Source: Central Bank | | | (1) | | Public sector banks. | | (2) | | From our consolidated financial statements. |
| | | | | | | | | | | | | | | Market Share | | | | | | | | (% share of equity | | Equity | | Ps. | | | for the Argentine | | (As of December 31, 2007) | | Million | | | financial system) | | 1 BANCO DE LA NACION ARGENTINA(1) | | | 6,880 | | | | 18.7 | % | | | | | | | | 2 BANCO MACRO S.A.(2) | | | 2,708 | | | | 7.4 | % | | | | | | | | 3 BANCO HIPOTECARIO S.A. | | | 2,642 | | | | 7.2 | % | 4 BBVA BANCO FRANCES S.A. | | | 2,057 | | | | 5.6 | % | 5 BANCO DE GALICIA Y BUENOS AIRES S.A. | | | 1,759 | | | | 4.8 | % | 6 BANCO DE LA PROVINCIA DE BUENOS AIRES(1) | | | 1,617 | | | | 4.4 | % | 7 BANCO SANTANDER RIO S.A. | | | 1,575 | | | | 4.3 | % | 8 BANCO DE LA CIUDAD DE BUENOS AIRES(1) | | | 1,443 | | | | 3.9 | % | 9 BANCO PATAGONIA S.A. | | | 1,377 | | | | 3.7 | % | 10 HSBC BANK ARGENTINA S.A. | | | 1,264 | | | | 3.4 | % | OTHER | | | 13,489 | | | | 36.6 | % | | | | | | | | TOTAL | | | 36,811 | | | | 100.0 | % | | | | | | | |
| | | | | | | | | | | | | | | Market Share | | | | | | | | (% share of equity | | Equity | | Ps. | | | for the Argentine | | (As of December 31, 2008) | | Million | | | financial system) | | 1 BANCO DE LA NACION ARGENTINA (1) | | | 7,456 | | | | 18 | % | | | | | | | | 2 BANCO MACRO S.A. (2) | | | 2,817 | | | | 6.8 | % | | | | | | | | 3 BANCO HIPOTECARIO S.A. | | | 2,619 | | | | 6.3 | % | 4 BBVA BANCO FRANCES S.A. | | | 2,076 | | | | 5.0 | % | 5 BANCO SANTANDER RIO S.A. | | | 1,967 | | | | 4.8 | % | 6 BANCO DE GALICIA Y DE BUENOS AIRES S.A. | | | 1,955 | | | | 4.7 | % | 7 BANCO DE LA PROVINCIA DE BUENOS AIRES (1) | | | 1,677 | | | | 4.1 | % | 8 HSBC BANK ARGENTINA S.A. | | | 1,629 | | | | 3.9 | % | 9 BANCO PATAGONIA S.A. | | | 1,556 | | | | 3.8 | % | 10 BANCO DE LA CIUDAD DE BUENOS AIRES (1) | | | 1,341 | | | | 3.2 | % | OTHERS | | | 16,278 | | | | 39.3 | % | | | | | | | | TOTAL | | | 41,371 | | | | 100.0 | % | | | | | | | |
| | | Source: Central Bank | | | (1) | | Public sector banks. | | (2) | | From our consolidated financial statements. |
| | | | | | | | | | | | | | | Market Share | | | | | | | | (% share of total | | | | | | | | private sector | | | | | | | | deposits for the | | Private Sector Deposits | | Ps. | | | Argentine | | (As of December 31, 2007) | | Million | | | financial system) | | 1 BANCO DE LA NACION ARGENTINA(1) | | | 21,181 | | | | 13.4 | % | 2 BANCO SANTANDER RIO S.A. | | | 15,103 | | | | 9.5 | % | 3 BBVA BANCO FRANCES S.A. | | | 14,828 | | | | 9.4 | % | 4 BANCO DE GALICIA Y BUENOS AIRES S.A. | | | 12,629 | | | | 8.0 | % | 5 BANCO DE LA PROVINCIA DE BUENOS AIRES(1) | | | 12,228 | | | | 7.7 | % | | | | | | | | 6 BANCO MACRO S.A.(2) | | | 11,804 | | | | 7.4 | % | | | | | | | | 7 HSBC BANK ARGENTINA S.A | | | 8,814 | | | | 5.6 | % | 8 CITIBANK N.A. | | | 8,140 | | | | 5.1 | % | 9 BANCO DE LA CIUDAD DE BUENOS AIRES(1) | | | 7,265 | | | | 4.6 | % | 10 BANCO CREDICOOP COOPERATIVO LIMITADO | | | 6,974 | | | | 4.4 | % | OTHER | | | 39,487 | | | | 24.9 | % | | | | | | | | TOTAL | | | 158,453 | | | | 100.0 | % | | | | | | | |
| | | | | | | | | | | | | | | Market Share | | | | | | | | (% share of total | | | | | | | | private sector | | | | | | | | deposits for the | | Total Deposits | | Ps. | | | Argentine | | (As of December 31, 2008) | | Million | | | financial system) | | 1 BANCO DE LA NACION ARGENTINA (1) | | | 57,018 | | | | 24.1 | % | 2 BANCO DE LA PROVINCIA DE BUENOS AIRES (1) | | | 22,564 | | | | 9.5 | % | 3 BBVA BANCO FRANCES S.A. | | | 17,282 | | | | 7.3 | % | 4 BANCO SANTANDER RIO S.A. | | | 16,979 | | | | 7.2 | % | | | | | | | | 5 BANCO MACRO (2) | | | 15,828 | | | | 6.7 | % | | | | | | | | 6 BANCO DE GALICIA Y DE BUENOS AIRES S.A. | | | 14,009 | | | | 5.9 | % | 7 HSBC BANK ARGENTINA S.A. | | | 10,582 | | | | 4.5 | % | 8 CITIBANK N.A. | | | 9,794 | | | | 4.1 | % | 9 BANCO DE LA CIUDAD DE BUENOS AIRES (1) | | | 9,102 | | | | 3.8 | % | 10 BANCO CREDICOOP COOPERATIVO LIMITADO | | | 8,841 | | | | 3.7 | % | OTHERS | | | 54,488 | | | | 23 | % | | | | | | | | TOTAL | | | 236,487 | | | | 100.0 | % | | | | | | | |
| | | Source: Central Bank | | | (1) | | Public sector banks. | | (2) | | From our consolidated financial statements. |
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| | | | | Net Income | | Ps. | | (12 months ended December 31, 2007)2008) | | Million | | 1 BANCO DE LA NACION ARGENTINA(1)MACRO S.A. (2) | | | 740660 | | | | | | 2 BANCO MACRO S.A.(2) DE LA NACION ARGENTINA (1) | | | 495651 | | 3 HSBC BANK ARGENTINA S.A. | | | 448 | | 34 BANCO SANTANDER RIO S.A. | | | 266347 | | 45 BBVA BANCO FRANCES S.A. | | | 235 | | 5 CITIBANK N.A. | | | 234311 | | 6 BANCO DE LA PROVINCIA DE BUENOS AIRES (1) | | | 214 | | 7 BANCO DE SAN JUAN S.A. | | | 209276 | | 7 CITIBANK N.A. | | | 268 | | 8 BANCO PATAGONIA S.A. | | | 267 | | 9 BANCO DE GALICIA Y BUENOS AIRES S.A. | | | 195 | | 10 NUEVO BANCO DE SANTA FE SOCIEDAD ANONIMA | | | 159188 | | 9 HSBC BANK ARGENTINA S.A.OTHERS | | | 136 | | 10 BANCO PATAGONIA S.A. | | | 133 | | OTHER | | | 9691,747 | | | | | | TOTAL | | | 3,7905,358 | | | | | |
| | | Source: Central Bank | | | (1) | | Public sector banks. | | (2) | | From our consolidated financial statements. |
We were the most profitable bank, among private sector banks, measured by net income. As of December 31, 2007,2008, our return annualized on average equity was 20.2%23.8% compared to the 11.1%16.0% for private-sector banks and 11.2%13.7% for the banking system as a whole. There is a large concentration of branches in the Buenos Aires area, as the following table shows. We have the most extensive private-sector branch network in Argentina, and a leading regional presence in teneleven Provinces including Santa Fe, Córdoba, Río Negro, Mendoza, Entre Ríos, Neuquén and Tierra del Fuego, in addition to Misiones, Salta, Tucumán and Jujuy where we are the largest bank in terms of branches. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2007 | | | As of December 31, 2008 | | | | Banking System | | Banco Macro | | | Banking System | | Banco Macro | | | | Market Share | | | Market Share | | | | (% share of | | | (% share of | | | | total # of | | | total # of | | | | branches in | | | | | branches in | | | | each | | | % of | | % of | | each | | Province | | Branches | | % of Total | | Branches | | % of Total | | province) | | | Branches | | Total | | Branches | | Total | | province) | | | | | CITY OF BUENOS AIRES | | 777 | | | 19.5 | % | | 24 | | | 5.6 | % | | | 3.1 | % | | 777 | | | 19.4 | % | | 24 | | | 5.8 | % | | | 3.1 | % | BUENOS AIRES-REST | | 1,239 | | | 31.1 | % | | 53 | | | 12.4 | % | | | 4.3 | % | | 1,250 | | | 31.2 | % | | 52 | | | 12.5 | % | | | 4.2 | % | CATAMARCA | | 21 | | | 0.5 | % | | 1 | | | 0.2 | % | | | 4.8 | % | | 22 | | | 0.5 | % | | 1 | | | 0.2 | % | | | 4.5 | % | CHACO | | 61 | | | 1.5 | % | | 2 | | | 0.5 | % | | | 3.3 | % | | 61 | | | 1.5 | % | | 2 | | | 0.5 | % | | | 3.3 | % | CHUBUT | | 78 | | | 2.0 | % | | 4 | | | 1.0 | % | | | 5.1 | % | | 82 | | | 2.0 | % | | 4 | | | 1.0 | % | | | 4.9 | % | CORDOBA | | 396 | | | 9.9 | % | | 73 | | | 17.1 | % | | | 18.4 | % | | 395 | | | 9.9 | % | | 68 | | | 16.3 | % | | | 17.2 | % | CORRIENTES | | 61 | | | 1.5 | % | | 3 | | | 0.7 | % | | | 4.9 | % | | 60 | | | 1.5 | % | | 3 | | | 0.7 | % | | | 5.0 | % | ENTRE RIOS | | 119 | | | 3.0 | % | | 6 | | | 1.4 | % | | | 5.0 | % | | 119 | | | 3.0 | % | | 6 | | | 1.4 | % | | | 5.0 | % | FORMOSA | | 18 | | | 0.5 | % | | 0 | | | 0.0 | % | | | 0.0 | % | | 18 | | | 0.4 | % | | — | | | — | | | | — | | JUJUY | | 29 | | | 0.7 | % | | 15 | | | 3.5 | % | | | 51.7 | % | | 30 | | | 0.7 | % | | 15 | | | 3.6 | % | | | 50.0 | % | LA PAMPA | | 106 | | | 2.7 | % | | 2 | | | 0.5 | % | | | 1.9 | % | | 103 | | | 2.6 | % | | 2 | | | 0.5 | % | | | 1.9 | % | LA RIOJA | | 26 | | | 0.7 | % | | 2 | | | 0.5 | % | | | 7.7 | % | | 26 | | | 0.6 | % | | 2 | | | 0.5 | % | | | 7.7 | % | MENDOZA | | 140 | | | 3.5 | % | | 13 | | | 3.0 | % | | | 9.3 | % | | 141 | | | 3.5 | % | | 13 | | | 3.1 | % | | | 9.2 | % | MISIONES | | 65 | | | 1.6 | % | | 35 | | | 8.2 | % | | | 53.8 | % | | 64 | | | 1.6 | % | | 35 | | | 8.4 | % | | | 54.7 | % | NEUQUÉN | | 70 | | | 1.8 | % | | 4 | | | 1.0 | % | | | 5.7 | % | | 70 | | | 1.7 | % | | 4 | | | 1.0 | % | | | 5.7 | % | RIO NEGRO | | 62 | | | 1.6 | % | | 7 | | | 1.6 | % | | | 11.3 | % | | 63 | | | 1.6 | % | | 7 | | | 1.7 | % | | | 11.1 | % | SALTA | | 50 | | | 1.3 | % | | 24 | | | 5.6 | % | | | 48.0 | % | | 52 | | | 1.3 | % | | 24 | | | 5.8 | % | | | 46.2 | % | SAN JUAN | | 36 | | | 0.9 | % | | 1 | | | 0.2 | % | | | 2.8 | % | | 35 | | | 0.9 | % | | 1 | | | 0.2 | % | | | 2.9 | % | SAN LUIS | | 41 | | | 1.0 | % | | 1 | | | 0.2 | % | | | 2.4 | % | | 44 | | | 1.1 | % | | 1 | | | 0.2 | % | | | 2.3 | % | SANTA CRUZ | | 38 | | | 1.0 | % | | 2 | | | 0.5 | % | | | 5.3 | % | | 38 | | | 0.9 | % | | 2 | | | 0.5 | % | | | 5.3 | % | SANTA FE | | 432 | | | 10.8 | % | | 124 | | | 29.0 | % | | | 28.6 | % | | 430 | | | 10.7 | % | | 119 | | | 28.6 | % | | | 27.7 | % | SANTIAGO DEL ESTERO | | 45 | | | 1.1 | % | | 1 | | | 0.2 | % | | | 2.2 | % | | 50 | | | 1.2 | % | | 1 | | | 0.2 | % | | | 2.0 | % | TIERRA DEL FUEGO | | 17 | | | 0.4 | % | | 2 | | | 0.5 | % | | | 11.8 | % | | 17 | | | 0.4 | % | | 2 | | | 0.5 | % | | | 11.8 | % | TUCUMAN | | 60 | | | 1.4 | % | | 28 | | | 6.6 | % | | | 46.7 | % | | 62 | | | 1.5 | % | | 28 | | | 6.7 | % | | | 45.2 | % | | | | | | | | | | | | | | TOTAL | | 3,987 | | | 100.0 | % | | 427 | | | 100.0 | % | | | 10.7 | % | | 4,009 | | | 100.0 | % | | 416 | | | 100.0 | % | | | 10.4 | % | | | | | | | | | | | | | | | | | | | | | | | |
2427
Approximately 80%81% of the branches in the Argentine financial system are outside the City of Buenos Aires while approximately 94% of our branches are outside the City of Buenos Aires. The ten largest banks, in terms of branches, account for 62%61% of the total amount of the system. We are second to Banco de la Nación Argentina in terms of market share outside the City of Buenos Aires, with a market share of 13%12%. The ranking is based on financial institutions which have 50 branches or more and with presence in 15 provinces or more. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Market | | | | | | | Market | | | | | | | | Market | | Share of | | Market | | % of | | | Market | | Share of | | Market | | % of | | | | Number | | Share of | | Branches in | | Branches | | Share of | | Branches | | | Number | | Total | | Share of | | Branches | | Branches | | Branches | | Share of | | Branches | | | | of | | Total | | Branches | | City of | | in City of | | Branches | | Branches | | in the | | | of | | Number | | Branches | | in City of | | in City of | | in the | | Branches | | in the | | | | Provinces | | Number of | | in | | Buenos | | Buenos | | in the Rest | | in Rest of | | Rest of | | | Provinces | | of | | in | | Buenos | | Buenos | | Rest of | | in Rest of | | Rest of | | | | Served | | Branches | | Argentina | | Aires | | Aires | | of Country | | Country | | Country | | | Served | | Branches | | Argentina | | Aires | | Aires | | Country | | Country | | Country | | 1 BANCO MACRO S.A.(2) | | 23 | | 427 | | | 11 | % | | 24 | | | 3 | % | | 403 | | | 13 | % | | | 94 | % | | 23 | | 416 | | | 10 | % | | 24 | | | 3 | % | | 392 | | | 12 | % | | | 94 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2 BANCO DE LA NACION ARGENTINA (1) | | 24 | | 623 | | | 16 | % | | 64 | | | 8 | % | | 559 | | | 17 | % | | | 90 | % | | 24 | | 623 | | | 16 | % | | 64 | | | 8 | % | | 559 | | | 17 | % | | | 90 | % | 3 BANCO CREDICOOP COOPERATIVO LIMITADO | | 18 | | 238 | | | 6 | % | | 35 | | | 4 | % | | 203 | | | 6 | % | | | 85 | % | | 4 COMPAÑIA FINANCIERA ARGENTINA S.A. | | 18 | | 61 | | | 2 | % | | 10 | | | 1 | % | | 51 | | | 2 | % | | | 84 | % | | 3 COMPAÑIA FINANCIERA ARGENTINA S.A. | | | 18 | | 59 | | | 1 | % | | 8 | | | 1 | % | | 51 | | | 2 | % | | | 86 | % | 4 BANCO CREDICOOP COOPERATIVO LIMITADO | | | 19 | | 243 | | | 6 | % | | 36 | | | 5 | % | | 207 | | | 6 | % | | | 85 | % | 5 BANCO PATAGONIA S.A. | | 24 | | 133 | | | 3 | % | | 37 | | | 5 | % | | 96 | | | 3 | % | | | 72 | % | | 24 | | 135 | | | 3 | % | | 37 | | | 5 | % | | 98 | | | 3 | % | | | 73 | % | 6 BANCO SANTANDER RIO S.A. | | 21 | | 244 | | | 6 | % | | 74 | | | 10 | % | | 170 | | | 5 | % | | | 70 | % | | 21 | | 258 | | | 6 | % | | 80 | | | 10 | % | | 178 | | | 6 | % | | | 69 | % | 7 BANCO DE GALICIA Y BUENOS AIRES S.A. | | 24 | | 232 | | | 6 | % | | 76 | | | 10 | % | | 156 | | | 5 | % | | | 67 | % | | 24 | | 238 | | | 6 | % | | 76 | | | 10 | % | | 162 | | | 5 | % | | | 68 | % | 8 HSBC BANK ARGENTINA S.A. | | 19 | | 144 | | | 4 | % | | 50 | | | 6 | % | | 94 | | | 3 | % | | | 65 | % | | 9 BBVA BANCO FRANCES S.A. | | 24 | | 235 | | | 6 | % | | 83 | | | 11 | % | | 152 | | | 5 | % | | | 65 | % | | 10 CITIBANK N.A. | | 16 | | 60 | | | 2 | % | | 22 | | | 3 | % | | 38 | | | 1 | % | | | 63 | % | | 8 BBVA BANCO FRANCES S.A. | | | 24 | | 240 | | | 6 | % | | 83 | | | 11 | % | | 157 | | | 5 | % | | | 65 | % | 9 STANDARD BANK ARGENTINA S.A. | | | 17 | | 95 | | | 2 | % | | 33 | | | 4 | % | | 62 | | | 2 | % | | | 65 | % | 10 HSBC BANK ARGENTINA S.A. | | | 19 | | 122 | | | 3 | % | | 44 | | | 6 | % | | 78 | | | 2 | % | | | 64 | % | OTHER | | 24 | | 1,590 | | | 38 | % | | 303 | | | 39 | % | | 1,287 | | | 40 | % | | | 81 | % | | 24 | | 1,580 | | | 39 | % | | 292 | | | 38 | % | | 1,288 | | | 40 | % | | | 82 | % | | | | | | | | | | | | | | | | | | | | TOTAL | | 24 | | 3,987 | | | 100.0 | % | | 778 | | | 100.0 | % | | 3,209 | | | 100.0 | % | | | 80 | % | | 24 | | 4,009 | | | 100.0 | % | | 777 | | | 100.0 | % | | 3,232 | | | 100.0 | % | | | 81 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Source: Central Bank and our consolidated financial statements. | | | (1) | | Public sector banks. | | (2) | | Includes the branches of Banco Macro, Nuevo Banco Suquía, Banco del Tucumán and Nuevo Banco Bisel. | | (3) | | Ranking based on financial institutions which have 50 branches or more and with presence in 15 provinces or more. |
