6-K 1 tm213551d1_6k.htm FORM 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

 

January 19, 2021

 

 

 

Commission File Number: 001-32827

 

 

 

MACRO BANK INC.

(Translation of registrant’s name into English)

 

 

 

Av. Eduardo Madero 1182

Buenos Aires C1106ACY

Tel: 54 11 5222 6500

 

(Address of registrant’s principal executive offices)

 

 

 

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

 

Form 20-F x Form 40-F ¨

 

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

 

Yes ¨ No x

 

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

 

Yes ¨ No x

 

 

 

 

 

 

BANCO MACRO S.A.

 

Condensed interim financial statements as of September 30, 2020 together with the reports on review of interim financial statements.

 

CONTENT

 

·Cover Sheet

 

·Condensed consolidated interim statement of financial position

 

·Condensed consolidated interim statement of income

 

·Condensed consolidated interim statement of other comprehensive income

 

·Condensed consolidated interim statement of changes in shareholders’ equity

 

·Condensed consolidated interim statement of cash flows

 

·Notes to the condensed consolidated interim financial statements

 

·Consolidated exhibits

 

·Condensed separate interim statement of financial position

 

·Condensed separate interim statement of income

 

·Condensed separate interim statement of other comprehensive income

 

·Condensed separate interim statement of changes in shareholders’ equity

 

·Condensed separate interim statement of cash flows

 

·Notes to the condensed separate interim financial statements

 

·Separate exhibits

 

·Review report on condensed consolidated interim financial statements

 

·Review report on condensed separate interim financial statements

 

 

 

 

CONDENSED INTERIM FINANCIAL STATEMENTS

 

AS OF SEPTEMBER 30, 2020

 

CORPORATE NAME: Banco Macro SA

 

REGISTERED OFFICE: Avenida Eduardo Madero 1182 – Autonomous City of Buenos Aires

 

CORPORATE PURPOSE AND MAIN ACTIVITY: Commercial bank

 

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

 

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

 

BY-LAWS EXPIRY DATE: March 8, 2066

 

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

 

PERSONAL TAX IDENTIFICATION NUMBER: 30-50001008-4

 

REGISTRATION DATES OF AMENDMENTS TO BY-LAWS:

 

August 18, 1972, August 10, 1973, July 15, 1975, May 30, 1985, September 3, 1992, May 10, 1993, November 8, 1995, October 8, 1996, March 23, 1999, September 6, 1999, June 10, 2003, December 17, 2003, September 14, 2005, February 8, 2006, July 11, 2006, July 14, 2009, November 14, 2012, August 2, 2014, July 15, 2019.

 

 

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

AS OF SEPTEMBER 30, 2020 AND DECEMBER 31, 2019

(Translation of the Financial statements originally issued in Spanish – See Note 41)

(Figures stated in thousands of pesos in terms of purchasing power of pesos as of September 30, 2020, except that indicated otherwise)

 

Items  Notes  Exhibits  09/30/2020   12/31/2019 
ASSETS                
Cash and Deposits in Banks  6      112,933,534    123,120,508 
Cash         20,151,251    23,860,558 
Central Bank of Argentina         66,366,745    67,452,287 
Other Local and Foreign Entities         26,410,774    31,803,082 
Other         4,764    4,581 
Debt Securities at fair value through profit or loss  6 and 37      16,546,573    6,939,904 
Derivative Financial Instruments  6      13,685    61,982 
Repo transactions  6      53,970,838    1,330,400 
Other financial assets  6 and 8  R   15,568,222    7,537,762 
Loans and other financing  5 and 6  B, C, D and R   237,678,324    270,133,440 
Non-financial Public Sector         4,009,092    7,888,422 
Other Financial Entities         1,786,047    4,833,107 
Non-financial Private Sector and Foreign Residents         231,883,185    257,411,911 
Other Debt Securities  6 and 37  R   240,247,772    78,947,577 
Financial Assets delivered as guarantee  6 and 27      12,228,348    13,052,299 
Equity Instruments at fair value through profit or loss  6, 11 and 37      1,626,591    1,878,634 
Investment in associates and joint arrangements  7      181,618    178,947 
Property, plant and equipment     F   30,899,709    31,486,396 
Intangible Assets     G   4,431,855    4,331,546 
Deferred Income Tax Assets  16      71,146    53,101 
Other Non-financial Assets  8      2,077,899    1,327,248 
Non-current assets held for sale         2,247,289    2,141,390 
TOTAL ASSETS         730,723,403    542,521,134 

 

Delfín Jorge Ezequiel Carballo

Chairperson

 

- 1 -

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

AS OF SEPTEMBER 30, 2020 AND DECEMBER 31, 2019

(Translation of the Financial statements originally issued in Spanish – See Note 41)

(Figures stated in thousands of pesos in terms of purchasing power of pesos as of September 30, 2020, except that indicated otherwise)

 

Items  Notes  Exhibits  09/30/2020   12/31/2019 
LIABILITIES                
Deposits  6  H and I   492,709,538    321,455,062 
Non-financial Public Sector         105,635,759    21,474,272 
Financial Sector         440,978    384,185 
Non-financial Private Sector and Foreign Residents         386,632,801    299,596,605 
Derivative Financial Instruments  6  I   381    940,073 
Repo Transactions  6  I        1,225,960 
Other Financial Liabilities  6 and 13  I   28,635,362    27,110,965 
Financing received from the Central Bank of Argentina and other financial institutions  6  I   687,918    2,746,369 
Issued Corporate Bonds  6 and 32  I   5,018,613    6,756,507 
Current Income Tax Liabilities  16      9,961,129    9,949,649 
Subordinated Corporate Bonds  6 and 32  I   31,529,966    29,730,457 
Provisions  12  J   1,625,544    1,801,946 
Deferred Income Tax Liabilities         2,534,570    198,852 
Other Non-financial Liabilities  13      24,096,458    12,374,809 
TOTAL LIABILITIES         596,799,479    414,290,649 
SHAREHOLDERS’ EQUITY                
Capital Stock  24      639,413    639,413 
Non-capital contributions         12,429,781    12,429,781 
Adjustments to Shareholders’ Equity         43,864,265    43,864,265 
Earnings Reserved         102,297,425    67,168,444 
Unappropriated Retained Earnings         (45,454,225)   (19,814,167)
Other Comprehensive Income         (840,159)   158,872 
Net Income for the period / fiscal year         20,985,802    23,782,154 
Net Shareholders’ Equity attributable to controlling interest         133,922,302    128,228,762 
Net Shareholders’ Equity attributable to non-controlling interests         1,622    1,723 
TOTAL SHAREHOLDERS’ EQUITY         133,923,924    128,230,485 
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES         730,723,403    542,521,134 

 

The notes 1 to 41 to the condensed consolidated interim financial statements and the exhibits B to D, F to J, L, Q and R are an integral part of the condensed consolidated interim financial statements.

 

Delfín Jorge Ezequiel Carballo

Chairperson

 

- 2 -

 

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF INCOME

FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND 2019

(Translation of the Financial statements originally issued in Spanish – See Note 41)

(Figures stated in thousands of pesos in terms of purchasing power of pesos as of September 30, 2020, except that indicated otherwise)

 

Items  Notes   Exhibits   Quarter
ended
09/30/2020
   Accumulated
from
beginning of
year up to
09/30/2020
   Quarter
ended
09/30/2019
   Accumulated
from
beginning of
year up to
09/30/2019
 
Interest income       Q    36,789,382    103,724,542    51,123,762    143,458,037 
Interest expense       Q    (15,630,562)   (36,825,950)   (22,392,883)   (65,524,033)
Net Interest income           21,158,820    66,898,592    28,730,879    77,934,004 
Commissions income   17    Q    5,737,830    16,658,213    5,946,633    17,983,620 
Commissions expense       Q    (466,680)   (1,355,984)   (551,867)   (1,414,784)
Net Commissions income           5,271,150    15,302,229    5,394,766    16,568,836 
Subtotal (Net Interest income +Net Commissions income)           26,429,970    82,200,821    34,125,645    94,502,840 
Loss from measurement of financial instruments at fair value through profit or loss       Q    (7,540,551)   (14,346,533)   (16,732,216)   (39,565,747)
Profit / (Loss) from sold or derecognized assets at amortized cost           61,240    1,048,498    (281)   (31,999)
Differences in quoted prices of gold and foreign currency   18        1,206,941    2,656,630    2,137,825    2,607,324 
Other operating income   19        1,181,527    3,573,568    1,510,281    8,246,375 
Allowance for loan losses   5        (1,749,586)   (5,249,218)   (393,783)   (3,461,430)
Net Operating Income           19,589,541    69,883,766    20,647,471    62,297,363 
Employee benefits   20        (6,199,034)   (17,733,562)   (6,349,867)   (19,589,080)
Administrative expenses   21        (3,399,705)   (9,560,106)   (4,153,107)   (11,464,354)
Depreciation and amortization of fixed assets       F and G    (1,015,353)   (2,954,856)   (956,344)   (2,725,913)
Other Operating Expenses   22        (4,586,948)   (13,905,032)   (9,332,573)   (21,150,485)
Operating Income/ (Loss)           4,388,501    25,730,210    (144,420)   7,367,531 
Income from associates and joint arrangements   7        15,057    47,228    23,906    1,066,445 
Gain on net monetary position             4,836,163    5,650,385    8,185,459    18,605,249 
Income before tax on continuing operations           9,239,721    31,427,823    8,064,945    27,039,225 
Income tax on continuing operations   16.c)        (3,164,086)   (10,441,755)   1,046,625    (10,213,936)
Net Income from continuing operations           6,075,635    20,986,068    9,111,570    16,825,289 
Net Income for the period           6,075,635    20,986,068    9,111,570    16,825,289 
Net Income for the period attributable to controlling interest           6,075,553    20,985,802    9,111,646    16,825,239 
Net Income / (Loss) for the period attributable to non-controlling interest           82    266    (76)   50 

 

 

Delfín Jorge Ezequiel Carballo

Chairperson

 

- 3 -

 

 

 

CONSOLIDATED EARNINGS PER SHARE
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND 2019
(Translation of the Financial statements originally issued in Spanish – See Note 41)
(Figures stated in thousands of pesos in terms of purchasing power of pesos as of September 30, 2020, except that indicated otherwise)

 

Items  Quarter
ended
09/30/2020
   Accumulated
from beginning
of year up to
09/30/2020
   Quarter
ended
09/30/2019
   Accumulated
from beginning
of year up to
09/30/2019
 
