Banco Macro Is 89% Cheaper Than 2017: Stock Is An Option With No Time Decay

Banco Macro Is 89% Cheaper Than 2017: Stock Is An Option With No Time Decay

Summary

Banco Macro 4Q 2021 shows – again – a conservatively managed and healthy operation in a special Country.

Banco Macro reported great numbers: Net Income up 30% Q-o-Q and 130% Y-o-Y, ROE at 18%, NPL ratio at 1.3% and coverage ratio improved to 209.61%.

Strong solvency ratio, with a 36.1% regulatory capital ratio – Basel III and 30.9% Tier 1 Ratio is probably possibly the envy of several international banks.

BMA has a history of growth through crisis and has a HUGE retained dividend. Stock trading 89% below end of 2017 price looks cheap.

BMA stock has a resilient and long term profitable business with an unrealized potential for the financial system to become much larger. The potentiality (option) grows when there are prospects of economic stability.

ferrantraite/E+ via Getty Images Banco Macro SA (NYSE: BMA ) is an Argentina-based public company that provides a wide range of financial services with focus in low & mid- income individuals and small & mid-sized companies. Digging into numbers that look great

Once again Banco Macro reported another good quarter on Q4, as it remains profitable in real terms, showing resiliency to what many foreign players considered a challenging economic and political environment in Argentina and reinforce my view of how cheap BMA is.

Net profits reached ARS 10.5 Bn in the quarter up from ARS 8.1 Bn in the prior quarter, even as the bank booked ARS 2.0 Bn in extraordinary provisions – 8.3x higher vs. 3Q21 – as a hedge, most of it additional due to IMF uncertainties in case the sovereign does not reach a debt agreement, which is set to be approved by Senate today.

The agreement does call for a reduction in the fiscal deficit, positive real interest rates and a limit to fiscal financing by the Central Bank.

Results widely bet street consensus as expressed on Bloomberg of ARS 7.4 Bn or 41.9% higher.

The reason for this surprise was mainly ARS 3.3 Bn tax reversion as Argentine banks report financials adjusted for inflation given the very high inflation. Taking that apart, operating results excluding inflation were mostly flat both Q-o-Q and Y-o-Y.

An environment of high inflation and high rates is typically positive for the Argentine banks given, as a relatively high amount of non-interest-bearing deposits. The bank’s net interest margin -or NIM- widened to 22.9% in the quarter, from 20.8% in the prior quarter, and 17.7% in the year-ago quarter.

Macro’s loans increased a healthy 13% QoQ and +20% YoY. Faster growth was seen in retail +15% QoQ and auto loans +10% QoQ. Part of the loan book shrink after the sale of the consumer loan book which, in this environment looks quite conservatory.

NPL (non-performing loan) ratio declined 40bps QoQ to 1.3%.

The nonperforming loan ratio, better known as the NPL ratio, is the ratio of the amount of nonperforming loans in a bank’s loan portfolio to the total amount of outstanding loans the bank holds. The NPL ratio measures the effectiveness of a bank in receiving repayments on its loans.

NPL improved from 1.7% in Q3 helped by the sale of some consumer loans and the. NPL coverage increased to 209% vs. 175% in 3Q21.

Macro balance sheet continued to strengthen and the bank remains very well capitalized, with a 30.9% Tier 1 ratio at the end of 2021 with liquid assets covering 90% of total deposits. This is something extremely unusual for a commercial bank.

Macro reported USD 380mm in foreign currency held in financial institutions locally and abroad – we understand most of this is held offshore. If so and to put it in context this equals to 38% BMA market value.The bank accumulated large amounts of capital over the last few years through both equity and undistributed dividends, which has led to lower profitability, although still in double digits.Dividends were declared, but not paid. Argentina Central Bank had restricted the banks from paying dividends during 2020 and 2021. Banco Macro still declared dividends every year, but these were not distributed. Now, given the restrictions have been lifted and the regulator has allowed the banks to pay dividends of up to 20% of accumulated reserves up to December 2021 which is still for pending distribution.In line with this authorization, there is a perception that an improved dialogue between the industry and the Central Bank seems to be better than in the past. One of the changes that clearly benefited the industry, including allowing the banks increased investment in so-called LELIQ together with the introduction of inflation accounting for tax purposes […]

source Banco Macro Is 89% Cheaper Than 2017: Stock Is An Option With No Time Decay

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