25
Argentine Banking Regulation Overview Founded in 1935, the Central Bank is the principal monetary and financial authority in Argentina. It is responsible for maintaining stability in the value of the domestic currency, establishing and implementing monetary policy and regulating the financial sector. It operates pursuant to its charter and the provisions of the Argentine Financial Institutions Law. Under the terms of its charter, the Central Bank must operate independently from the Argentine government. Since 1977, banking activities in Argentina have been regulated primarily by the Argentine Financial Institutions Law, which empowers the Central Bank to regulate the financial sector. The Central Bank regulates and supervises the Argentine banking system through the Superintendencia de Entidades Financieras y Cambiarias, or the Superintendency of Financial and Exchange Entities, or the Superintendency. The Superintendency is responsible for enforcing Argentina’s banking laws, establishing accounting and financial reporting requirements for the banking sector, monitoring and regulating the lending practices of financial institutions and establishing rules for participation of financial institutions in the foreign exchange market and the issuance of bonds and other securities, among other functions. These powers of the Central Bank include the authority to fix minimum capital, liquidity and solvency requirements, approve bank mergers, approve certain capital increases and transfers of stock, grant and revoke banking licenses, and to authorize the establishment of branches of foreign financial institutions in Argentina and the extension of financial assistance to financial institutions in cases of temporary liquidity or solvency problems. 28
The Central Bank also establishes different “technical ratios” that must be observed by financial entities with respect to levels of solvency, liquidity, credits risks and foreign exchange assets and liability positions. In addition, financial entities need the authorization of the Central Bank for the disposition of their assets, such as opening or changing branches or ATMs, acquiring share interests in other financial or non-financial corporations and establishing liens over their assets, among others. As supervisor of the financial system, the Central Bank requires financial institutions to submit information on a daily, monthly, quarterly, semi-annual and annual basis. These reports, which include balance sheets and income statements, information relating to reserve funds, use of deposits, classifications of portfolio quality (including details on principal debtors and any allowances for loan losses), compliance with capital requirements and any other relevant information, allow the Central Bank to monitor the business practices of financial entities. In order to confirm the accuracy of the information provided, the Central Bank is authorized to carry out inspections. If the Central Bank’s rules are not complied with, various sanctions may be imposed by the Superintendency, depending on the level of infringement. These sanctions range from a notice of non - -compliance to the imposition of fines or even the revocation of the financial entity’s operating license. Additionally, non-compliance with certain rules may result in the compulsory filing of specific adequacy or restructuring plans with the Central Bank. These plans must be approved by the Central Bank in order to permit the financial institution to remain in business. Banking regulations Since 1994, the Central Bank has supervised the Argentine financial entities on a consolidated basis. Such entities must file periodic consolidated financial statements that reflect the operations of head offices or headquarters as well as those of their branches in Argentina and abroad, and of their significant subsidiaries, whether domestic or foreign. Accordingly, requirements in relation to liquidity and solvency, minimum capital, risk concentration and loan loss provisions, among others, should be calculated on a consolidated basis. Permitted activities and investments The Argentine Financial Institutions Law governs any individuals and entities that are part of the financial system, including commercial banks, investment banks, mortgage banks, financial companies, savings and loan companies for residential purposes and credit unions. Except for commercial banks, which are authorized to conduct all financial activities and services that are specifically established by law or by regulations of the Central Bank, the activities that may be carried out by Argentine financial entities are set forth in the Argentine Financial Institutions Law and related Central Bank regulations. Some of the activities permitted for commercial banks include the ability to (i) receive deposits from the public in both local and foreign currency; (ii) underwrite, acquire, place or negotiate debt securities, including government securities, in the over-the-counter market; (iii) make and receive loans; (iv) guarantee customers’ debts; (v) act as custodians of pension funds, orAdministradoras de Fondos de Jubilaciones y Pensiones; (vi) conduct transactions in foreign currency; (vii)(vi) issue credit cards; (viii)(vii) act, subject to certain conditions, as brokers in real estate transactions; (ix)(viii) carry out commercial financing transactions; and (x)(ix) act as registrars of mortgage bonds. In addition, pursuant to the Argentine Financial Institutions Law and Central Bank Communication A 3086, commercial banks are authorized to operate commercial, industrial, agricultural and other types of companies that do not provide supplemental services to the banking services (as defined by applicable Central Bank regulations) to the extent that the commercial bank’s interest in such companies does not exceed 12.5% of its voting stock or 12.5% of its capital stock. However, even when commercial banks’ interests do not reach such percentages, they are not allowed to operate such companies if (i) such interest allows them to control a majority of votes at a shareholders’ meeting, or (ii) the Central Bank does not authorize the acquisition. Under Central Bank regulations, the total amount of the investments of a commercial bank in the capital stock of third parties, including interests in Argentine mutual funds, may not exceed 50% of such bank’s regulatory capital, orResponsabilidad Patrimonial Computable, or RPC. In addition, the total amount of a commercial bank’s investments in the following: (i) unlisted stock, excluding interests in companies that provide services that are supplementary to the finance business and interests in state-owned companies that provide public services, (ii) listed stock and interests in mutual funds that do not give rise to minimum capital requirements on the basis of market risk, and (iii) listed stock that does not have a “largely publicly available market price,” taken as a whole, is limited to 15% of such bank’s RPC. To this effect, a given stock’s market price is considered to be “largely publicly available” when daily quotations of relevant transactions are available, which quotations would not be significantly affected by a disposition of the bank’s holdings of such stock. 26
