subordinated – Class C   Ps. 3,207,500,000 (a.3)   Ps. 3,207,500,000       3,414,891          
Total                     19,771,517       12,277,975  

 

a.1) On April 26, 2016, the general regular shareholders’ meeting approved the creation of a Global Program for the Issuance of Medium-Term Debt Securities, in accordance with the provisions of Law No. 23,576, as amended and further applicable regulations, up to a maximum amount outstanding at any time during the term of the program of USD 1,000,000,000 (one billion US dollars), or an equal amount in other currencies, under which it is possible to issue simple corporate bonds, not convertible into shares in one or more classes. Also, on April 28, 2017, the General and Special Shareholder´s Meeting resolved to extend of the maximum amount of the abovementioned Global Program up to USD 1,500,000,000 (one thousand five hundred millions US dollars).

 

On November 4, 2016, under the abovementioned Global Program, Banco Macro SA issued Subordinated Resettable Corporate Bonds, class A, at a fixed rate of 6.750% p,a, until reset date, fully amortizable upon maturity (November 4, 2026) for a face value of USD 400,000,000 (four hundred million US dollars), under the terms and conditions set forth in the pricing supplement dated October 21, 2016, Interest is paid semiannually on May 4 and November 4 of every year and the reset date will be November 4, 2021. Since reset date, these Corporate Bonds will accrue a benchmark reset rate plus 546.3 basis point, according terms and conditions abovementioned.

 

In addition, the Bank has the option to fully redeem the issuance as the reset date and under the conditions established in the pricing supplement after that date. The Bank used the funds derived from such issuance to grant loans in accordance with Central Bank guidelines.

 

As of December 31, 2016, the recorded amount related to these corporate bonds was 6,376,537.

 

a.2) On May 8, 2017, under Global Program mention on item a.1), Banco Macro SA issued non subordinated simple corporate bonds Class B, not convertible into shares, at a fixed rate of 17.50%, fully amortizable upon maturity (May 8, 2022) for a face value of pesos 4,620,570,000 equivalent to USD 300,000,000 (three hundred million US dollars), under the terms and conditions set forth in the price supplement dated April 21, 2017. Interest is paid semiannually on November 8 and May 8 of every year, beginning on November 8, 2017.

 

In addition, the Bank may fully redeem the issuance for tax matters, but not partially. The Bank used the funds derived from such issuance to grant loans in accordance with Central Bank guidelines.

 

As of the date of issuance of these condensed consolidated interim Financial Statement, the Bank made purchases of this issuance for a face value of Ps. 644,691,000.

 

 

 

  40  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

a.3) On April 9, 2018, under Global Program mention on item a.1), Banco Macro SA issued non subordinated simple corporate bonds Class C, for a face value of pesos 3,207,500,000, at an annual variable rate equivalent to the sum of (i) Badlar private rate applicable for the related accrued period; plus (ii) applicable margin of 3.5% p.a., fully amortizable upon maturity (April 9, 2021). Interest will be paid quarterlyfor the periods due on July 9, October 9, January 9 and April 9 of every year, beginning on July 9, 2018.

 

In addition, the Bank may fully redeem the issuance for tax matters, but not partially. The Bank used the funds derived from such issuance to grant loans in accordance with Central Bank guidelines.

 

As of the date of issuance of these condensed consolidated interim Financial Statement, the Bank made purchases of this issuance for a face value of Ps, 195,000,000.

 

As of December 31, 2016 the Bank had recorded 1,684,636, related to Non-subordinated Corporate Bonds – Class 2, for a face value of USD 150,000,000.

 

Moreover, on April 27, 2018, the Shareholder´s Meeting resolved to increase the maximum amount of the Global Program for the Issuance of Corporate Bonds for a face value from USD 1,500,000,000 to USD 2,500,000,000 or an equal amount in other currencies, according to the Board of Directors opportunely determines.

 

29. ACCOUNTING ITEMS OUTSIDE THE BALANCE SHEET

 

In addition to the expressed in Note 4, the Bank recognizes different transactions outside its Balance sheet, pursuant to the Central Bank standards.

 

As of June 30, 2018, December 31, 2017 and 2016, the main balances outside the Bank’s Balance sheet position include the preferred and non-preferred guarantees received from customers, under the applicable rules in force in this matter, to secure loans transactions and other financing, the value of which totals 44,342,619, 39,247,291 and 22,116,120, respectively; the custody of government and private bonds and other assets held by third parties, the value of which totals 109,156,613, 82,906,533 and 51,936,124, respectively; checks already deposited and pending clearance amount to 1,279,844, 1,266,306 and 1,134,949, respectively and outstanding checks not yet paid amount to 2,810,633, 2,032,128 and 1,852,989, respectively.