Net Profit attributable to Parent’s shareholders   6,075,553    20,985,802    9,111,646    16,825,239 
PLUS: Potential diluted earnings per common share                    
Net Profit attributable to Parent’s shareholders adjusted as per diluted earnings   6,075,553    20,985,802    9,111,646    16,825,239 
Weighted average of outstanding common shares for the period   639,413    639,413    639,398    639,403 
PLUS: Weighted average of the number of additional common shares with dilution effects                    
Weighted average of outstanding common shares for the period adjusted as per dilution effect   639,413    639,413    639,398    639,403 
Basic earnings per share (in pesos)   9.5018    32.8204    14.2503    26.3140 

 

Delfín Jorge Ezequiel Carballo

Chairperson

 

- 4 -

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF OTHER COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND 2019
(Translation of the Financial statements originally issued in Spanish – See Note 41)
(Figures stated in thousands of pesos in terms of purchasing power of pesos as of September 30, 2020, except that indicated otherwise)

 

Items  Notes  Exhibits  Quarter
ended
09/30/2020
   Accumulated
from
beginning of
year up to
09/30/2020
   Quarter
ended
09/30/2019
   Accumulated
from
beginning of
year up to
09/30/2019
 
Net Income for the period         6,075,635    20,986,068    9,111,570    16,825,289 
Items of Other Comprehensive Income that will be reclassified to profit or loss                          
Foreign currency translation differences in financial statements conversion         51,818    127,449    491,649    275,188 
Foreign currency translation differences for the period         51,818    127,449    491,649    275,188 
Profit or losses for financial instruments measured at fair value through other comprehensive income (FVOCI) (IFRS 9(4.1.2)(a))         (530,112)   (1,126,480)   41,361    47,935 
Profit or losses for the period from financial instruments at fair value through other comprehensive income (FVOCI) (*)     Q   (482,983)   (1,003,407)   176,935    166,040 
Income tax  16.c)      (47,129)   (123,073)   (135,574)   (118,105)
Total Other Comprehensive (Loss) / Income  that is subsequently reclassified to profit or loss         (478,294)   (999,031)   533,010    323,123 
Total Other Comprehensive (Loss) / Income         (478,294)   (999,031)   533,010    323,123 
Total Comprehensive Income  for the period         5,597,341    19,987,037    9,644,580    17,148,412 
Total Comprehensive Income attributable to controlling interest         5,597,259    19,986,771    9,644,660    17,148,373 
Total Comprehensive Income / (Loss) attributable to non-controlling interest         82    266    (80)   39 

 

(*)Net amount of reclassifications to the income statement of instruments classified at fair value through other comprehensive income that were derecognized or charged during the period. At September 30, 2020 and 2019 the reclassified amounts at profit or loss was (1,819,538) and (8,247,472), respectively.

 

The notes 1 to 41 to the condensed consolidated interim financial statements and the exhibits B to D, F to J, L, Q and R are an integral part of the condensed consolidated interim financial statements.

 

Delfín Jorge Ezequiel Carballo

Chairperson

 

- 5 -

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2020

(Translation of the Financial statements originally issued in Spanish – See Note 41)

(Figures stated in thousands of pesos in terms of purchasing power of pesos as of September 30, 2020, except that indicated otherwise)

 

      Capital stock   Non- capital
contributions
         Other comprehensive
income
   Earnings Reserved                 
Changes  Notes  Outstanding
shares
   In
treasury
   Additional
paid-in
capital
    Adjustments
to
Shareholders’
Equity
   Accumulative
foreign
currency
translation
difference in
financial
statements
conversion
   Other   Legal   Other   Unappropriated
Retained
Earnings
   Total
Controlling
Interests
   Total Non-
Controlling
Interests
  

Total

Equity

 
Amount at the beginning of the fiscal year restated      639,413         12,429,781      43,864,265     705,527    (546,655)   18,846,857    48,321,587    3,967,987    128,228,762    1,723    128,230,485 
Total comprehensive income for the period                                                                  
- Net income for the period                                                 20,985,802    20,985,802    266    20,986,068 
- Other comprehensive income/ (loss) for the period                             127,449    (1,126,480)                  (999,031)        (999,031)
Distribution of unappropriated retained earnings as approved by Shareholders´ Meeting held on April 30, 2020                                                                  
Legal reserve                                       9,978,718         (9,978,718)               
Normative reserve                                            39,443,494    (39,443,494)               
Cash dividends  25 and 35                                         (14,293,231)        (14,293,231)        (14,293,231)
Other changes                                                           (367)   (367)
Amount at the end of period      639,413                         12,429,781      43,864,265     832,976    (1,673,135)   28,825,575    73,471,850    (24,468,423)   133,922,302    1,622    133,923,9240 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2019
(Translation of the Financial statements originally issued in Spanish – See Note 41)
(Figures stated in thousands of pesos in terms of purchasing power of pesos as of September 30, 2020, except that indicated otherwise)

 

               Non-capital       Other comprehensive                         
       Capital stock   Contributions       income   Earnings Reserved                 
                       Accumulative                             
                       foreign                             
                       currency                             
                       translation                             
                   Adjustments   difference in                             
               Additional   to   financial               Unappropriated   Total   Total Non-     
       Outstanding   In   paid-in   Shareholders’   statements               Retained   Controlling   Controlling   Total 
Changes  Notes   shares   treasury   capital   Equity   conversion   Other   Legal   Other   Earnings   Interests   Interests   Equity 
Amount at the beginning of the fiscal year restated       640,715    28,948    12,428,461    43,896,564    601,187    (708,010)   12,928,892    28,449,843    15,944,082    114,210,682    1,897    114,212,579 
Adjustment and retroactive restatements  3                                            370,000     370,000          370,000  
Amount at the beginning of the fiscal year adjusted and restated       640,715     28,948     12,428,461     43,896,564     601,187     (708,010 )    12,928,892     28,449,843     16,314,082    114,580,682    1,897     114,582,579 
Total comprehensive income for the period                                                                
- Net income for the period                                               16,825,239    16,825,239    50    16,825,289 
- Other comprehensive income/ (loss) for the period                           275,188    47,946                   323,134    (11)   323,123 
Distribution of unappropriated retained earnings as approved by Shareholders´ Meeting held on April 30, 2019                                                                
Legal reserve                                     5,917,966         (5,917,966)               
Normative reserve                                           6,538,425    (6,538,425)                
Cash dividends                                          (10,402,570)        (10,402,570)        (10,402,570)
Other                                          23,671,870    (23,671,870)               
Own shares in treasury  24    (1,317)   1,317                                                   
Decrease of own shares in treasury            (30,265)        (33,753)                  64,018                     
Other changes                                                         (387)   (387)
Amount at the end of the period       639,398         12,428,461    43,862,811    876,375    (660,064)   18,846,858    48,321,586    (2,988,940)   121,326,485    1,549    121,328,0341 

 

The notes 1 to 41 to the condensed consolidated interim financial statements and the exhibits B to D, F to J, L, Q and R are an integral part of the condensed consolidated interim financial statements.

 

Delfín Jorge Ezequiel Carballo

Chairperson

 

- 6 -

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND 2019
(Translation of the Financial statements originally issued in Spanish – See Note 41)
(Figures stated in thousands of pesos in terms of purchasing power of pesos as of September 30, 2020, except that indicated otherwise)

 

Items  Notes  09/30/2020   09/30/2019 
CASH FLOWS FROM OPERATING ACTIVITIES             
Income for the period before Income Tax      31,427,823    27,039,225 
Adjustment for the total monetary effect of the period      (5,650,385)   (18,605,249)
Adjustments to obtain cash flows from operating activities:             
Amortization and depreciation      2,954,856    2,725,913 
Allowance for loan losses      5,249,218    3,461,430 
Difference in quoted prices of foreign currency      (11,423,199)   (28,490,180)
Other adjustments      39,792,977    90,592,920 
Net increase / (decrease) from operating assets:             
Debt Securities at fair value through profit and loss      (9,606,669)   2,913,923 
Derivative financial instruments      48,297    (44,572)
Repo transactions      (52,640,438)     
Loans and other financing             
Non-financial public sector      3,879,330    2,697,340 
Other financial entities      3,047,060    7,252,611 
Non-financial private sector and foreign residents      20,261,508    58,058,403 
Other debt securities      (87,510,689)   (11,304,260)
Financial assets delivered as guarantee      823,951    (1,922,912)
Equity instruments at fair value through profit or loss      252,043    1,089,552 
Other assets      (8,733,896)   (2,011,224)
Net increase / (decrease) from operating liabilities:             
Deposits             
Non-financial public sector      84,161,487    (8,529,922)
Financial sector      56,793    121,400 
Non-financial private sector and foreign residents      87,036,196    (85,116,497)
Derivative financial instruments      (939,692)   198,679 
Repo transactions      (1,225,960)   2,651,201 
Other liabilities      323,331    (5,616,876)
Payments for Income Tax      (5,912,014)   (9,518,475)
TOTAL CASH FROM OPERATING ACTIVITIES (A)      95,671,928    27,642,430 

 

Delfín Jorge Ezequiel Carballo

Chairperson

 

- 7 -

 

 

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND 2019
(Translation of the Financial statements originally issued in Spanish – See Note 41)
(Figures stated in thousands of pesos in terms of purchasing power of pesos as of September 30, 2020, except that indicated otherwise)

 

Items  Notes  09/30/2020   09/30/2019 
CASH FLOWS FROM INVESTING ACTIVITIES             
Payments:             
Acquisition of PPE, intangible assets and other assets      (2,423,051)   (3,842,667)
TOTAL CASH USED IN INVESTING ACTIVITIES (B)      (2,423,051)   (3,842,667)
CASH FLOWS FROM FINANCING ACTIVITIES             
Payments:             
Dividends      (367)   (10,402,957)
Acquisition or redemption of equity instruments           (365,330)
Non subordinated corporate bonds      (1,472,969)   (2,818,903)
Central Bank of Argentina      (9,341)     
Financing from local financial entities      (1,993,840)   (1,318,561)
Subordinated Corporate Bonds      (1,020,904)   (956,823)
Other payments related to financing activities      (369,390)   (170,763)
Proceeds:             
Central Bank of Argentina           8,245 
Financing to local financial entities      49      
Subordinated Corporate Bonds      18,411      
TOTAL CASH USED IN FINANCING ACTIVITIES (C)      (4,848,351)   (16,025,092)
EFFECT OF EXCHANGE RATE FLUCTUATIONS (D)      19,085,823    42,433,953 
MONETARY EFFECT ON CASH AND CASH EQUIVALENTS (E)      (43,869,167)   (86,994,327)
NET INCREASE/ (DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C+D+E)      63,617,182    (36,785,703)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FISCAL YEAR  23   180,242,451    245,740,566 
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD  23   243,859,633    208,954,863 

 

The notes 1 to 41 to the condensed consolidated interim financial statements and the exhibits B to D, F to J, L, Q and R are an integral part of the condensed consolidated interim financial statements.