Operations and activities that banks are not permitted to perform The Argentine Financial Institutions Law prohibits commercial banks from: (a) creating liens on their assets without prior approval from the Central Bank, (b) accepting their own shares as security, (c) conducting transactions with their own directors or managers and with companies or persons related thereto under terms that are more favorable than those regularly offered to other customers, and (d) carrying out commercial or industrial activities without prior approval of the Central Bank, except those considered financially related activities under Central Bank regulations. Notwithstanding the foregoing, banks may own shares in other financial institutions with the prior approval of the Central Bank, and in public services companies, if necessary to obtain those services. 29
LIQUIDITY AND SOLVENCY REQUIREMENTS Minimum capital requirements The Central Bank requires that financial institutions maintain minimum capital amounts measured as of each month closing, which are defined as a ratio of the counterparty risk and interest rate risk of the financial institution’s assets. Such requirement should be compared to the basic requirement, which is explained below, taking into account the one with the highest value. The basic requirement varies depending on the type of institution and the jurisdiction in which the relevant institution is registered, from Ps. 10 million to Ps. 25 million, for banks, and from Ps. 5 million to Ps. 10 million for other institutions. In addition, financial institutions must comply with a market risk requirement that is calculated on a daily basis. Description of Argentine Tier 1 and Tier 2 Capital Regulations The Central Bank takes into consideration a financial institution’s regulatory capital (Responsabilidad Patrimonial Computableor RPC) in order to determine compliance with capital requirements. RPC consists of Tier 1 capital (Basic Net Worth) and Tier 2 capital (Complementary Net Worth) minus certain deducted items. Tier 1 capital consists of capital stock as defined by Argentine Business Companies Law No. 19,550, irrevocable contributions on account of future capital increases, adjustments to shareholders’ equity, disclosed reserves, unappropriated retained earnings, non-realized valuation differences, subordinated debt securities that meet certain conditions and requirements and, subsequent to December 31, 2012, reserve funds of up to 10% of the issuance of the related subordinated debt securities. In the case of consolidation, minority interests are included. Tier 2 capital consists of (i) debt securities contractually subordinated to all other liabilities not computable as Tier 1 capital, with an average initial maturity of at least five years and issued under certain conditions and requirements, plus (ii) amounts of reserve funds applied to the payment of interest on subordinated debt securities before December 31, 2012 and as from such date also those amounts which have not been used, provided they exceed certain limits, plus or minus (iii) 100% of net earnings or losses recorded through the most recent audited quarterly financial statements, plus or minus (iv) 100% of net earnings or losses for the current year as of the date of the most recent quarterly financial statement, plus or minus (v) 50% of profits or 100% of losses, from the most recent audited quarterly or annual financial statements, minus (vi) 100% of losses not shown in the financial statements, arising from quantification of any facts and circumstances reported by the auditor and plus (vii) 50% of loan loss provisions on the loan portfolio classified as “normal” or “normal performance.” Items to be deducted include, among others: (a) demand deposits maintained with foreign financial institutions that are not rated as “investment grade,” (b) negotiable instruments not held by the relevant financial institutions, except where the Central Bank (CRYL), Caja de Valores S.A., Clearstream, Euroclear, Depository Trust Company or Deutsche Bank, New York, are in charge of their registration or custody, (c) securities issued by foreign governments whose risk rating is lower than that assigned to Argentine government securities, (d)subordinated debt instruments issued by other financial institutions, (e) equity interests in other Argentine or foreign financial institutions, (f) any balance unpaid on subscribed stock pending in shareholders’ equity accounts, including share premiums, (g) real property added to the assets of the financial entity and with respect to which there is title deed duly recorded with the pertinent Argentine real property registry, except where such assets shall have been acquired in a court-ordered auction sale, (h) goodwill, (i) organization and development costs, and (j) any deficiency relating to the minimum loan loss provisions required by the Superintendency of Financial Institutions. Requirements for subordinated debt to be computed as Tier 1 Capital In general, debt securities can account for up to 30% of a financial institution’s Tier 1 capital. This percentage decreases over time to 15% by January 2013. In order for debt securities to be computed as Tier 1 capital, the issuance must be approved by: (i) the shareholders; (ii) the Superintendency of Financial Institutions; (iii) the CNV and (iv) a stock exchange in order for the debt securities to be admitted for listing. In addition, debt securities must have certain characteristics. Tier 1 capital must have a maturity of at least thirty years, and they may permit optional redemption by the issuer only if: (i) at least five years have elapsed since issuance, (ii) prior authorization of the Superintendency of Financial Institutions has been obtained, and (iii) funds used for redemption are raised through the issuance of capital stock or other Tier 1 capital debt securities. 27
