Banco Macro SA (NYSE:BMA)
Q2 2021 Earnings Call
Aug 27, 2021, 3:00 p.m. ET
- Prepared Remarks
- Questions and Answers
- Call Participants
Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Banco Macro's 2Q21 Earnings Call. We would like to inform you that the 2Q21 press release is available to download at the Investor Relations website of Banco Macro at www.macro.com.ar/relaciones-inversores. [Operator Instructions]. After the Company's remarks are completed, there will be a question-and-answer session. [Operator Instructions].
It is now my pleasure to introduce our speakers. Joining us from Argentina are, Mr. Gustavo Manriquez, Chief Executive Officer; Mr. Jorge Scarinci, Chief Financial Officer; and Mr. Nicolas Torres, IR.
Now, I will turn the conference over to Mr. Nicolas Torres. You may begin your conference.
Nicolas A. Torres -- Investor Relations
Thank you, Sara. Good morning and welcome to Banco Macro's 2Q21 conference call. Any comment, we may make today, may include forward-looking statements, which are subject to various conditions and these are outlined in our 20-F which was filed to the SEC and it is available at our website.
Second quarter 2021 press release was distributed yesterday and it's also available at our website. All figures are in Argentine pesos and have been restated in terms of the measuring unit current at the end the reporting period. As of the first quarter of 2020, the Bank started reporting results applying hyperinflation accounting in accordance with IFRS IAS 29 as established by the Central Bank of Argentina. For ease of comparison, figures of previous quarters have been restated applying IAS 29 to reflect the accumulated effect of the inflation adjustment for each period through June 30, 2021.
I will now briefly comment on the Bank's second quarter 2021 financial results. Banco Macro's net income for the quarter was ARS4.6 billion, 90% higher than the first quarter of 2021 and 50% lower than the result posted a year ago. The Bank's second quarter 2021 accumulated ROE and ROA of 7.8% and 1.7% respectively, remained healthy and showed the Bank's earnings potential.
Net operating income before general and administrative and personnel expenses for the second quarter of 2021 was ARS39.4 billion, decreasing 5% or ARS1.9 billion quarter-on-quarter due to a relatively small loan loss provisions and higher income from financial instruments at fair value through profit or loss.
On a yearly basis, net operating income decreased 1% or ARS355 million due to lower net interest income and lower net fee income. Operating income after general, administrative expenses and personnel expenses was ARS19.4 billion, 7% or ARS1.6 billion lower than in the first quarter of 2021 and 1% lower than in the second quarter of 2020. In the quarter, net interest income totaled ARS25.5 billion, 4% or ARS957 million lower than the result posted in the first quarter of 2021 and 15% or ARS4.6 billion lower than the result posted one year ago. As a result of different regulations adopted by the Central Bank that set caps on lending rates and floors on deposit rates.
In the second quarter of 2021, interest income totaled ARS44.3 billion, 12% or ARS5.8 billion lower than the first quarter of 2021 and ARS215 million lower than the previous year. Within interest income, interest on loans decreased 7% or ARS1.7 billion quarter-on-quarter, and interest income decreased 15% or ARS4 billion year-on-year.
In the second quarter of 2021, interest on loans represented 52% of total interest income. Net income from government and private securities decreased 14% or ARS3.2 billion quarter-on-quarter due to lower Leliq volume and lower income from government securities. Compared to the second quarter of 2020, net income from government and private securities increased 30% or ARS4.6 billion.
In the second quarter of 2021, FX gains including investments in dilutive financing totaled ARS640 million gain, 53% or ARS709 million lower than in the first quarter of 2021. The gain is due to a 4% Argentine peso depreciation against the US dollars and the Bank's long spot dollar position. On a yearly basis, FX gains decreased 47% or ARS569 million.
In the second quarter of 2021, interest expenses totaled ARS18.8 billion, 20% or ARS4.8 billion lower compared to the first quarter of 2021 and 31% or ARS4.4 billion higher on a yearly basis. Within interest expenses, interest on deposits decreased 20% or ARS4.5 billion quarter-on-quarter, mainly driven by a 16% decrease in the average volume of time deposits and by a 129 basis point decrease in the average interest rate paid on deposits. On a yearly basis, interest on deposits increased 37% or ARS4.8 billion. In the second quarter of 2021, interest on deposits represented 95% of the Bank's financial expenses.
In the second quarter of 2021, the Bank's net interest margin, including FX was 18.8%, higher than the 17.4% posted in the first quarter of 2021 and lower than the 19.8% registered one year ago.
In the second quarter of 2021, net fee income totaled ARS6.8 billion, 3% or ARS186 million higher than in the first quarter of 2021. On a yearly basis, net fee income decreased 3% or ARS218 million. In the second quarter of 2021, net income from financial assets and liabilities at fair value through profit or loss totaled ARS5.3 billion gain, 4% or ARS221 million higher than in the previous quarter. This gain is mostly related to higher income from Government and private securities.