 

Delfín Jorge Ezequiel Carballo

Chairperson

 

- 8 -

 

 

  

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

AS OF SEPTEMBER 30, 2020 

(Translation of Financial statements originally issued in Spanish – See Note 41) 

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

1.CORPORATE INFORMATION

 

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

 

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

 

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

 

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

 

On May 21, 2019, the Bank acquired 100% of Argenpay SAU for an amount of 100 conformed by 100,000 common, registered shares, with a face value of Ps. 1 each one and entitled to one vote. The main activity of such company is the development of its own network or the incorporation into other networks so that it can operate with individuals or companies, in-person or remotely, by using information and communication technologies, grant, offer or accept electronic payments online or offline, digital and virtual wallets and e-commerce in general. This subsidiary started to develop its principal activities during the fourth quarter of 2019. On November 18, 2020, it was registered in the “Payment services suppliers Registry that offers payment accounts” of the Central Bank of Argentina (BCRA, for its acronym in Spanish) under Nº 33678.

 

Additionally, on July 17 and August 26, 2020, the Bank made irrevocable capital contributions in advance of future share subscription to the company Play Digital SA of 16,250 and 27,250, respectively. On July 23 and August 26, 2020, the Extraordinary Shareholders’ Meeting of Play Digital SA accepted the irrevocable capital contributions and gave its approval to the Bank to subscribe 16,250,000 and 26,634,046 common, registered shares, with a face value of Ps. 1, respectively, which represents 25% of the capital stock. On October 15, 2020, the Bank made a new irrevocable capital contribution of 61,689 which was accepted by the Extraordinary Shareholders’ Meeting of Play Digital SA on that date and gave its approval to the Bank to subscribe 58,017,400 common, registered shares, with a face value of Ps. 1. The capital stock increase totaled 685,631, which allowed that other companies were accepted as shareholders together with Banco de Galicia y Buenos Aires SAU, Banco BBVA Argentina SA and Banco Santander Río SA. After the abovementioned capital stock increase, the Bank’s interest in Play Digital amounted to 11.7715%. The company’s purpose is to develop and market a payment solution linked to bank accounts held by financial system users in order to bring significant improvement to their payment experience.

 

On November 30, 2020, 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, December 28, 2006 and October 1, 2018 extensions to such agreement were agreed upon, making it currently effective through December 31, 2029.

 

- 9 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

AS OF SEPTEMBER 30, 2020 

(Translation of Financial statements originally issued in Spanish – See Note 41) 

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

As of September 30, 2020 and December 31, 2019, the deposits held by the Misiones Provincial Government with the Bank amounted to 17,144,889 and 8,359,140 (including 818,821 and 846,426, 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 September 30, 2020 and December 31, 2019, the deposits held by the Salta Provincial Government with the Bank amounted to 6,682,956 and 5,330,045 (including 1,136,086 and 1,109,490, related to court deposits), respectively.

 

2.3.Agreement with the Jujuy Provincial Government

 

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

 

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

 

As of September 30, 2020 and December 31, 2019, the deposits held by the Jujuy Provincial Government with the Bank amounted to 6,769,875 and 1,443,682 (including 865,193 and 785,141, related to court deposits), respectively.

 

2.4.Agreement with the Tucumán Provincial Government. Merger with Banco del Tucumán SA

 

The Bank, acts as an exclusive financial agent and as revenue collection and obligation payment agent of the Tucumán Provincial Government, the Municipality of San Miguel de Tucumán and the Municipality of Yerba Buena. The services agreements with the Provincial and Municipalities Governments are effective through years 2031, 2023 and 2025, respectively.

 

On July 4, 2018, the legislative body of the province of Tucumán enacted into law a bill issued by the provincial executive, authorizing the sale of the shares held by such province in Banco de Tucumán SA to Banco Macro SA. On August 10, 2018, the province of Tucumán transferred to Banco Macro SA, 43,960 Class B common registered non-endorsable shares, with a face value of Ps. 100 each one and entitled to one vote, which is equivalent to 10% of its common stock and votes and the exchange ratio was agreed at 0.65258 ordinary shares of Banco Macro SA for each face value Ps.1 of common share of Banco del Tucumán SA. Therefore, the minority shareholders of Banco del Tucumán SA were entitled to receive at 0.65258 common shares of Banco Macro SA, for each face value Ps. 1 of ordinary shares they hold in Banco del Tucumán SA. Consequently, Banco Macro SA issued 15,662 Class B common, registered shares, with a face value of Ps. 1 each one and entitled to one vote (see additionally note 24).

 

During 2019, the merger with Banco del Tucuman SA by Banco Macro SA was performed and authorized by the Board of the BCRA through Resolution No. 179. On September 25, 2019, Argentine Securities and Exchange Commission (CNV, for its acronym in Spanish), authorized the merger which was registered at the Public Registry of Commerce on September 30, 2019.

 

Through Communiqué “C” 84993 the BCRA informed that, according to the authorization gave in due time on October 15, 2019, Banco Macro SA performed the merger with Banco del Tucumán SA. Additionally, since that date, the authorization of Banco del Tucumán SA to operate as a commercial bank was revoked and its buildings were incorporated to Banco Macro SA as branches.

 

- 10 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

AS OF SEPTEMBER 30, 2020 

(Translation of Financial statements originally issued in Spanish – See Note 41) 

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

As of September 30, 2020 and December 31, 2019, the deposits held by the Tucumán Provincial Government, the Municipality of San Miguel de Tucumán and the Municipality of Yerba Buena with the Bank amounted to 10,301,022 and 4,403,376 (including 3,151,091 and 3,002,247, related to court deposits), respectively.

 

Additionally, as of September 30, 2020 and December 31, 2019, the Bank granted loans to the Tucumán Provincial Government for an amount of 3,122,568 and 6,832,614, respectively.

 

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

 

Presentation basis

 

Applicable Accounting Standards

 

These condensed consolidated interim financial statements of the Bank were prepared pursuant with Conceptual Framework as established by BCRA (Communiqué “A” 6114 as supplementary rules of the BCRA). Apart from the exceptions established by the BCRA which are explained in the following paragraph, such framework is based on International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and adopted by the Argentine Federation of Professionals Councils in Economic Sciences (FACPCE, for its acronym in Spanish). The abovementioned international standards include the IFRS, the International Accounting Standards (IAS) and the interpretations developed by the IFRS Interpretations Committee (IFRIC) or former IFRIC (SIC).

 

From transitory exceptions established by BCRA to the application of effective IFRS, the following have affected the preparation of these condensed consolidated interim financial statements.

 

a)According to Communiqué “A” 6114, as supplementary, and in the convergence process through IFRS, the BCRA established that since fiscal years beginning on January 1, 2020 included, financial institutions defined as “Group A” by BCRA rules, in which the Bank is included, begin to apply section 5.5 “Impairment” of the IFRS 9 “Financial Instruments” (sections B5.5.1 to B5.5.55), except for the temporary exclusion for the debt securities of the non-financial public sector established by BCRA Communiqué “A” 6847.

 

b)Additionally, on April 29, 2019, the Bank received a Memorandum from the BCRA, which established specifics guidelines related to the measurement of the Bank’s holding in Prisma Medios de Pago SA as explained in note 11. Considering such guidelines, the Bank adjusted the fair value previously determined.

 

As of the date of issuance of these condensed consolidated interim financial statements, the Bank is in the process of quantifying the effect of the fully application of section 5.5 “Impairment” will have and the needed adjustment over the fair value of the Bank’s holding in Prisma Medios de Pago SA, as mentioned in sections (a) and (b) abovementioned, which could be material.

 

Except for what was mentioned in the preceding paragraphs, the accounting policies applied by the Bank comply with the IFRS as currently approved and are applicable to the preparation of these condensed consolidated interim financial statements in accordance with the IFRS as adopted by the BCRA through Communiqué “A” 6840. Generally, the BCRA does not allow the anticipated application of any IFRS, unless otherwise expressly stated.

 

Basis for the preparation and consolidation

 

These condensed consolidated interim financial statements for the nine-month period ended on September 30, 2020, have been prepared in accordance with the Conceptual Framework established by the BCRA as mentioned in the previous section “Applicable accounting standards” which, particularly for condensed consolidated interim financial statements, is based on IAS 34 “Interim Financial Reporting”.

 

For the preparation of these condensed consolidated interim financial statements, in addition to sections “measuring unit” and “Beginning effects of application of section 5.5. “impairment” of the IFRS 9”, of this note, the Bank has applied the basis for the preparation and consolidation, the accounting policies and the material accounting judgements, estimates and assumptions described in the consolidated financial statements for the fiscal year ended on December 31, 2019, already issued.

 

- 11 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

AS OF SEPTEMBER 30, 2020 

(Translation of Financial statements originally issued in Spanish – See Note 41) 

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

These condensed consolidated interim financial statements include all the necessary information for an appropriate understanding, by the users thereof, of the basis for the preparation and disclosure used therein as well as the relevant events and transactions occurred after the issuance of the last annual consolidated financial statements for the fiscal year ended on December 31, 2019, already issued. Nevertheless, the present condensed consolidated interim financial statements do not include all the information or all the disclosures required for the annual consolidated financial statements prepared in accordance with the IAS 1 “Presentation of Financial Statements”. Therefore, these condensed consolidated interim financial statements must be read together with the annual consolidated financial statements for the fiscal year ended December 31, 2019, already issued.

 

As of September 30, 2020 and December 31, 2019, the Bank has consolidated into its financial statements the financial statements of the following companies:

 

Subsidiaries  Principal Place of Business   Country   Main Activity
Macro Securities SA (a) and (b)  Av. Eduardo Madero 1182 – Autonomous City of Buenos Aires   Argentina   Stock exchange services
            
 Macro Fiducia SA  Av. Leandro N. Alem 1110– 1st floor. Autonomous City of Buenos Aires   Argentina   Services
            
Macro Fondos SGFCISA  Av. Eduardo Madero 1182– 24th floor, Office B–. Autonomous City of Buenos Aires   Argentina   Management and administration of mutual funds
            
Macro Bank Limited (c)  Caves Village, Building 8 Office 1 – West Bay St., Nassau   Bahamas   Banking entity
            
Argenpay SAU  Av. Eduardo Madero 1182 – Autonomous City of Buenos Aires   Argentina   Electronic payments services

 

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

 

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

 

(c)Consolidated with Sud Asesores (ROU) SA (100% voting rights – Equity interest 18,461).