Interest on Tier 1 capital debt securities may only accrue and be payable to the extent the interest does not exceed available distributable amounts based on the prior year’s audited financial statements. Accordingly, interest payments are non-cumulative such that if an interest payment is not made in full as a result of such limitation, the unpaid interest shall not accrue or be due and payable at any time. The available distributable amounts under Tier 1 capital debt instruments for an Argentine financial institution is determined by calculating the amount of its unappropriated retained earnings minus (i) required legal and statutory reserves; (ii) asset valuation adjustments as determined and notified by the Superintendency of Financial Institutions, whether or not agreed to by such financial institution, and the asset valuation adjustments indicated by its external auditor, in each case to the extent not recorded in its respective financial statements; and (iii) any amounts resulting from allowances permitted by the Superintendency of Financial Institutions, including adjustments arising from the failure to put into effect an agreed upon compliance plan. In order to make interest payments under Tier 1 capital debt instruments, the shareholders of the financial institution must, at their annual ordinary meeting that considers the allocation of the results available for distribution, approve the creation of a special reserve for such payments. The amount of the reserve may contemplate additional payments as a result of changes in exchange rates (for instruments issued in foreign currencies) or variable rates (in case of instruments with floating rates). The creation of the reserve and any adjustments to the reserve amount must be approved by the Superintendency of Financial Institutions. Ordinary shareholders’ meetings to consider the allocation of results available for distribution must be held within four months of the end of each fiscal year. 30
Only one interest rate step-up is permitted during the life of the securities and it may occur only after ten years have elapsed since issuance. Tier 1 capital debt securities may not be accelerated, nor have cross acceleration provisions, except upon bankruptcy. In the event of bankruptcy, Tier 1 capital debt securities rank before capital stock but after all senior debt and Tier 2 capital obligations (all Tier 1 capital debt securities rankpari passu amongst themselves). Tier 1 subordinated instruments cannot be secured or guaranteed by the issuer or subsidiaries affecting the above described ranking of priority rights in payments. If at any time Tier 1 capital debt securities exceed the established percentage computable as Tier 1 capital, or if it is established that unpaid interest thereon will be cumulative, or when their residual maturity is less than ten years, then thereafter they will be computed as Tier 2 capital. Argentine financial institutions cannot acquire Tier 1 capital debt securities issued by other Argentine financial institutions, nor can they purchase for subsequent resale their own Tier 1 capital debt securities. In accordance with current Central Bank regulations, financial institutions would not be permitted to pay interest or make other payments on Tier 1 capital debt securities in the event that, as provided in Communications “A” 4589 and “A” 4591 of the Central Bank or any successor regulations thereto, (a) they are subject to a liquidation procedure or the mandatory transfer of our assets by the Central Bank in accordance with Sections 34 or 35 bis of the Financial Institutions Law or successors thereto; (b) they are receiving financial assistance from the Central Bank (except liquidity assistance under the pesification rules pursuant to Decree No. 739/2003); (c) they are not in compliance with or have failed to comply on a timely basis with our reporting obligations to the Central Bank; or (d) they are not in compliance with minimum capital requirements (both on an individual and consolidated basis) or with minimum cash reserves (on average). Counterpart risk The capital requirement for counterpart risk is defined as: Cer = k* [a* Ais + c* (Ci + Fspn) + r* (Vrf + Vrani)] + INC + IP The required capital to assets-at-risk ratio is 10% (“a”) for fixed assets (Ais) and 8% (“r”) for loans, (Vrf), other creditsclaims from financial intermediation and other financing (Vrani).financings. The same ratio (“c”) is applied to claims on the public sector-securities held in investment accounts (Ci) and public sector loans (Fspn). The “INC” variable refers to incremental minimum capital requirements originated in excesses in other regulationstechnical ratios (fixed assets, credit risk diversification and rating and limitations on transactions with related clients). The variable IP refers to the incremental originated in the general limit extension of the negative foreign currency net global position. Each type of asset is weighted according to the level of risk assumed to be associated with it. TheIn broad terms, the weights assigned to the different types of assets are: | | | | | Type of Asset | | Weighting | | Cash and due from bankscash equivalents | | | 0-20 | % | Government Bonds | | | | | With market risk capital requirements and BCRA monetary control instruments including those registered as “available of sale” and “investment accounts” | | | 0 | % | Other domestic bonds (without Central Government collateral) | | | 100 | % | OECD Central Government bonds—rated AA or investment gradehigher | | | 20 | % | Loans | | | | | To the non-financial private sector | | | | | With preferred collateral under the form of: | | | | | Cash, termtime deposit certificates issued by the creditor entityinstitution and given as security | | | 0 | % | A guarantee by Reciprocal Guarantee Companies authorized by the BCRA, export credit insurance, documentary credits | | | 50 | % | Mortgages/Mortgages | | | 50%-100 | % | Pledges | | | 50%-100 | % | To the non-financial public sector | | | 100 | % | To the financial sector | | | | | Public financial entities with the collection of federal taxes as collateral | | | 50 | % | To foreign financial entitiesinstitutions or to financial entitiesinstitutions backed by them (rated AA or higher or investment grade) | | | 0%-20 | % | Other credits from financial intermediation | | | 0%-100 | % | Assets subject to financial leasing | | | 50%-100 | % | Other assets | | | 0%-100 | % | Guarantees and contingent liabilities | | | 0%-100 | % |
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Minimum capital requirements also depend on the CAMELS rating (1 strongest, 5 weakest) assigned by the Superintendence, which also determines the “k” value. This rating system complies with international standards and provides a broad definition of the performance, risks and perspectives of financial entities. Financial entities have to adjust their capital requirements according to the following “k” factors: | | | | | CAMEL Rating | | K Factor | | 1 | | | 0.97 | | 2 | | | 1.00 | | 3 | | | 1.05 | | 4 | | | 1.10 | | 5 | | | 1.15 | |
Interest rate risk FinancialIn addition to counterpart and market risk requirements, financial entities must comply with minimum capital requirements regarding interest rate risk. These minimum capital requirements capture the various levels of risk arising from the different sensitivity of assets and liabilities affected by adverse or unexpected changes in interest rates.rates (“duration” approach). This effect is immediately evident in the case of secondary markets, as a change in the interest rate leads to a change in the price of such assets, and therefore in the entity’s balance sheet. This regulation covers all the assets and liabilities not subject to the minimum capital requirements covering market risk.risk (including securities held in investment accounts).