In the quarter, other operating income totaled ARS1.4 billion, decreasing 23% or ARS421 million compared to first quarter of 2021. On a yearly basis, other operating income decreased 12% or ARS189 million.
In the second quarter of 2021, Banco Macro's personnel and administrative expenses totaled ARS12.3 billion, 4% or ARS441 million higher than in the previous quarter due to higher employee benefits and higher administrative expenses. On a yearly basis, personnel and administrative expenses decreased 5% or ARS693 million showing the strict cost control policies adopted by the Bank's senior management.
In the second quarter of 2021, the efficiency ratio reached 38.4%, deteriorating from the 35.7% posted in the first quarter of 2021. In the quarter, expenses increased 3% or ARS446 million, while net interest income plus net fee income plus other operating income decreased ARS1.3 billion.
In the second quarter of 2021, the result from the net monetary position totaled ARS13.6 billion loss, 15% or ARS2.5 billion lower than the loss posted in the first quarter of 2021 due to lower inflation observed in the quarter, 200 basis points below the first quarter of 2021 down to 10.95% from 12.95% posted in the first quarter of 2021.
On a yearly basis, the loss related to the monetary position increased 119% or ARS7.4 billion. This is the second quarter in which the result from net monetary position is shown pursuant to Communication "A" 7211 of the Central Bank of Argentina in which the inflation adjustment on our Leliqs and other government securities holdings is included, which was previously shown in net income from financial instruments at fair value through profit or loss.
In the second quarter of 2021, Banco Macro's effective tax rate was 21.8%, lower than the 51.4% registered during the first quarter of 2021 and 29.9% registered a year ago. In terms of loan growth, the Bank's financing to the private sector totaled ARS267.8 billion, decreasing 7% or ARS20 billion quarter-on-quarter and 19% or ARS61.7 billion lower year-on-year as a consequence of the economic recession that affected Argentina during 2020 and weak loan demand.
Commercial loans decreased 13% or ARS13.4 billion, among which Others stand out as loans extended to SMEs as part of the relief package given the COVID-19 pandemic started to come due. Consumer lending decreased 5% or ARS7.3 billion. Personal loans decreased 6%, while credit card loans decreased 4%. Within private sector financing, peso financing decreased 5% or ARS12.4 billion, while U.S. dollar financing decreased 31% or $90 million. It is important to mention that Banco Macro's market share over private sector loans as of June 2021 reached 7%.
On the funding side, total deposits totaled ARS492.3 billion and decreased 3% or ARS15.1 billion quarter-on-quarter and decreased 19% or ARS117.5 billion year-on-year. Private Sector deposits decreased 1% quarter-on-quarter while public sector deposits decreased 16% quarter-on-quarter. The decrease in private sector deposits was led by time deposits, which decreased 7% or ARS15.7 billion quarter-on-quarter, while demand deposits increased 4% or ARS8.6 billion.
Within private sector deposits, peso deposits decreased 3% or ARS11.1 billion, while US dollar deposits decreased 8% or $81 million. As of June 2021, Banco Marco's transactional accounts represented approximately 51% of total deposits. Banco Marco's market share over private sector deposits as of June 2021 totaled 5.1%.
In terms of asset quality, Banco Macro's non-performing total financial ratio reached 1.68%. The coverage ratio measured as total allowances under expected credit losses over non-performing loans under Central Bank rules totaled 212.91%. Consumer portfolio in non-performing loans deteriorated 89 basis points up to 1.88% from 0.89% in the previous quarter, while commercial portfolio non-performing loans deteriorated 11 basis points in the second quarter of 2021 up to 1.1% from 1% in the previous quarter. During 2020, asset quality was positively affected by measures adopted by the Central Bank of Argentina in the current pandemic context, particularly the 60-days grace period that was added to debtor classification before a loan was considered as non-performing.
In March 2021, the Central Bank established gradual transition, which was completed by June 1st, 2021. And financial entities must classify their debtors according to the general debtor classification. In terms of capitalization, Banco Macro accounted an excess capital of ARS167 billion, which represented a total regulatory capital ratio of 38.3% and a Tier 1 ratio of 30.9%. It should be noted that Pursuant Communication 7312 issued by the Central Bank of Argentina, the distribution of profits by financial entities is suspended until December 31st, 2021. The Bank's aim is to make the best use of this excess capital.
The Bank's liquidity remained more than appropriate, liquid assets to total deposit ratio reached 93%. Overall, we have accounted for another positive quarter. We continued showing a solid financial position. Asset quality remain under control and closely monitored. We will keep on working to improve more our efficiency standards and we will keep a well optimized deposit base.
At this time, we would like to take the questions that you may have.
Questions and Answers:
[Operator Instructions]. There are no questions at this time. This concludes the question-and-answer session. I will now turn it over to Mr. Nicolas Torres for final consideration.
Nicolas A. Torres -- Investor Relations
Thank you all for your interest in Banco Macro. We appreciate your time and look forward to speaking with you again. Good day.
[Operator Closing Remarks].
Duration: 14 minutes
Nicolas A. Torres -- Investor Relations