 

As of September 30, 2020 and December 31, 2019, the Bank’s equity interest and voting rights in the companies it consolidates is as follows:

 

    Shares    Bank’s interest    Non-controlling interest 
Subsidiaries   Type    Number    Total capital
stock
    Voting
rights
    Total capital
stock
    Voting
Rights
 
Macro Securities SA   Common    12,776,680    99.925%   99.932%   0.075%   0.068%
Macro Fiducia SA   Common    46,935,318    99.046%   99.046%   0.954%   0.954%
Macro Fondos SGFCISA   Common    327,183    99.939%   100.00%   0.061%     
Macro Bank Limited   Common    39,816,899    99.999%   100.00%   0.001%     
Argenpay SAU   Common    7,700,000    100.00%   100.00%          

 

Total assets, liabilities and Shareholders’ equity of the Bank and all its subsidiaries as of September 30, 2020 and December 31, 2019 are as follows:

 

As of 09/30/2020  Banco Macro
SA
   Macro Bank
Limited
  Macro
Securities SA
  Macro
Fiducia SA
  Argenpay
SAU
  Eliminations  Consolidated 
Assets  716,293,091   15,934,056  5,288,011  81,967  251,042  (7,124,764) 730,723,403 
Liabilities  582,370,789   13,542,159  3,913,073  5,184  47,136  (3,078,862) 596,799,479 
Equity attributable to the owners of the Bank  133,922,302   2,391,897  1,317,692  76,783  203,906  (3,990,278) 133,922,302 
Equity attributable to non-controlling interests         57,246        (55,624) 1,622 

 

- 12 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

AS OF SEPTEMBER 30, 2020 

(Translation of Financial statements originally issued in Spanish – See Note 41) 

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

As of 12/31/2019  Banco Macro
SA
  Macro Bank
Limited
  Macro
Securities SA
  Macro
Fiducia SA
  Argenpay
SAU
  Eliminations  Consolidated 
Assets  538,747,442   4,205,113  4,921,212  78,284  9,436  (5,440,353) 542,521,134 
Liabilities  410,518,680   1,781,941  3,343,612  3,843  691  (1,358,118) 414,290,649 
Equity attributable to the owners of the Bank  128,228,762   2,423,172  1,491,774  74,441  8,745  (3,998,132) 128,228,762 
Equity attributable to non-controlling interests         85,826        (84,103) 1,723 

 

Transcription in the Books of Accounts

 

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

 

Figures expressed in thousands of pesos

 

These condensed consolidated interim financial statements disclose figures expressed in thousands of Argentine pesos in terms of purchasing power as of September 30, 2020, and are rounded up to the nearest amount in thousands of pesos, unless otherwise expressly stated (see section “Measuring unit” of this note).

 

Comparative information

 

The condensed consolidated interim statement of financial position as of September 30, 2020, is presented comparatively with year-end data of the immediately preceding fiscal year, while the statement of income and the statement of other comprehensive income for the three-month and nine-month periods ended September 30, 2020, and the statement of changes in shareholders’ equity and the statement of cash flows and cash equivalents for the nine-month period ended on that date, are presented comparatively with data as of the same periods of the immediately preceding fiscal year.

 

The figures related to comparative information have been restated to consider the changes in the general purchasing power of the functional currency and, as a result, are stated in terms of the measuring unit current at the end of the reporting period (see the following section “Measuring unit”):

 

Measuring unit

 

These condensed consolidated interim financial statements as of September 30, 2020 have been restated for the changes in the general purchasing power of the functional currency (Argentine pesos) of the Bank, as of that date, as established by IAS 29 “Financial Reporting in Hyperinflationary Economies” and considering, in addition, specifics rules established by BCRA through Communiqués “A” 6651, 6849, as amendments, which established to apply this method, on a mandatory basis, from fiscal years beginning on January 1, 2020, included and determined as the transition date on December 31, 2018.

 

According to IFRS, the restatement of financial statements is needed when the functional currency is the currency of a hyperinflationary economy. To achieve consistency in identifying an economic environment of that nature, IAS 29 establishes (i) certain qualitative indicators, not limited to, consisting of analyzing the general population behavior, prices, interest rates and wages with changes to a price index and the loss of purchasing power, and (ii) as quantitative characteristic, which is the most used condition in practice, to test if a three-year cumulative inflation rate is around 100% or more. Due to miscellaneous macroeconomic factors, the three-year inflation rate exceeds that figures and the Argentine government goals and other available estimates also indicate that this trend will not be reversed in the short term.

 

- 13 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

AS OF SEPTEMBER 30, 2020 

(Translation of Financial statements originally issued in Spanish – See Note 41) 

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

The restatement was applied as if the economy had always been hyperinflationary; using a general price index that reflects changes in general purchasing power. To apply the restatement, a series of indexes were used, as prepared and published on a monthly basis by the FACPCE, which combines consumer price index (CPI) on a monthly basis published by the Argentine Institute of Statistics and Censuses (INDEC, for its acronym in Spanish) since January 2017 (baseline month: December 2016) with the wholesale prices indexes published by the INDEC until that date. For the months of November and December 2015, for which the INDEC did not publish the wholesale price index (WPI) variation, the CPI variation for Autonomous City of Buenos Aires was used.

 

Considering the abovementioned indexes, the inflation rate was 22.29% and 37.70% for the nine-month periods ended on September 30, 2020 and 2019, respectively and 53.83% for the fiscal year ended on December 31, 2019.

 

Below is a description of the restating mechanism provided by IAS 29 and the restatement process for financial statements established by BCRA Communiqué “A” 6849, as supplementary:

 

Description of the main aspects of the restatement process for statements of financial position:

 

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

 

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

 

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

 

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

 

(v)When an entity capitalizes borrowing cost in the non-monetary assets, the part of the borrowing cost that compensates for the inflation during the same period is not capitalized.

 

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

 

Description of the main aspects of the restatement process for statements of income and other comprehensive income:

 

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

 

- 14 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

AS OF SEPTEMBER 30, 2020 

(Translation of Financial statements originally issued in Spanish – See Note 41) 

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

(ii)Certain income and expenses generated at fair value measurement or for derecognition of non-monetary assets and items of other comprehensive income are disclosed in terms of measuring unit current.

 

(iii)The gain or loss from monetary position will be classified based on the item that generated it and will be separately disclosed reflecting the inflationary effects over such items.

 

Description of the main aspects of the restatement process for the statements of changes in shareholders’ equity:

 

(i)As the transition date (December 31, 2018), the Bank has applied the following procedures:

 

(a)The components of equity, except the ones mentioned below, were restated from the dates the components were contributed or otherwise arose according to BCRA Communiqué “A” 6849, for each item.

 

(b)Earnings reserved, including the special reserve for the first time application of IFRS, were stated at nominal value at the transition date (legal amount not restated).

 

(c)The accumulated balances of other comprehensive income were recalculated in terms of measuring unit current at the transition date.

 

(d)The unappropriated retained earnings were determinated as a difference between the restated net asset at the transition date and the other components of equity, restated as disclosed in the abovementioned paragraphs.

 

(ii)After the transition date restatement abovementioned in (i), all equity’s components are restated by applying a general price index as mentioned before from the beginning of the period and each variation of those components is restated from the contribution date or from the moment it was produced by any other way.

 

Other comprehensive income generated after the transition date are presented in terms of the measuring unit current at the end of the reporting period.

 

Description of the main aspects of the restatement process for the statement of cash flows:

 

a)All items are restated in terms of the measuring unit current at the end of the reporting period.

 

b)The monetary gain or losses generated by cash and cash equivalents are separately disclosed in the statement of cash flows after the cash flow from operating investment activities and financing activities, in a separate and independent line, under the description “Effect of inflation on cash and cash equivalent”.

 

Reclassification of financial assets and liabilities – Changes in business model

 

Considering the volatile context in the local markets as described in note 38, during July and August 2020, the Bank’s management decided to update the objective related to the investments in Federal Government Treasury Bonds adjusted by CER 1%, resulting in a reclassification from business model at amortized cost to business model at fair value to profit or loss (FVPL) and the investments in Federal Government Treasury Bonds adjusted by CER maturing 2021, resulting in a reclassification business model at FVPL to business model at fair value through other comprehensive income (FVOCI).

 

At the reclassifications date abovementioned, the amortized cost of Federal Government Treasury Bonds adjusted by CER 1%, amounted to 2,338,686 and 4,595,929, respectively while the fair value as of that dates amounted to 3,237,658 and 4,951,124, respectively, generating reclassification gains for an amount of 898,972 and 355,195, respectively.

 

In addition, at the reclassifications date mentioned in the first paragraph, the investments reclassified from FVPL to FVOCI amounted to 3,728,110 and 4,522,706, respectively. At the reclassification dates, the effective interest rates were 31.45% and 33.31%, respectively. As of September 30, 2020, the fair values of such investments amounted to 3,788,000 and 4,545,600, respectively. The interest income recognized during the period amounted to 299,403 and 218,350, respectively.

 

These reclassifications do not have a material impact on these condensed consolidated interim financial statements.

 

- 15 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

AS OF SEPTEMBER 30, 2020 

(Translation of Financial statements originally issued in Spanish – See Note 41) 

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

Other new standards adopted in the fiscal year

 

Beginning effects of application of section 5.5. “impairment” of the IFRS 9.

 

Through Communiqué “A” 6114, the BCRA set specific guidelines within the scope of the convergence process among which it defined the transitory exception to the application of section 5.5. of IFRS 9 “Financial Instruments” (sections B5.5.1 to B5.5.5) up to the fiscal years beginning as of January 1, 2020. In addition, the BCRA established that December 31, 2018 as the transition date and the temporary exclusion for the debt securities of the non-financial public sector under the scope of IFRS 9.

 

The impact of transition of retained earnings into Expected Credit Losses (ECP) methodology established in section 5.5 of IFRS 9 is as follows:

 

   Retained
earnings
 
Closing balance under previous standards (December 31, 2018)   15,944,082 
Recognition of IFRS 9 ECL   528,575 
Deferred tax in relation to the above   (158,575)
Opening balance under IFRS 9’S ECL (January 1, 2019)   16,314,082 
Total change in equity due to adopting IFRS 9’s ECL   370,000 

 

The following table reconciles the aggregate opening allowances and provisions for financial instruments in accordance with previous standards to the ECL:

 

   Credit loss
provision under
previous standards
   Re -
measurement
   ECL under IFRS 9 as
of January 1, 2019
 
Loans and other financing and other items   7,827,072    (548,760)   7,278,312 
Subtotal   7,827,072    (548,760)   7,278,312 
Loan commitments        20,185    20,185 
Subtotal        20,185    20,185 
Total   7,827,072    (528,575)   7,298,497 

 

1.      New accounting standard over impairment of financial assets not measured at fair value through profit or loss

 

1.1   Overview of the ECL principles

 

Except for public sector exposures which were temporary excluded through BCRA Communiqué “A” 6847, the Bank records an allowance for ECL for all loans, other financing and other debt financial assets not measured at fair value through profit or loss, together with loan commitments and financial guarantee contracts (not measured at fair value through profit or loss) and contract assets and lease receivables, in this section all referred to as ‘financial instruments’. Equity instruments are not subject to impairment under IFRS 9. In accordance with the abovementioned BCRA Communiqué “A” 6847, for public sector exposures the BCRA rule “Regulatory minimum allowance for uncollectibility risk” is continuing to apply and it established that this specific sector is not subject to impairment.