Minimum capital requirements measure the value at risk (VaR) or maximum potential loss due to interest risk rate increases, considering a 3 month horizon and with confidence level of 99%. When calculating the requirements, the cash flows of the financial entity’s transactions are assigned to different time bands taking into account their maturity. Financial entities with 1-3 CAMELS ratings may treat 50% of sight deposits as long-term maturities (in the case of financial entities with a 3 rating, the assigned maturity cannot exceed 3 years). Contracts with variable interest rates based on a foreign index are treated as if they had fixed interest rates. The risk arising from liability contracts with variable rates based on a domestic index are considered up to the first rate adjustment date. Market risk Minimum capital requirements for market risks are added to previously measured requirements. Minimum capital requirements are computed as a function of the market risk of financial entities’ portfolios, measured as their value at risk (VaR). The regulation covers only those assets usually traded in open markets and excludes those assets in investment accounts.accounts (the latter must meet counterpart and interest rate risk minimum capital requirements). There are five categories of assets. Domestic assets are divided into equity and public bonds,bonds/BCRA’s debt instruments, the latter being classified into two areas according to whether their modified duration is less than or more than 2.5. Foreign equity and foreign bonds make up another two categories, which arethe latter also classified according to their duration.comprising two areas, defined as for domestic assets. The fifth category is comprised of foreign exchange positions, differentiated according to currency involved. OverallThe overall capital requirementsrequirement in relation to market risk is the sum of the five amounts of capital necessary to cover the risks arising from each category. Minimum capital requirements measure the market risk by calculating the Value at riskRisk (VaR) with a confidence level of 99%.
Market risk minimum capital requirements must be met daily. Information must be reported to the Central Bank on a monthly basis. As from May 2003, the U.S. dollar has been included as a foreign currency risk factor for the calculation of the market risk requirement, considering all assets and liabilities in that currency. Temporary regulations 1. Minimum capital requirements for counterpart risk have been temporarily reduced (via “Alpha1 coefficient”) for non-financial public sector financing granted before May 31, 2003. Minimum capital requirements for interest rate risk have also been temporarily diminished (via “Alpha2 coefficient”). The reduction coefficients to be applied converge to the unit according to an established schedule. These allowances have been introduced in order to reduce the impact on minimum capital requirements of those components that:that; (i) showed the biggest growth as a consequence of the 2002 crisis and (ii) are not present in international standards. | | | | | | | | | | | Alpha1 (applied | | | Alpha2 (applied | | | | to public sector | | | to interest | | Period | | financing) | | | rate risk) | | January/December 2004 | | | 0.05 | | | | 0.20 | | January/December 2005 | | | 0.15 | | | | 0.40 | | January/December 2006 | | | 0.30 | | | | 0.70 | | January/December 2007 | | | 0.50 | | | | 1.00 | | January/December 2008 | | | 0.75 | | | | 1.00 | | As from January 2009 | | | 1.00 | | | | 1.00 | |
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| | | | | | | | | | | Alpha1 (applied | | | Alpha2 (applied | | | | to public sector | | | to interest | | Period | | financing) | | | rate risk) | | January/December 2004 | | | 0.05 | | | | 0.20 | | January/December 2005 | | | 0.15 | | | | 0.40 | | January/December 2006 | | | 0.30 | | | | 0.70 | | January/December 2007 | | | 0.50 | | | | 1.00 | | January/December 2008 | | | 0.75 | | | | 1.00 | | As from January 2009 | | | 1.00 | | | | 1.00 | |
2. The capitalization derived from the difference between the equivalent in Pesos as if the judicial deposits were recorded in their original currency and the book value of those deposits in foreign currency that on January 5, 2002 were affected by Law No. 25,561 and Decree 214/02, will be a deductible item for the computing of the Regulatory Capital, until June 2009.Consequences of a failure to meet minimum capital requirements In the event of non-compliance with capital requirements by an existing financial institution, Central Bank Communication A“A” 3171 provides the following: (i) non-compliance reported by the institutions : the institution must meet the required capital no later than in the second month after non-compliance was incurred or submit a restructuring plan within 30 calendar days following the last day of the month in which such non-compliance occurred; and (ii) non-compliance detected by the Superintendency: the institution must file its defense within 30 calendar days after being served notice by the Superintendency. If no defense is filed, or if the defense is disallowed, the non-compliance will be deemed to be final, and the procedure described in item (i) will apply. In addition, non-compliance with minimum capital requirements will entail a number of consequences for the financial institution, including prohibition from opening branches in Argentina or in other countries, establishing representative offices abroad, or owning equity in foreign financial institutions, as well as a prohibition from paying cash dividends. Minimum cash requirements The minimum cash reserve requirement requires that a financial institution keep a portion of its deposits or obligations readily available and not allocated to lending transactions. Minimum cash requirements are applicable to demand and time deposits and other liabilities arising from financial intermediation denominated in pesos and foreign currency (including government and private securities), and any unused balances of advances in checking accounts under formal agreements not containing any clauses that permit the bank to discretionally and unilaterally revoke the possibility of using such balances. Minimum cash reserve obligations exclude amounts owed (i) to the Central Bank, domestic financial institutions, foreign financial institutions (including their head offices, controlling domestic institutions and their branches), and (ii) forward purchases and sales and spot transactions to be settled demand obligations for money orders and transfers from abroad pending payment and for overseas correspondent banking operations. The liabilities subject to these requirements are computed on the basis of the effective principal amount of the transactions, excluding interest accrued, past due, or to become due on the liabilities, provided they were not credited to the account of, or made available to, third parties, and the amount accruing upon the adjustment rate known as CER is applied. The minimum cash requirement is calculated on the monthly average of the liabilities (average of the daily balances at the end of each day during each calendar month). Such requirement shall be complied with on a separate basis for each currency in which the liabilities are denominated. 30