 

30. TAX AND OTHER CLAIMS

 

30.1. Tax claims

 

The AFIP (Federal Public Revenue Agency) and tax authorities of the relevant jurisdictions have reviewed the tax returns filed by the Bank related to income tax, minimum presumed income tax and other taxes (mainly gross turnover tax). As a result, there are claims pending at court and/or administrative levels, either subject to discussion or appeal. The most significant claims are summarized below:

 

a) AFIP´s Challenges against the income tax returns filed by former Banco Bansud SA (for the fiscal years since June 30, 1995, through June 30, 1999, and of the irregular six-month period ended December 31, 1999) and by former Banco Macro SA (for the fiscal years ended since December 31, 1998, through December 31, 2000).

 

The matter under discussion that has not been resolved as yet and on which the regulatory agency bases its position is the impossibility of deducting credits that have collateral security, an issue that has been addressed by the Federal Administrative Tax Court and CSJN in similar cases, which have issued resolutions that are favorable to the Bank’s position.

 

b) Ex-officio gross turnover tax assessments in progress and/or adjustments pending resolution by the tax authorities of certain jurisdiction.

 

 

 

  41  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

c) On February 20, 2018, the AFIP required the Bank to amend the returns in connection with Employer’s Contributions for the period between November, 2012 to December, 2016, or otherwise explain the reasons why it had applied the tax rate set forth in Section 2b) of Presidential Decree No. 814/01 (text as per Section 9 of Law No. 25,453). On March 14, 2018, the Bank submitted a detailed explanation of the grounds supporting its position. As of the date hereof, the Bank has not received an answer from AFIP. In the understanding of the bank´s management and its tax and legal advisors, no amount for Employer’s Contributions should be claimed for the indicated periods.

 

The Bank’s Management and its legal advisors consider no further significant accounting effects could arise from the final outcome of the above mentioned proceedings other than those disclosed in the accompanying Condensed consolidated interim Financial Statements.

 

30.2. Other claims

 

In addition, before merging with and into the Bank, Banco Privado de Inversiones (BPI) had a pending class action styled “Adecua v, Banco Privado de Inversiones on ordinary proceedings”, File No. 19073/2007, before Commercial Court No. 3 in and for the City of Buenos Aires, Clerk’s Office No. 5, whereby it was required to reimburse to its clients the life insurance amounts overcharged to amounts payable, as well as to reduce the amounts charged in this regard in the future; this legal proceeding was concluded upon the abovementioned merger because BPI complied in full with the terms of the court-approved agreement reached with Adecua before answering the complaint. However, in March 2013, when BPI had already been merged with and into the Bank, the trial court resolved to amend the terms of the agreement and ordered the reimbursement of amounts of money to a larger number of clients as compared to the number arising from the terms approved by the court in due time. Such resolution was appealed by the Bank as BPI’s surviving company. The appeal was dismissed by the Court of Appeals, which abrogated both the trial court decision and the court-approved agreement, thus ordering the Bank to answer the complaint. This gave rise to the filing of an extraordinary appeal against such decision, as well as the subsequent filing of a complaint for the extraordinary appeal denied. It is currently pending with the Argentine Supreme Court.

 

Moreover, the Bank is also subject to three lawsuits filed with consumers’ associations for the same purpose: a) Adecua v, Banco Macro on ordinary proceedings, File No. 20495/2007, pending with Commercial Court No. 26 in and for the City of Buenos Aires, Clerk’s Office No. 52; b) Damnificados Financieros Asociación Civil Para Su Defensa et al v, Banco Macro on summary proceedings, File No. 37729/2007, pending with Commercial Court No. 26 in and for the City of Buenos Aires, Clerk’s Office No. 52; c) Unión de Usuarios y Consumidores v, Nuevo Banco Bisel on ordinary proceedings, File No. 44704/2008, pending with Commercial Court No. 26 in and for the City of Buenos Aires, Clerk’s Office No. 52.

 

There are also other lawsuits filed by consumer protections associations in relation to the collection of certain commissions and/or financial charges and certain withholdings made by the Bank to individuals as Buenos Aires City stamp tax withholding agent.