 

The ECL allowance is based on the credit losses expected to arise over the life of the asset (the lifetime expected credit loss), unless there has been no significant increase in credit risk since origination, in which case, the ECL are based on the 12 months expected credit loss (hereinafter, 12mECL). The Bank’s policies for determining if there has been a significant increase in credit risk are set out in note 36.1.1 "Definition of significant increase in credit risk, impaired and default”.

 

The 12mECL is the portion of the lifetime expected credit loss (hereinafter, LTECL) that represents the ECL that result from default events on a financial instrument that are possible within the 12 months after the reporting date.

 

- 16 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

AS OF SEPTEMBER 30, 2020 

(Translation of Financial statements originally issued in Spanish – See Note 41) 

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

Both the LTECL and 12mECL are calculated on either an individual basis or a collective basis, depending on the nature of the underlying portfolio of financial instruments. The Bank’s policy for grouping financial assets measured on a collective basis is explained in note 36.1.1.1 “Clients evaluated on a collective basis” and 36.1.1.2 “Clients evaluated on an individual basis”.

 

The Bank has established a policy to perform an assessment, at the end of each reporting period, of whether a financial instrument’s credit risk has increased significantly since initial recognition, by considering the change in the risk of default occurring over the remaining life of the financial instrument. This is further explained in note 36.1.1 "Definition of significant increase in credit risk, impaired and default”.

 

Based on the above process, the Bank groups its loans into Stage 1, Stage 2 and Stage 3, including Purchased or originated credit impaired (hereinafter, POCI), as described below:

 

·Stage 1: when financial instruments are first recognized, the Bank recognizes an allowance based on 12mECL. Stage 1 financial instruments also include facilities where the credit risk has improved and the financial instrument has been reclassified from other stage.

 

·Stage 2: when a financial instrument has shown a significant increase in credit risk since origination, the Bank records an allowance for the LTECL. Stage 2 financial instruments also include facilities, where the credit risk has improved and the loan has been reclassified from Stage 3.

 

·Stage 3: financial instruments considered credit-impaired (as described in note 36.1.1 "Definition of significant increase in credit risk, impaired and default”). The Bank records an allowance for the LTECL.

 

·POCI: financial instruments that are credit impaired on initial recognition. POCI assets are recorded at fair value at original recognition and interest income is subsequently recognized based on a credit-adjusted effective interest rate. The ECL allowance is only recognized or released to the extent that there is a subsequent change in the ECL. It is worthwhile to mention that the Bank has not purchased nor originated POCI financial instruments.

 

For financial instruments for which the Bank has no reasonable expectations of recovering either the entire outstanding amount, or a proportion thereof, the gross carrying amount of the financial instrument is reduced. This is considered a (partial) derecognition of the financial instruments.

 

1.2   The calculation of Expected Credit Loss

 

The mechanics of the ECL calculations are outlined below and the key elements are, as follows:

 

·Probability of Default (PD): is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the facility has not been previously derecognized and is still in the portfolio. The concept of PD is further explained in note 36.1.2 “The Bank’s internal rating and PD estimation process”.

 

·Exposure at Default (EAD): is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest, whether scheduled by contract or otherwise, expected drawdowns on committed facilities, and accrued interest from missed payments. The EAD is further explained in note 36.1.3 “Exposure at default EAD”.

 

·Loss Given Default (LGD): is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realization of any collateral or credit enhancement related to the loan. It is usually expressed as a percentage of the EAD. The LGD is further explained in note 36.1.4 “Loss given default”.

 

- 17 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

AS OF SEPTEMBER 30, 2020 

(Translation of Financial statements originally issued in Spanish – See Note 41) 

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

  

When estimating the ECL, the Bank considers three probability-weighted scenarios (base case, upside and downside) and the amount resulting for the multiplication of the abovementioned scenarios is discounted at the EIR determined at initial recognition.

 

For credit cards and revolving facilities that include both a loan and an undrawn commitment, ECL is calculated and presented together with the loan. For loan commitments and letters of credit, the ECL is recognized within Provisions.

 

The mechanics of the ECL method are summarized below:

 

·Stage 1: the 12mECL is calculated as the portion of LTECL that represents the ECL that result from default events on a financial instrument that are possible within the 12 months after the reporting date. The Bank calculates the 12mECL allowance based on the expectation of a default occurring in the 12 months following the reporting date. These expected 12-month default probabilities are applied to a forecast EAD and multiplied by the expected LGD and discounted by an approximation to the original EIR. This calculation is made for each of the three scenarios (base case, upside and downside), as explained above.

 

·Stage 2: when a financial instrument has shown a significant increase in credit risk since origination, the Bank records a credit loss expense on financial instruments for the LTECL. The mechanics are similar to those explained above, including the use of different scenarios, but PDs are estimated over the lifetime of the instrument. The expected cash shortfalls are discounted by an approximation to the original effective interest rate.

 

·Stage 3: for financial instruments considered credit-impaired, the Bank recognizes the LTECL for these financial instruments. The method is similar to that for Stage 2 financial instruments, with the PD set at 100%.

 

·Loan commitments and letters of credit: when estimating LTECL for undrawn loan commitments, the Bank estimates the expected portion of the loan commitment that will be drawn down over 12 months or its expected life. The ECL is then based on the present value of the expected shortfalls in cash flows if the loan is drawn down, based on a probability-weighting of the three scenarios. The expected cash shortfalls are discounted at an approximation to the expected interest rate on the loan.

 

·Guarantees and other commitments: the Bank’s liability under each guarantee is measured at the higher of the amount initially recognized less cumulative amortization recognized in the income statement, and the ECL provision. For this purpose, the Bank estimates ECL based on the present value of the expected payments to reimburse the holder for a credit loss that it incurs. The shortfalls are discounted by the risk-adjusted interest rate relevant to the exposure. The calculation is made using a probability-weighting of the three forward-looking scenarios. The ECL related to financial guarantee contracts are recognized within Provisions.

 

1.3  Forward looking information

 

For the purpose of determining a loss allowance in the calculation of ECL, the impact of macroeconomic variables have to be analyzed in order to adjust historical information to the current conditions and the forward looking perspectives in the near future. To this end, different and probable macroeconomic scenarios have to be weighed (base case, upside and downside), using relevant variables in credit risk determination (like GDP growth, interest rate and CPI).

 

The inputs and models used for calculating ECL may not always capture all characteristics of the market at the date of these condensed consolidated interim financial statements. To reflect this, qualitative adjustments or overlays are occasionally made as temporary adjustments. Detailed information about these inputs and sensitivity analysis are provided in note 36.2 “Forward looking information use in ECL models”.

 

- 18 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2020

(Translation of Financial statements originally issued in Spanish – See Note 41)

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

1.4 Debt instruments measured at fair value through OCI

 

The ECL for debt instruments measured at fair value through Other Comprehensive Income (OCI) do not reduce the carrying amount of these financial instruments in the statement of financial position, which remains at fair value. Instead, an amount equal to the allowance that would arise if the assets were measured at amortized cost is recognized in OCI as an accumulated impairment amount, with a corresponding charge to profit or loss. The accumulated loss recognized in OCI is recycled to the profit and loss upon derecognition of the assets.

 

1.5 Credit cards and other revolving facilities

 

For credit cards and other revolving facilities, the Bank does not limit its exposure to credit losses to the contractual notice period, but instead calculates ECL over a period that reflects the Bank’s expectations of the customer behavior, its unused agreed commitments, its likelihood of default and the Bank’s future risk mitigation procedures, which could include reducing or cancelling the facilities. Based on the Bank’s methodology, the period over which the Bank calculates ECL for these products is three years.

 

The interest rate used to discount the ECL for credit cards is based on the average EIR that is expected to be charged over the expected period of exposure to the facilities. This estimation takes into account that some facilities are repaid in full each month and are consequently charged no interest.

 

1.6 Write-offs

 

The Bank´s financial instruments are derecognized after the first month in which the Bank has no reasonable expectation of recovering a financial instrument in its entirety or a portion thereof. If the amount written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the allowance that is then applied against the gross carrying amount. Any subsequent recoveries impact on the income statement of the current period under “Other operating income”.

 

1.7 Forborne and modified loans

 

The Bank considers a loan forborne when such modifications are provided as a result of the borrower’s present or expected financial difficulties. Forbearance may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated, any impairment is measured using the original EIR as calculated before the modification of terms. It is the Bank’s policy to monitor forborne loans to help ensure that future payments continue to be likely to occur. Derecognition decisions and classification between Stage 2 and Stage 3 are determined on a case-by-case basis for commercial portfolio and collectively for consumer portfolio. If these procedures identify a loss in relation to a loan, it is disclosed and managed as an impaired Stage 3 forborne asset until it is collected or written off.

 

When the loan has been renegotiated or modified, but not derecognized, considers whether the assets should be classified in Stage 3. Once an asset has been classified as forborne, it will remain in Stage 2 until it is fully collected or considered impaired (Stage 3).

 

If modifications are substantial, the loan is derecognized and a new loan with different conditions is recognized.

 

1.8 Collateral valuation

 

To mitigate its credit risks on financial instruments, the Bank seeks to use collateral, where possible. The collateral comes in various forms, such as cash, securities, letters of credit/guarantees, real estate, receivables, other non-financial assets and credit enhancements, such as netting agreements. Collateral, unless repossessed, is not recorded on the Bank’s statement of financial position. However, the fair value of collateral affects the calculation of ECL, in certain products and customers assessed on an individual basis. It is generally assessed, at a minimum, at inception and re-assessed on a periodically basis.

 

- 19 -

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2020

(Translation of Financial statements originally issued in Spanish – See Note 41)

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

To the extent possible, the Bank uses active market data for valuing financial assets held as collateral. Other financial assets which do not have readily determinable market values are valued using internal procedures. Non-financial collateral, such as real estate, is valued based on data provided by third parties, such as mortgage brokers.