The table below shows the percentage rates that should be applied to determine the required minimum cash requirement: | | | | | | | | | | | | | | | Rate (%) | | | | Rate (%) | | | (Foreign | | Item | | (Pesos) | | | Currency) | | Checking account deposits | | | 19 | | | | — | | Savings account deposits | | | 19 | | | | 30 | | Legal custody accounts, special accounts for savings clubs, “Unemployment Fund for construction industry workers” and “Salary payment,” special checking accounts for legal entities and social security savings accounts | | | 19 | | | | 30 | | Other demand deposits and liabilities, including with foreign banks and correspondents, pension and social security benefits credited by ANSES (Government Social Security Agency) pending collection and immobilized reserve funds for liabilities covered by these regulations | | | 19 | | | | 30 | | Unused balances of advances in checking accounts under formal agreements | | | 19 | | | | | | Deposits in checking accounts of non-bank financial institutions, computed for purposes of meeting their required minimum cash reserve | | | 100 | | | | 100 | | Time deposits, liabilities under acceptances, repurchase agreements, stock-exchange repos (cauciones y pases bursátiles pasivos), constant-term investments, with an option for early termination or for renewal for a specified term and variable income, and other fixed-term liabilities, except rescheduled deposits included in the following items 11 and 13 and 15 of this table: | | | | | | | | | (i) Up to 29 days | | | 14 | | | | 35 | | (ii) From 30 days to 59 days | | | 11 | | | | 28 | | (iii) From 60 days to 89 days | | | 7 | | | | 20 | | (iv) From 90 days to 179 days | | | 2 | | | | 10 | | (v) From 180 days to 365 days | | | — | | | | 6 | | (vi) More than 365 days | | | — | | | | — | | Liabilities owed due to foreign finances | | | — | | | | — | | Securities (including Negotiable Obligations) | | | | | | | | | a- Debt issued from 01/01/02, including restructured liabilities | | | | | | | | | (i) Up to 29 days | | | 14 | | | | 35 | | (ii) From 30 days to 59 days | | | 11 | | | | 28 | | (iii) From 60 days to 89 days | | | 7 | | | | 20 | | (iv) From 90 days to 179 days | | | 2 | | | | 10 | | (v) From 180 days to 365 days | | | — | | | | 6 | | (vi) More than 365 days | | | — | | | | — | | b- Others | | | | | | | | | Liabilities owing to the Trust Fund for Assistance to Financial and Insurance Institutions | | | — | | | | — | | Demand and time deposits made upon a court order with funds arising from cases pending before the court, and the related immobilized balances | | | 10 | | | | 15 | | Deposits as assets of a mutual fund | | | 19 | | | | 40 | | Special deposits related to inflows of funds. Decree 616/2005 | | | — | | | | 100 | | Deposits and other liabilities (excluding “Fondo de Desempleo para los trabajadores de la Industria de la Construcción”) which return is higher than the 15% of BADLAR rates average, corresponding to the preceding month | | | 100 | | | | — | | Time deposits in pesos, belonging to public sector holders, with the right to opt for early withdrawal in less than 30 days from its setting up | | | 16 | | | | — | |
| | | | | | | | | | | | | | | Rate (%) | | | | Rate (%) | | | (Foreign | | Item | | (Pesos) | | | Currency) | | Checking account deposits | | | 19 | | | | — | | Savings account deposits | | | 19 | | | | 20 | | Legal custody accounts, special accounts for savings clubs, “Unemployment Fund for construction industry workers” and “Salary payment,” special checking accounts for legal entities and social security savings accounts | | | 19 | | | | 20 | | Other demand deposits and liabilities, including with foreign banks and correspondents, pension and social security benefits credited by ANSES (Government Social Security Agency) pending collection and immobilized reserve funds for liabilities covered by these regulations | | | 19 | | | | 20 | | Unused balances of advances in checking accounts under formal agreements | | | 19 | | | | — | | Deposits in checking accounts of non-bank financial institutions, computed for purposes of meeting their required minimum cash reserve | | | 100 | | | | 100 | |
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| | | | | | | | | | | | | | | Rate (%) | | | | Rate (%) | | | (Foreign | | Item | | (Pesos) | | | Currency) | | Time deposits, liabilities under acceptances, repurchase agreements (Included responsibilities for sale or transfer of credits to agents different from financial institutions) , stock-exchange repos (cautions and stock exchange passive repos), constantterm investments, with an option for early termination or for renewal for a specified term and variable income, and other fixed-term liabilities, except rescheduled deposits included in the following items 11 and 12 and 13 and 15 of this table: | | | | | | | | | (i) Up to 29 days | | | 14 | | | | 20 | | (ii) From 30 days to 59 days | | | 11 | | | | 15 | | (iii) From 60 days to 89 days | | | 7 | | | | 10 | | (iv) From 90 days to 179 days | | | 2 | | | | 5 | | (v) From 180 days to 365 days | | | — | | | | 2 | | (vi) More than 365 days | | | — | | | | — | | Liabilities owed due to foreign finances | | | — | | | | — | | Securities (including Negotiable Obligations) | | | — | | | | — | | a- Debt issued from 01/01/02, including restructured liabilities | | | — | | | | — | | (i) Up to 29 days | | | 14 | | | | 20 | | (ii) From 30 days to 59 days | | | 11 | | | | 15 | | (iii) From 60 days to 89 days | | | 7 | | | | 10 | | (iv) From 90 days to 179 days | | | 2 | | | | 5 | | (v) From 180 days to 365 days | | | — | | | | 2 | | (vi) More than 365 days | | | — | | | | — | | b- Others | | | — | | | | — | | Liabilities owing to the Trust Fund for Assistance to Financial and Insurance Institutions | | | — | | | | — | | Demand and time deposits made upon a court order with funds arising from cases pending before the court, and the related immobilized balances | | | 10 | | | | 10 | | Deposits as assets of a mutual fund | | | 19 | | | | 20 | | Special deposits related to inflows of funds. Decree 616/2005 | | | — | | | | 100 | | Deposits and other liabilities (excluding “Fondo de Desempleo para los trabajadores de la Industria de la Construcción”) which return is higher than the 15% of BADLAR rates average, corresponding to the preceding month | | | 100 | | | | — | | Time deposits in pesos, belonging to public sector holders, with the right to opt for early withdrawal in less than 30 days from its setting up | | | 16 | | | | — | |
In addition to the above mentioned requirements, the following requirements must be observed: 100% reserve for any defect in the application of resources in foreign currency for the month in respect to which the calculation of the minimum cash requirement is made. See “Information on the Company—The Argentine Banking System— Foreign Currency Lending Capacity”. The minimum cash requirement must be set up in the same currency to which the requirement applies, and eligible items include the following: | | | (i) Cash (in treasury, in custody at other financial institutions, in transit and in value carriers). | | (ii) Accounts maintained by financial institutions with the Central Bank in pesos. | | (iii) Accounts of minimum cash maintained by financial institutions with the Central Bank in U.S. dollars, or other foreign currency. | | (iv) Special guarantee accounts for the benefit of electronic clearing houses and to cover settlement of credit card and ATM transactions. | | (v) Checking accounts maintained by non-bank financial institutions with commercial banks for the purpose of meeting the minimum reserve requirement. | | (vi) Special guarantee accounts maintained with the Central Bank for transactions involving cheque cancelatorio (a check similar to a cashier’s check that may be purchased from a bank to pay a third party). | | (vii) Special accounts maintained with the Central Bank opened by the ANSES (Argentine Social Security Administration). | | (viii) Special accounts maintained by financial institutions with the Central Bank in securities. |
(i) Cash (in treasury, in custody at other financial institutions, in transit and in value carriers). (ii) Accounts maintained by financial institutions with the Central Bank in pesos. (iii) Accounts of minimum cash maintained by financial institutions with the Central Bank in U.S. dollars, or other foreign currency. (iv) Special guarantee accounts for the benefit of electronic clearing houses and to cover settlement of credit card and ATM transactions. (v) Checking accounts maintained by non-bank financial institutions with commercial banks for the purpose of meeting the minimum reserve requirement. (vi) Special guarantee accounts maintained with the Central Bank for transactions involving cheque cancelatorio (a check similar to a cashier’s check that may be purchased from a bank to pay a third party). (vii) Special accounts maintained with the Central Bank opened by the ANSES (Argentine Social Security Administration). (viii) Special accounts maintained by financial institutions with the Central Bank in securities. Compliance on public bonds time deposits must be done with holdings marked to market and of the same type, only in terms of monthly status. Holdings must be deposited on special accounts at the BCRA. These eligible items are subject to ongoing review by the Central Bank and may be changed in the future.