 

The Bank’s Management and its legal advisors consider no further significant accounting effects could arise from the final outcome of the above mentioned proceedings other than those disclosed in the accompanying Financial Statements.

 

31. RESTRICTION ON PROFIT DISTRIBUTION

 

a) According to Central Bank regulations, 20% of income for the year plus/less prior-year adjustments and less accumulated losses as for the prior year-end, if any, should be allocated to the Legal Reserve.

 

b) Pursuant to Law No. 25,063, dividends to be distributed in cash or in kind in excess of taxable income accumulated as of the end of the fiscal year immediately preceding the payment or distribution date shall be subject to a 35% income tax withholding as a single and definitive payment. For this purpose, income to be considered in each year will result from adding dividends or earnings from other corporations not computed in the calculation of those earnings in the same tax period(s) to the earnings determined under application of Income Tax Law, and deducting the tax paid for the tax period(s) in which the earnings, or the related proportional amount, being distributed were generated, This withholding shall not be applicable to earnings distributions payable in the fiscal years beginning as of January 1, 2018.

 

 

 

  42  

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

c) Through Communiqué “A” 6464, the Central Bank establishes the general procedure to distribute earnings. According to that procedure, earnings may only be distributed if certain circumstances are met such as no records of financial assistance from the Central Bank due to illiquidity or shortages in payments of minimum capital or minimum cash requirement deficiencies and not being subject to the provisions of sections 34 and 35 bis of the Financial Entities Act (sections dealing with tax payment and restructuring agreements and reorganization of the Bank), among other conditions listed in the abovementioned communiqué that must be met.

 

In addition, profits may only be distributed to the extent there are positive results, after deducting, on a non-accounting basis, from retained earnings and earnings reserves – other for future distribution of profits, (i) the amounts of the legal and other earnings reserves which are mandatory, (ii) all debit balances of each one of the accounting items recognized in “Other Comprehensive Income”, (iii) the income derived of the revaluation of property, plant and equipment, intangible assets and investment property, (iv) the positive net difference between the amortized cost and the fair value of government debt instruments and/or monetary regulation instruments issued by the Central Bank for those instruments recognized at amortized cost, (v) the adjustments identified by the Superintendency of Financial and Exchange Entities of the Central Bank or by the independent external auditor and that have not been recognized in the accounting records and (vi) certain franchises granted by the Central Bank. Additionally, no profit distributions shall be made out of the profit originated as a result of the first-time application of the IFRS, which profit shall be included as a special reserve, the amount of which as of June 30, 2018 is 3,475,669 and is recognized in Retained Earnings.

 

Additionally, the maximum amount to be distributed shall not be over the minimum capital excess recalculating, exclusively for these purposes, the position in order to consider the above mentioned adjustments, among other issues.

 

Finally, the Bank must verify that, after completion of the proposed profit distribution, a capital maintenance margin equal to 3.5% of risk-weighted assets is kept, apart from the minimum capital required by law, to be integrated by level-1(Con1) ordinary capital, net of deductible items (CDCOn1).

 

d) Pursuant to CNV General Resolution No. 593, the Shareholders’ Meeting in charge of analyzing the annual Financial statements will be required to decide on the application of the Bank’s retained earnings, such as the actual distribution of dividends, the capitalization thereof through the delivery of bonus shares, the creation of earningsl reserves additional to the Legal reserve or a combination of any of these applications.

 

32. CAPITAL MANAGEMENT AND CORPORATE GOVERNANCE TRANSPARENCY POLICY AND RISK MANAGEMENT

 

As financial institutions, the activities of Banco Macro SA and Banco del Tucumán SA are governed by the Financial Entities Act No. 21,526, as supplemented, and the regulations issued by the Central Bank and are exposed to intrinsic risks related to the financial industry. Moreover, they adhere to the good banking practices laid out in Central Bank Communiqué “A” 5201 (Financial Entities Corporate Governance Guidelines) as supplemented. Details explanations about the main aspects related to capital management and corporate governance transparency policy and risk management related to the Bank, are disclose in Note 41 to the condensed consolidated interim Financial Statements as of march 31, 2018, already issued.

 

Aditionally, the table below shows the minimum capital requirements measured on a consolidated basis, effective for the month of June 2018, together with the integration thereof (computable equity) as of the end of such month:

 

Description   06/30/2018  
Minimum capital requirements     17,478,311  
Computable equity     58,988,830  
Capital surplus     41,510,519  

 

 

 

  43  

 

   

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2018

(Translation of Financial statements originally issued in Spanish – See Note 36)

(Figures expressed in thousands of Pesos)

 

33. ADDITIONAL DISCLOSURES

 

The table below shows the amounts corresponding to the detail of Government and private debt securities as of June 30, 2018, December 31, 2017 and 2016.