 

1.9 . Collateral repossessed

 

The Bank’s policy is to determine whether a repossessed asset can be best used for its internal operations or should be sold. Assets determined to be useful for the internal operations are transferred to their relevant asset category at the lower of their repossessed value or the carrying value of the original secured asset.

 

Assets for which selling is determined to be a better option are transferred to assets held for sale at their fair value (if financial assets) and fair value less cost to sell for non-financial assets at the repossession date in, line with the Bank’s policy.

 

In its normal course of business, the Bank does not physically repossess properties or other assets in its retail portfolio, but engages external agents to recover funds, generally at auction, to settle outstanding debt. Any surplus funds are returned to the customers/obligors. As a result of this practice, the residential properties under legal repossession processes are not recorded on the balance sheet.

 

2.Amendments to the Conceptual Framework for Financial Reporting:

 

The modification to the Conceptual Framework includes some new concepts, provides updated definitions and recognition criteria for assets and liabilities and clarifies some important concepts.

 

The changes to the Conceptual Framework may affect the application of IFRS in situations where no standard applies to a particular transaction or event.

 

This standard did not have a material impact on these condensed consolidated interim financial statements since, currently, there are not material uncertainties about the application to a particular transaction or event.

 

3.IFRS 3 “Business Combination” – amendments in definition of a business:

 

These amendments will help entities determine whether an acquisition made is a business or the purchase of a group of assets. The new amended definition emphasizes that the output of a business is to provide goods and services to customers, whereas the previous definition focused on returns in the form of dividends, lower costs or other economic benefits. This standard did not have a material impact on these condensed consolidated interim financial statements since, currently, there are not business combination transactions.

 

4.IAS 1 “Presentation of Financial Statements” and IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” – amendments to definition of material:

 

The new definition states that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The amendments clarify that materiality will depend on the nature or magnitude of information or both. These amendments replaced the threshold “could influence” with “could reasonably be expected to influence”. This implies that the materiality assessment will need to take into account how primary users could reasonably be expected to be influenced in making economic decisions. This standard did not have a material impact on these condensed consolidated interim financial.

 

5.IFRS 16 “leases” – Amendment that provides accounting relief to lessees on lease modification accounting for rent concessions arising as a direct consequence of the COVID-19:

 

This amendment excepts lessees to assess lease arrangement, on an individual basis, whether a rent concession arising as a direct consequence of COVID-19 pandemic, is a lease modification and allows lessees to account the rent concession as if it was not a lease modification and charged it in the statement of income. This applies to rent concession related to COVID-19 that reduces lease payments due on or before June 30, 2021. This standard did not have a material impact on these condensed consolidated interim financial (see note 39).

 

- 20 -

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2020

(Translation of Financial statements originally issued in Spanish – See Note 41)

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

New pronouncements

 

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

 

The new and amended standards and interpretation that are issued, but not yet effective, up to the date of issuance of these condensed consolidated interim financial statements are disclosed below. The Bank intends to adopt these standards, if applicable, when they come effective.

 

a)Amendments to IFRS 3 - Reference to the Conceptual: the amendments are intended to replace a reference to a previous version of the IASB’s Conceptual Framework with a reference to the current version issued in March 2018 without significantly changing its requirements. The amendments add an exception to the recognition principle of IFRS 3 to avoid the issue of potential ‘day 2’ gains or losses arising for liabilities and contingent liabilities that would be within the scope of IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” or IFRIC 21 “Levies”, if incurred separately. The exception requires entities to apply the criteria in IAS 37 or IFRIC 21, respectively, instead of the Conceptual Framework, to determine whether a present obligation exists at the acquisition date. At the same time, the amendments add a new paragraph to IFRS 3 to clarify that contingent assets do not qualify for recognition at the acquisition date. This amendment is applicable as of January 1, 2022. The Bank does not expect this standard to have a material impact on the financial statements.

 

b)Amendments to IAS 16 - Property, Plant and Equipment (PP&E): proceeds before Intended Use. The amendment prohibits entities from deducting from the cost of an item of PP&E, any proceeds of the sale of items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the costs of producing those items, in profit or loss. This amendment is applicable as of January 1, 2022. The Bank does not expect this standard to have a material impact on the financial statements.

 

c)Amendments to IAS 37 - Onerous Contracts – Costs of Fulfilling a Contract: the IASB issued amendments to IAS 37 to specify which costs an entity needs to include when assessing whether a contract is onerous or loss-making. The amendments apply a ‘directly related cost approach’. The costs that relate directly to a contract to provide goods or services include both incremental costs and an allocation of costs directly related to contract. The impact of these amendments on Entities that previously applied the incremental cost approach, is that they will see provisions increase to reflect the inclusion of costs related directly to contract activities, whilst entities that previously recognized contract loss provisions using the guidance from the former standard, IAS 11 Construction Contracts, will be required to exclude the allocation of indirect overheads from their provisions. This amendment is applicable as of January 1, 2022. The Bank does not expect this standard to have a material impact on the financial statements.

 

d)Annual improvement cycle (2018-2020): the following is a summary of the amendments from the 2018-2020 annual improvements cycle:

 

·IFRS 1 First-time Adoption of International Financial Reporting – Subsidiary as a first-time adopter: the amendment permits a subsidiary that elects to apply paragraph D16(a) of IFRS 1 to measure cumulative translation differences using the amounts reported by the parent, based on the parent’s date of transition to IFRS. This amendment is also applied to an associate or joint venture that elects to apply paragraph D16(a) of IFRS 1. This amendment is applicable as of 1 January 2022.

 

·IFRS 9 Financial Instruments Fees in the ’10 per cent’ test for derecognition of financial liabilities: the amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of them original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf.

 

- 21 -

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2020

(Translation of Financial statements originally issued in Spanish – See Note 41)

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

·IFRS 16 “Leases” Illustrative examples - Lease incentives: the amendment removes the Example 13 accompanying IFRS 16 of payments from the lessor relating to leasehold improvements. This removes potential confusion regarding the treatment of lease incentives when applying IFRS 16.

 

The Bank does not expect this standard to have a material impact on the 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. The Bank is also exposed to overdrafts and unused agreed credits on credit cards of the Bank. Since they imply a contingent obligation for the Bank, they expose the Bank to credit risks other than those recognized in statement of financial position and they are, therefore, an integral part of the total risk of the Bank.

 

As of September 30, 2020 and December 31, 2019, the Bank maintains the following maximum exposures to credit risk related to this type of transactions:

 

   09/30/2020   12/31/2019 
Undrawn commitments of credit cards and checking accounts   97,475,676    111,710,802 
Guarantees granted (1)   1,172,854    2,102,164 
Letters of credit   872,911    545,983 
Overdraft and unused agreed commitments (1)   711,938    1,286,924 
    100,233,379    115,645,873 
Less: Allowance for ECL   (18,786)   (21,122)
Total   100,214,593    115,624,751 

 

(1)Includes transactions not covered by BCRA debtor classification standard. For Guarantee granted, it includes an amount of 169,654 and 218,132 as of September 30, 2020 and December 31, 2019, respectively. For Overdraft and unused agreed commitments, it includes an amount of 128,812 and 231,770 as of September 30, 2020 and December 31, 2019, respectively.

 

Risks related to the contingent transactions described above have been evaluated and are controlled within the framework of the Bank’s credit risk policy, described in note 41 to the consolidated financial statements as of December 31, 2019, already issued.

 

5.LOSS ALLOWANCE FOR EXPECTED CREDIT LOSSES ON CREDIT EXPOSURES NOT MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS

 

The Bank recognizes a loss allowance for expected credit losses on all credit exposures not measured at fair value through profit or loss, like debt instruments measured at amortized cost, debt instruments measured at fair value through other comprehensive income, loan commitments and financial guarantee contracts (not measured at fair value through profit or loss), contract assets and lease receivables.

 

Note 6 discloses financial assets measured at fair value through profit or loss on a recurring basis and financial assets not recognized at fair value. This classification is made pursuant to the expressed in note 3 “Basis for the preparation of these financial statements and applicable accounting standards” for the annual consolidated financial statements as of December 31, 2019, already issued. Additionally, note 6 explains the information related to the valuation process.

 

As a consequence, considering the temporary exclusion established by BCRA mentioned in note 3 “applicable accounting standards”, the Bank applies the impairment requirements for the recognition and measurement of a loss allowance for financial assets measured at amortized cost or at fair value through profit or loss, except for public sector exposures. In addition, the Bank applies the impairment requirements for guarantees granted, undrawn commitments of credit cards and checking accounts, letter of credits, which are not recognized in the consolidated statement of financial position.

 

- 22 -

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2020

(Translation of Financial statements originally issued in Spanish – See Note 41)

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

For the purpose of assessing the Bank’s credit risk exposure and identifying material credit risk concentration, disclosures regarding to credit risk of financial assets and items not recognized in the statement of financial position, are as follows:

 

5.1 Loans and other financing measured at amortized cost

 

According to the nature of the information to be disclosed and the loans characteristic, the Bank groups them as follows:

 

   09/30/2020   12/31/2019 
Loans and other financing   246,263,313    276,333,149 
Collective assessment   172,891,187    155,789,128 
Individual assessment   73,372,126    120,544,021 
Less: Allowance for ECL (*)   (8,584,989)   (6,199,709)
    237,678,324    270,133,440 

 

(*) As explain in note 3 section “applicable accounting standards” point a), ECL are not calculated to public sector exposures.

 

The following table shows the credit quality and the debt balance to credit risk, based on the Bank’s credit risk rating system and the year-end stage classification, taking into account the several guidelines related to flexible conditions for credit established by the BCRA to moderate the pandemic effects generated by COVID-19 (see also note 36.2). The amounts are presented before the impairment allowances.