 

Description   06/30/2018     12/31/2017     12/31/2016  
             
Debt securities at fair value through profit or loss                        
                         
Government debt securities     1,107,525       720,015       276,780  
Private securities     232,177       366,013       55,701  
Total debt securities at fair value through profit or loss     1,339,702       1,086,028       332,481  
                         
Other debt securities                        
                         
At fair value through OCI                        
Government debt securities     1,315,125       1,090,423       3,983,642  
Central Bank internal bills     38,038,863       32,655,908       15,132,569  
Private securities             18,583       423,456  
At amortized cost                        
Government debt securities     3,516,998       121,723       124,885  
Private securities     291,658       817,128       730,947  
Total other debt securities     43,162,644       34,703,765       20,395,499  
                         
Equity instruments                        
                         
At fair value through profit or loss     50,009       282,659       406,868  
Total equity instruments     50,009       282,659       406,868  

 

34. CHANGES IN THE ARGENTINE MACROECONOMIC ENVIRONMENT OF THE FINANCIAL AND CAPITAL SYSTEM

 

The international and local macroeconomic context generates a certain degree of uncertainty regarding its future progress as a result of the financial asstes and foreign exchange market volatility and, additionally certain political events and the level of economic growth, among other issues. At a local level, there is an increase in the prices for other relevant economic variables, such as salary costs, exchange rate, interest rates and prices of the main raw materials.

 

Therefore, the Bank’s Management permanently monitors any changes in the abovementioned situations in international and local markets, to determine the possible actions to adopt and to identify the possible impact on its financial situation that may need to be reflected in the financial statements for future periods.

 

35. EVENTS AFTER REPORTING PERIOD

 

No events occurred between the end of the reporting period and the issuance of the accompanying condensed consolidated interim Financial Statements that may materially affect the financial position or the profit and loss for the period, not disclosed in the accompanying Financial Statements.

 

36. ACCOUNTING PRINCIPLES – EXPLANATION ADDED FOR TRANSLATION INTO ENGLISH

 

These Condensed consolidated interim Financial Statements are presented in accordance with the accounting framework established by the Central Bank, as mention in Note 3. These accounting standards may not conform with accounting principles generally accepted in other countries.

 

 

Delfín Jorge Ezequiel Carballo
Chairperson

  44  

 

 

EXHIBIT B

 

CONSOLIDATED CLASSIFICATION OF LOANS AND OTHER FINANCING

BY SITUATION AND COLLATERAL RECEIVED

AS OF JUNE 30, 2018 AND DECEMBER 31, 2017 AND 2016

(Translation of the Financial statements originally issued in Spanish - See Note 36)

(Figures stated in thousands of pesos)

 

    06/30/2018     12/31/2017     12/31/2016  
                   
COMMERCIAL                        
                         
In normal situation     58,340,617       48,364,751       34,766,790  
With Senior “A” guarantees and counter-guarantees     3,382,479       3,822,852       2,545,541  
With Senior “B” guarantees and counter-guarantees     9,310,470       7,594,429       5,297,800  
Without Senior guarantees or counter-guarantees     45,647,668       36,947,470       26,923,449  
                         
Subject to special monitoring     297,350       299,221       27,887  
In observation                        
With Senior “A” guarantees and counter-guarantees     3,484       6,042          
With Senior “B” guarantees and counter-guarantees     71,681       66,613       18,875  
Without Senior guarantees or counter-guarantees     218,519       226,566       9,012  
In negotiation or with financing agreements                        
Without Senior guarantees or counter-guarantees     3,666                  
                         
Troubled     195,576       37,164       50,039  
With Senior “A” guarantees and counter-guarantees     450       3,441          
With Senior “B” guarantees and counter-guarantees     98,003       22,971       50,039  
Without Senior guarantees or counter-guarantees     97,123       10,752          
                         
With high risk of insolvency     171,609       144,001       137,431  
With Senior “A” guarantees and counter-guarantees     3,178       729       1,882  
With Senior “B” guarantees and counter-guarantees     129,522       86,437       61,374  
Without Senior guarantees or counter-guarantees     38,909       56,835       74,175  
                         
Irrecoverable     437       6,500       7,372  
With Senior “B” guarantees and counter-guarantees                     813  
Without Senior guarantees or counter-guarantees     437       6,500       6,559  
                         
Subtotal Commercial     59,005,589       48,851,637       34,989,519  

 

 

Delfín Jorge Ezequiel Carballo
Chairperson

  45  

 

 

EXHIBIT B

(Continued)

 

CONSOLIDATED CLASSIFICATION OF LOANS AND OTHER FINANCING

BY SITUATION AND COLLATERAL RECEIVED

AS OF JUNE 30, 2018 AND DECEMBER 31, 2017 AND 2016

(Translation of the Financial statements originally issued in Spanish - See Note 36)

(Figures stated in thousands of pesos)

 

    06/30/2018     12/31/2017     12/31/2016  
                   
CONSUMER AND MORTGAGE                        
                         
Performing     98,851,176       85,407,541       55,204,350  
With Senior “A” guarantees and counter-guarantees     1,890,854       2,140,761       771,053  
With Senior “B” guarantees and counter-guarantees     10,202,180       7,272,856       2,573,886  
Without Senior guarantees or counter-guarantees     86,758,142       75,993,924       51,859,411  
                         
Low risk     1,512,066       1,050,600       555,222  
With Senior “A” guarantees and counter-guarantees     26,027       7,823       1,486  
With Senior “B” guarantees and counter-guarantees     61,503       32,681       20,699  
Without Senior guarantees or counter-guarantees     1,424,536       1,010,096       533,037  
                         
Medium risk     1,001,983       647,332       443,357  
With Senior “A” guarantees and counter-guarantees     6,231       1,447       3,188  
With Senior “B” guarantees and counter-guarantees     15,967       13,672       7,676  
Without Senior guarantees or counter-guarantees     979,785       632,213       432,493  
                         
High risk     652,016       479,925       317,466  
With Senior “A” guarantees and counter-guarantees     2,016       496       2,099  
With Senior “B” guarantees and counter-guarantees     24,385       18,106       20,486  
Without Senior guarantees or counter-guarantees     625,615       461,323       294,881  
                         
Irrecoverable     202,802       148,425       92,508  
With Senior “A” guarantees and counter-guarantees     371       18,375       18,222  
With Senior “B” guarantees and counter-guarantees     18,358       130,050       74,286  
Without Senior guarantees or counter-guarantees     184,073                  
                         
Irrecoverable according to Central Bank's rules     522       249       210  
Without Senior guarantees or counter-guarantees     522       249       210  
                         
Subtotal consumer and mortgage     102,220,565       87,734,072       56,613,113  
Total     161,226,154       136,585,709       91,602,632  

 

This exhibit disclosures the contractual figures in accordance as established by Central Bank. The conciliation with the Condensed consolidated interim balance sheet, is listed below:

 

    As of 06/30/2018     As of 12/31/2017     As of 12/31/2016  
 Loans and other financing     155,620,519       132,658,674       88,390,646  
+ Allowances for loans and other financing     3,321,929       2,666,738       1,839,422  
+ Adjustment amortized cost and fair value     261,477       298,538       244,608  
+ Private securities - Debt securities of financial trust     294,546                  
+ Corporate bonds             362,425       486,144  
Guarantees provided and contingent liabilities     1,727,683       599,334       641,812  
Total computable concepts     161,226,154       136,585,709       91,602,632  

 

 

Delfín Jorge Ezequiel Carballo
Chairperson

  46  

 

 

EXHIBIT C

 

CONSOLIDATED CONCENTRATION OF LOANS AND FINANCING-FACILITIES

AS OF JUNE 30, 2018 AND DECEMBER 31, 2017 AND 2016

(Translation of the Financial statements originally issued in Spanish - See Note 36)

(Figures stated in thousands of pesos)

 

    06/30/2018     12/31/2017     12/31/2016  
Number of customers   Cutoff
balance
    % of total
portfolio
    Cutoff
balance
    % of total
portfolio
    Cutoff
balance
    % of total
portfolio
 
                                     
10 largest customers     11,404,623       7.07       10,886,705       7.97       6,363,324       6.95  
50 next largest customers     15,353,287       9.52       11,082,657       8.11       9,003,785       9.83  
100 next largest customers     9,808,121       6.08       7,511,713       5.50       5,580,023       6.09  
Other customers     124,660,123       77.33       107,104,634       78.42       70,655,500       77.13