 

      09/30/2020 
Internal rating grade  Range PD  Stage 1   Stage 2   Stage  3   Total   % 
Performing      223,358,789    14,648,285         238,007,074    96.65%
High grade  0.00%-3.50%   176,127,154    141,621         176,268,775    71.58%
Standard grade  3.51%-7.00%   25,892,370    1,407,390         27,299,760    11.09%
Sub-standard grade  7.01%-33.00%   21,339,265    13,099,274         34,438,539    13.98%
Past due but not impaired  33.01%-99.99%   339,026    3,964,861         4,303,887    1.75%
Not-performing  100%             3,952,352    3,952,352    1.60%
Total      223,697,815    18,613,146    3,952,352    246,263,313    100%
       90.84%   7.56%   1.60%   100%     

 

      12/31/2019 
Internal rating grade  Range PD  Stage 1   Stage 2   Stage  3   Total   % 
Performing      251,577,906    12,185,308         263,763,214    95.45%
High grade  0.00%-3.50%   210,964,474    137,831         211,102,305    76.40%
Standard grade  3.51%-7.00%   20,826,750    1,926,874         22,753,624    8.23%
Sub-standard grade  7.01%-33.00%   19,786,682    10,120,603         29,907,285    10.82%
Past due but not impaired  33.01%-99.99%   440,518    7,393,074         7,833,592    2.84%
Not-performing  100%             4,736,343    4,736,343    1.71%
Total      252,018,424    19,578,382    4,736,343    276,333,149    100%
       91.20%   7.09%   1.71%   100%     

 

5.1.1Loans on individual assessment

 

The table below shows the credit quality and the debt balance to credit risk of loans based by grade on the Bank’s internal credit rating system, PD range and year-end stage classification. The Bank’s internal credit rating systems and the evaluation and measurement approaches are explained in note 36 section “Credit risk”.

 

- 23 -

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2020

(Translation of Financial statements originally issued in Spanish – See Note 41)

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

      09/30/2020 (*) 
Internal rating grade  Range PD  Stage 1   Stage 2   Stage  3   Total   % 
Performing      67,519,361    3,362,338         70,881,699    96.60%
High grade  0.00%-3.50%   64,708,497    5         64,708,502    88.19%
Standard grade  3.51%-7.00%        956,967         956,967    1.30%
Sub-standard grade  7.01%-33.00%   2,810,864    2,405,366         5,216,230    7.11%
Past due but not impaired  33.01%-99.99%        519,055         519,055    0.71%
Not-performing  100%             1,971,372    1,971,372    2.69%
Total      67,519,361    3,881,393    1,971,372    73,372,126    100%
       92.02%   5.29%   2.69%   100%     

 

      12/31/2019 
Internal rating grade  Range PD  Stage 1   Stage 2   Stage 3   Total   % 
Performing      114,995,184    2,601,206         117,596,390    97.55%
High grade  0.00%-3.50%   108,792,172    9,629         108,801,801    90.26%
Standard grade  3.51%-7.00%   23,245    1,063,763         1,087,008    0.90%
Sub-standard grade  7.01%-33.00%   6,179,767    1,527,814         7,707,581    6.39%
Past due but not impaired  33.01%-99.99%        1,247,732         1,247,732    1.04%
Not-performing  100%             1,699,899    1,699,899    1.41%
Total      114,995,184    3,848,938    1,699,899    120,544,021    100%
       95.40%   3.19%   1.41%   100%     

 

(*) See also note 36.2.

 

5.1.2Loans on collective assessment

 

The table below shows the credit quality and the debt balance to credit risk of loans portfolio under collective assessment, by grade of credit risk classification based on the Bank’s internal credit rating system, PD range and year-end stage classification. The Bank’s internal credit rating systems and the evaluation and measurement approaches are explained in note 36 section “Credit risk”.

 

      09/30/2020 (*) 
Internal rating grade  Range PD  Stage 1   Stage 2   Stage 3   Total   % 
Performing      155,839,428    11,285,947         167,125,375    96.67%
High grade  0.00%-3.50%   111,418,657    141,616         111,560,273    64.53%
Standard grade  3.51%-7.00%   25,892,370    450,423         26,342,793    15.24%
Sub-standard grade  7.01%-33.00%   18,528,401    10,693,908         29,222,309    16.90%
Past due but not impaired  33.01%-99.99%   339,026    3,445,806         3,784,832    2.18%
Not-performing  100%             1,980,980    1,980,980    1.15%
Total      156,178,454    14,731,753    1,980,980    172,891,187    100%
       90.33%   8.52%   1.15%   100%     

 

      12/31/2019 
Internal rating grade  Range PD  Stage 1   Stage 2   Stage 3   Total   % 
Performing      136,582,722    9,584,102         146,166,824    93.82%
High grade  0.00%-3.50%   102,172,302    128,202         102,300,504    65.66%
Standard grade  3.51%-7.00%   20,803,505    863,111         21,666,616    13.91%
Sub-standard grade  7.01%-33.00%   13,606,915    8,592,789         22,199,704    14.25%
Past due but not impaired  33.01%-99.99%   440,518    6,145,342         6,585,860    4.23%
Not-performing  100%             3,036,444    3,036,444    1.95%
Total      137,023,240    15,729,444    3,036,444    155,789,128    100%
       87.95%   10.10%   1.95%   100%     

 

(*) See also note 36.2.

 

- 24 -

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2020

(Translation of Financial statements originally issued in Spanish – See Note 41)

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

5.2Other debt securities at amortized cost

 

For financial trusts at amortized cost, the criteria that was used in the calculation of ECL is based on credit risk ratings given by a credit rating agency for each types of debt securities that compose each financial trust. That is, the factor to be used will vary in relation to the holding debt securities (A or B). It is assumed that the EAD is equal to the debt balance.

 

For corporate bonds issued by the Bank’s customers, PD and LGD parameters calculated for loan exposures of those customers were used. The corporate bonds’ EAD is considered equal to the debt balance, because there is not available information of such instrument´s behavior when it defaulted.

 

The table below shows the exposures gross of impairment allowances by stages:

 

   09/30/2020 
   Stage 1   Stage 2   Stage 3   Total   % 
Corporate bonds   797,909              797,909    76.66%
Financial trust   242,975                                     242,975    23.34%
                          
Total   1,040,884              1,040,884      
    100%             100%     

 

   12/31/2019 
   Stage 1   Stage 2   Stage 3   Total   % 
Corporate bonds   1,974,743                           1,974,743    59.47%
Financial trust   1,345,987              1,345,987    40.53%
                          
Total   3,320,730              3,320,730      
    100%             100%     

 

The related ECL for corporate bonds as of September 30, 2020 and December 31, 2019 amounted to 3,104 and 1,876, respectively. The ECL related to financial trusts as of September 30, 2020 and December 31, 2019 amounted to 300 and 493, respectively.

 

5.3Government securities at amortized cost or fair value through OCI

 

This group includes federal government securities, provincial or Central Bank instruments measured at amortized cost or fair value through OCI. For these assets, an individual assessment of the related parameters was performed. However, under domestic standards and according to Communiqué “A” 6847, no ECL was calculated for these instruments.

 

A detail of these investments and their characteristics are disclosed in note 37.

 

5.4Prisma Medios de Pago SA

 

The ECL related to the payments to be collect for the sale of Prisma Medios de Pago is recognized in the item “Other financial assets”, as mentioned in note 11 and amounted to 9,759 and 2,023 as of September 30, 2020 and December 31, 2019, respectively.

 

During the nine-month periods ended September 30, 2020 and 2019, losses for ECL related to loans and other financing and other debt securities measured at amortized cost amounted to 5,249,218 and 3,461,430, respectively, and were recognized in the condensed consolidated interim statements of income under the item “allowance for loan losses”.

 

In addition, in exhibit R “Value adjustment for credit losses for credit losses – Allowance for uncollectibility risk” are also disclosed the ECL movements by portfolio and products.

 

- 25 -

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

AS OF SEPTEMBER 30, 2020 

(Translation of Financial statements originally issued in Spanish – See Note 41) 

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

6.FAIR VALUE QUANTITATIVE AND QUALITATIVE DISCLOSURES

 

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

 

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

 

Notwithstanding the above, the Bank’s Management has used its best judgment to estimate the fair values of its financial instruments; any technique to perform such estimate implies certain inherent fragility level.

 

Fair value hierarchy

 

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

 

-Level 1: quoted prices (unadjusted) observable in active markets that the Bank accesses to at the measurement day for identical assets or liabilities. The Bank considers markets as active only if there are sufficient trading activities with regards to the volume and liquidity of the identical assets or liabilities and when there are binding and exercisable price quotes available at each reporting period.

 

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

 

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

 

The following tables show the hierarchy in the Bank’s financial asset and liability at fair value measurement, as of September 30, 2020 and December 31, 2019:

 

   Financial assets and financial liabilities measured at fair value on
a recurring basis as of September 30, 2020
 
Description  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   16,546,573    16,471,531         75,042 
Derivative financial instruments   13,685    118    13,567      
Other financial assets   670,345    622,485         47,860 
Equity instruments at fair value through profit or loss   1,626,591    6,858         1,619,733 
At fair value through OCI                    
Other debt securities   218,721,026    91,970,821    126,750,205      
Total   237,578,220    109,071,813    126,763,772    1,742,635 

 

- 26 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

AS OF SEPTEMBER 30, 2020 

(Translation of Financial statements originally issued in Spanish – See Note 41) 

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

   Financial assets and financial liabilities measured at fair value on
a recurring basis as of September 30, 2020
 
Description (contd.)  Total   Level 1   Level 2   Level 3 
Financial liabilities                               
At fair value through profit or loss                    
Derivatives financial instruments   381    357    24      
Total   381    357    24      

 

   Financial assets and financial liabilities measured at fair value on
a recurring basis as of December 31, 2019
 
Description  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   6,939,904    5,351,459    591,719    996,726 
Derivative financial instruments   61,982    38,636    23,346      
Other financial assets   451,404    423,276         28,128 
Equity instruments at fair value through profit or loss   1,878,634    11,535         1,867,099 
                     
At fair value through OCI                    
Other debt securities   57,330,842    45,232,250    12,098,592      
Total   66,662,766    51,057,156    12,713,657    2,891,953 
                     
Financial liabilities                    
At fair value through profit or loss                    
Derivatives financial instruments   940,073         940,073      
Total   940,073         940,073      

 

Description of valuation process

 

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

 

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

 

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

 

Finally, the Bank has categorized as level 3 those assets and liabilities for which there are no identical or similar transactions in the market. To determine the market value of these instruments, valuation techniques based on own assumptions were used. For this approach, the Bank mainly used the cash flow discount model.

 

- 27 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

AS OF SEPTEMBER 30, 2020 

(Translation of Financial statements originally issued in Spanish – See Note 41)

 (Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

As of September 30, 2020 and December 31, 2019, the Bank has neither changed the techniques nor the assumptions used to estimate the fair value of the financial instruments.

 

Below is the reconciliation between the amounts at the beginning and at the end of the period or fiscal year, as applicable, of the financial instruments recognized at fair value categorized as level 3:

 

   As of September 30, 2020 
Description  Debt securities   Other financial
assets
   Equity
instruments at
fair value
through profit or
loss
 
Amount at the beginning   996,726    28,128    1,867,099 
Transfers to Level 3               
Transfers from Level 3               
Profit and loss   163,325    4,090    94,522 
Recognition and derecognition   (982,427)   19,366    9,244 
Monetary effects   (102,582)   (3,724)   (351,132)
Amount at end of the period   75,042    47,860    1,619,733 

 

   As of December 31, 2019 
Description  Debt securities   Other financial
assets
   Equity
instruments at
fair value
through profit or
loss
 
Amount at the beginning   2,428,687    171,502    85,419 
Transfers to Level 3               
Transfers from Level 3               
Profit and loss   795,324    16,831    (134,259)
Recognition and derecognition   (1,532,573)   (128,689)   2,854,090(*)
Monetary effects   (694,712)   (31,516)   (938,151)
Amount at end of the fiscal year   996,726    28,128    1,867,099 

 

(*) It is mainly related to the reclassification from non-current assets held for sale of Prisma Medios de Pago SA. See also note 11.

 

Quantitative information about Level 3 fair value measurements

 

The following table provides quantitative information about the valuation techniques and significant unobservable inputs used in the valuation of substantially all of Level 3 principal assets and liabilities measured at fair value on a recurring basis for which the Bank uses an internal model (with the exception of the Bank’s holding in Prisma Medios de Pago SA for the reasons described in note 11).

 

   Fair value of         Range of inputs 
   Level 3
Assets
   Valuation  Significant
unobservable
  09/30/2020 
   09/30/2020   Technique  inputs  Range of inputs 
             Low   High   Unit
Debt Securities of Financial Trusts   58,240   Income approach (discounted cash flow)  Discount rate in pesos   29.66    33.70   %
Debt Securities of Financial Trusts Provisional   64,662   Income approach (discounted cash flow)  Discount rate in pesos   39.08    40.92   %

 

 

- 28 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

AS OF SEPTEMBER 30, 2020 

(Translation of Financial statements originally issued in Spanish – See Note 41) 

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

   Fair value of         Range of inputs
   Level 3
Assets
   Valuation  Significant
unobservable
  12/31/2019
   12/31/2019   Technique  inputs  Range of inputs
             Low   High   Unit
Debt Securities of Financial Trusts   263,338   Income approach (discounted cash flow)  Discount rate in pesos   48.50    74.06   %
Debt Securities of Financial Trusts Provisional   761,516   Income approach (discounted cash flow)  Discount rate in pesos   39.27    44.97   %

 

The table below describes the effect of changing the significant unobservable inputs to reasonable possible alternatives. Sensitivity data were calculated using a number of techniques including analyzing price dispersion of different price sources, adjusting model inputs to analyze changes within the fair value methodology.

 

   09/30/2020   12/31/2019 
   Favorable
changes
   Unfavorable
changes
   Favorable
changes
   Unfavorable
changes
 
Debt / Interests in  Securities of Financial Trusts   145    (145)   5,079    (4,491)
Debt Securities of Financial Trusts Provisional   18    (18)   972    (949)

 

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 September 30, 2020 and December 31, 2019, the Bank has not recognized any transfers between levels 1, 2 and 3.

 

Financial assets and liabilities not recognized at fair value

 

Next follows a description of the main methods and assumptions used to determine the fair values of financial instruments not recognized at their fair value in these condensed consolidated interim financial statements:

 

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

 

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

 

-For public listed assets and liabilities, or those for which the prices are reported by certain renown pricing providers, the fair value was determined based on such prices.

 

- 29 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

AS OF SEPTEMBER 30, 2020 

(Translation of Financial statements originally issued in Spanish – See Note 41) 

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

The following table shows a comparison between the fair value and the carrying amount of financial instruments not measured at fair value as of September 30, 2020 and December 31, 2019:

 

   09/30/2020 
   Carrying
amount
   Level 1   Level 2   Level 3   Fair
Value
 
Financial assets                         
Cash and deposits in banks   112,933,534    112,933,534              112,933,534 
Repo transactions   53,970,838    53,970,838              53,970,838 
Other financial assets   14,897,877    14,897,877              14,897,877 
Loans and other financing   237,678,324              223,208,226    223,208,226 
Other debt securities   21,526,746    635,995    20,568,160    268,090    21,472,245 
Financial assets delivered as guarantee   12,228,348    12,228,348              12,228,348 
    453,235,667    194,666,592    20,568,160    223,476,316    438,711,068 
Financial liabilities                       
Deposits   492,709,538    223,081,066         269,473,552     492,554,618
Other financial liabilities   28,635,362    27,415,998    1,211,681          28,627,679
Financing received from the BCRA and other financial entities   687,918    390,778    289,928          680,706
Issued corporate bonds   5,018,613         4,039,485          4,039,485
Subordinated corporate bonds   31,529,966         22,852,500          22,852,500
    558,581,397    250,887,842    28,393,594    269,473,552     548,754,988

 

   12/31/2019 
   Carrying
amount
   Level 1   Level 2   Level 3   Fair
Value
 
Financial assets                         
Cash and deposits in banks   123,120,508    123,120,508              123,120,508 
Repo transactions   1,330,400    1,330,400              1,330,400 
Other financial assets   7,086,358    7,086,358              7,086,358 
Loans and other financing   270,133,440    381,208         237,297,282    237,678,490 
Other debt securities   21,616,735    1,910,912    20,347,261    1,491,976    23,750,149 
Financial assets delivered as guarantee   13,052,299    11,735,148              11,735,148 
    436,339,740    145,564,534    20,347,261    238,789,258    404,701,053 
                          
Financial liabilities                         
Deposits   321,455,062    179,914,252         141,817,869    321,732,121 
Repo transactions   1,225,960    1,225,960              1,225,960 
Other financial liabilities   27,110,965    25,762,088    1,337,836         27,099,924 
Financing received from the BCRA and other financial entities   2,746,369    2,246,906    432,315         2,679,221 
Issued corporate bonds   6,756,507         1,687,627    3,251,452    4,939,079 
Subordinated corporate bonds   29,730,457         22,427,007         22,427,007 
    389,025,320    209,149,206    25,884,785    145,069,321    380,103,312 

 

- 30 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

AS OF SEPTEMBER 30, 2020 

(Translation of Financial statements originally issued in Spanish – See Note 41) 

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

7.INVESTMENTS IN ASSOCIATES AND JOINT ARRANGEMENTS

 

7.1 Associates entities

 

a)Macro Warrants SA

 

The Bank holds an investment in the associate Macro Warrants SA. The existence of significant influence is evidenced by the representation the Bank has in the Board of Directors of the associate. In order to measure this investment, the Bank used accounting information of Macro Warrants SA as of June 30, 2020. Additionally, the Bank has considered, when applicable, the material transactions or events occurring between July 1, 2020, and September 30, 2020.

 

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

 

Summarized statement of financial position  09/30/2020   12/31/2019 
Total assets   46,073    38,495 
Total liabilities   7,505    9,624 
Shareholders’ equity   38,568    28,871 
Proportional Bank’s interest   5%   5%
Investment carrying amount   1,928    1,444 

 

As of September 30, 2020 and 2019, the investment carrying amount in the net income for the periods amounted to (1,200) and 615, respectively.

 

b)Play Digital SA

 

As explain in note 1, the Bank holds and investment in the associate Play Digital SA which, as of September 30, 2020 amounted to 43,500. Although as of the date of issuance of these condensed consolidated interim financial statements the Bank’s interest in Play Digital SA is 11.7715%, the investment is also classified as associate according to IAS 28 due to the representation that Banco Macro SA has in the Board of Director of the company.

 

7.2Joint ventures

 

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

 

a)Banco Macro SA – Wordline Argentina SA Unión transitoria: on April 7, 1998, the Bank executed an agreement with Siemens Itron Services SA to organize an UTE controlled on a joint basis through a 50% interest, the purpose of which is to facilitate a data processing center for the tax administration, to modernize the systems and tax collection processes of the Province of Salta and manage and recover municipal taxes and fees.

 

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

 

Summarized statement of financial position  09/30/2020   12/31/2019 
Total assets   369,750    465,383 
Total liabilities   97,442    113,205 
Shareholders’ equity   272,308    352,178 
Proportional Bank’s interest   50%   50%
Investment carrying amount   136,154    176,089 

 

As of September 30, 2020 and 2019, the investment carrying amount in the net income for the periods amounted to 49,807 and 105,437, respectively.

 

- 31 -

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

AS OF SEPTEMBER 30, 2020 

(Translation of Financial statements originally issued in Spanish – See Note 41) 

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

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

 

On June 27, 2018, the Bank, the UTE and the tax authorities of the Misiones provincial government entered into an agreement of “termination by mutual agreement” of the adaptation agreement, without implying or modifying the Bank’s rights and obligations as a financial agent of the province for the services provision established in the agreement. As of September 30, 2020 and December 31, 2019, according to the above-mentioned, the remaining investment amounted to 36 and 1,414, respectively.

 

8.OTHER FINANCIAL AND NON-FINANCIAL ASSETS

 

The breakdown of other financial and non-financial assets as of September 30, 2020 and December 31, 2019 is as follows:

 

Other financial assets  09/30/2020   12/31/2019 
Receivables from spot sales of foreign currency pending settlement   7,658,638    16,439 
Sundry debtors (see note 11)   6,231,067    5,745,949 
Receivables from other spot sales pending settlement   850,735    1,115,103 
Private securities   670,345    451,403 
Receivables from spot sales of government securities pending settlement   100,867    7,861 
Other   76,565    213,612 
Allowances   (19,995)   (12,605)
    15,568,222    7,537,762 

 

Other non-financial assets  09/30/2020   12/31/2019 
Investment property (see Exhibit F)   936,112    886,284 
Advanced prepayments   608,487    287,722 
Tax advances   454,732    46,068 
Other   78,568    107,174 
    2,077,899    1,327,248 

 

Disclosures related to allowance for ECL are detailed in note 5 “Loss allowance for credit losses on credit exposures not measured at fair value through profit or loss”.

 

9.RELATED PARTIES

 

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

 

-has control or joint control of the Bank;

 

-has significant influence over the Bank;

 

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

 

-members of the same group;

 

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

 

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

 

As of September 30, 2020 and December 31, 2019, amounts related to transactions performed with the related parties are as follows:

 

- 32 -

 

 

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

AS OF SEPTEMBER 30, 2020 

(Translation of Financial statements originally issued in Spanish – See Note 41) 

(Figures stated in thousands of pesos in terms of purchasing power of Argentine pesos as of September 30, 2020, unless otherwise expressly stated)

 

   Information as of September 30, 2020 
   Main subsidiaries (1)                 
   Macro Bank
Limited
   Macro
Securities
SA
   Macro
Fondos
SGFCISA
  

Argenpay

SAU

   Associates   Key
management
personnel (2) 
   Other related
parties