Compliance with the minimum cash reserve requirement will be measured on the basis of the monthly average of the daily balances of eligible items maintained during the month to which the minimum cash reserve refers by dividing the aggregate of such balances by the total number of days in the relevant period. 31
The aggregate balances of the eligible items referred to from items (ii) to (vii) above, maintained as of each daily closing, may not, on any one day during the month, be less than 50% of the total required cash reserve, excluding the requirement for incremental deposits, determined for the next preceding month, recalculated on the basis of the requirements and items in force in the month to which the cash reserves relate. The daily minimum required is 70% when a deficit occurs in the previous month. Any deficiencies in meeting the required minimum cash reserve and the daily minimum reserve are subject to a penalty equal to twice the nominal interestprivate bank’s BADLAR rate for reposdeposits in pesos with the BCRA (published during periodthe last business day of non-compliance for the longest term transaction —not exceeding 30 days)period) for deficiencies in Argentine currency and to twice the nominal interestprivate bank’s BADLAR rate of Us dollar denominated LEBAC (BCRA bill)for deposits in US dollars or twice the 30 day US LIBO rate for the last business day of the month (whichever is higher) for deficiencies in foreign currency. 34
Internal liquidity policies of financial institutions The regulations designed to limit liquidity risk provide that financial institutions should adopt management and control policies that ensure the maintenance of reasonable liquidity levels to efficiently manage their deposits and other financial commitments. Such policies should establish procedures for evaluating the liquidity of the institutions in the framework of prevailing market conditions to allow them to revise projections, take steps to eliminate liquidity constraints and obtain sufficient funds, at market terms, to maintain a reasonable level of assets over the long term. Such policies should also address (i) the concentration of assets and liabilities in specific customers, (ii) the overall economic situation, likely trends and the impact on credit availability, and (iii) the ability to obtain funds by selling government debt securities and/or assets. Credit risk The regulations on credit risk prescribe standards in order to reduce such risk without significantly eroding average profitability. There are three types of ratios that limit a lender’s risk exposure, namely: risk concentration limits, limits on transactions with customers on the basis of the institution’s capital and credit limits on the basis of the customer’s net worth. Concentration of risk means the aggregate amount of relevant transactions consummated with companies, individuals or groups of companies—whether affiliated or not—where such transactions, measured for each one of such customers, are at any time equal to or higher than 10% of the institution’s RPC on the last day of the month prior to the relevant month. Total operations may not exceed, at any time, three times the institution’s RPC for the previous month, without considering the operations involving local financial institutions. The limit is increased to five times the RPC if operations involving local financial institutions are considered. Diversification of risk: limitations are established for operations with clients, which may not exceed certain percentages applied on top of the entity’s RPC for the previous month. These percentages vary in function depending upon the operations considered. The regulation sets forth a number of transactions that are excluded from the credit risk diversification rules. In the case of credit limits based on the customers’ net worth, as a general rule the financial assistance cannot exceed 100% of the customer’s net worth, although this basic margin may be increased to 300% provided it does not exceed 2.5% of the financial institution’s RPC and the increase is approved by the board of directors of the relevant financial institution (since July 2006 this basic margin may be increased to 200% instead of 300%). Any excess over the ceilings established by these three ratios will trigger the consequences described above. Foreign exchange system During the first quarter of 2002, the Argentine government established certain foreign exchange controls and restrictions. On February 8, 2002, Decree No. 260 was issued, establishing as of February 11, 2002 a Single Free Exchange Market system through which all transactions involving the exchange of foreign currency are to be traded at exchange rates to be freely agreed upon. On such date, the Central Bank issued Communications A 3471 and A 3473, which stated that single and free exchange transactions can only be performed with entities authorized by the Central Bank to operate in foreign exchange. Item 4 of Central Bank Communication A 3471 stated that the exchange sale transactions in the single and free exchange market shall be performed using peso bills. Since January 2, 2003, there have been further modifications to the restrictions imposed by the Central Bank. See Item 10.D — “Additional Information — Exchange Controls”. Foreign currency lending capacity The Regulations on the allocation of deposits in foreign currencies establish that the lending capacity from foreign currency deposits, including U.S. dollar-denominated deposits to be settled in pesos, must fall under one of the following categories: (a) pre-financing and financing of exports to be made directly or through principals, trustees or other brokers;brokers, acting on behalf of the owner of the merchandise; (b) financing of investment projects, working capitalfor manufacturers, processors or purchase of any kindcollectors of goods, that increaseprovided they refer to non-revocable sales agreements with exporters for foreign currency-denominated prices (irrespective of the currency in which such transaction is settled), and they refer to exchangeable foreign-currency denominated goods listed in local or are relatedforeign markets, broadly advertised and easily available to the production of goods to be exported;general public; (c) financing tofor manufacturers of goods to be exported, as final products or as part of other goods, by third-party purchasers, provided that such transactions are secured or collateralized in foreign currency by said third-party purchasers; (d) financing of investment projects, working capital and/or the acquisitionpurchase of any kind of goods including-including temporary importationimports of commodities, which maycommodities- that increase or beare related to the production of goods for exportation;to be exported; (e) financing for commercial clients involved inor commercial loans considered as consumer loans, with the importpurpose of importing capital goods, whichwhenever they help to increase thegoods production of goods destined for the domestic marketmarket; (f) debt securities or financial trust participation certificates whose underlying assets are loans made withby the above-mentioned conditions and underfinancial entities in the “Préstamos BID N° 1192/OC-AR” program;manners set forth in (a) to (d) above; (g) loans made from one financial institution to another; (h) financing transactions for purposes other than those mentioned in point 6 above, included under the credit program of the BID (IDB),without exceeding 10% of the lending capacity and (i) foreign currency debt securities or financial trust participation certificates, offered by means of a public offering and authorizedpublicly listed under an authorization by the CNV, whose underlying assets are securities bought by the fiduciary and guaranteed by reciprocal guarantee companies, in order to finance export transactions. transactions; (h) financings for purposes other than those mentioned in (a) to (d) above, included under the IDB credit program (“Préstamos BID N° 119/OC-AR”), not exceeding 10% of the lending capacity; and (i) interfinancing loans (any interfinancing loans granted with such resources must be identified). 35
The lending capacity shall be determined for each foreign currency raised, such determination being made on the basis of the monthly average of daily balances recorded during each calendar month. Any defect in the application shall give rise to an increase in the minimum cash requirement in the relevant currency.currency 32
General Exchange Position The general exchange position includes all the liquid external assets of the institution, such as gold, currency and foreign currency notes reserves maintained in Argentina and abroad, deposits and investments, regardless of their term, in foreign banks, investments in foreign government securities (OECD members and sovereign debt rated not less than “AA”), certificates of time deposits in foreign institutions (rated not less than “AA”), other liquid investments abroad and correspondents’ debit and credit balances. It also includes purchases and sales of these assets already arranged and pending settlement involving foreign exchange purchases and sales performed with customers within a term not exceeding two business days. It does not include, however, third parties’ foreign assets held in custody, correspondent balances for third-party transfers pending settlement, term sales and purchases of foreign currency or securities nor direct investments abroad. The GEP ceiling is calculated every month and, therefore, updated the first business day of the month. Pursuant to the relevant reporting system regulations this ceiling is set at 15% of the amount equivalent in U.S. dollars to the computable equity at the end of the month immediately preceding the last month when filing with the BCRA has already expired. It will be increased by an amount equivalent in U.S. dollars to 5% of the total amount traded by the institution on account of the purchases and sales of foreign currency in the calendar month prior to the immediately preceding month, and by 2% of the total demand and time deposits locally held and payable in foreign bills, excluding deposits held in custody, recorded by the institution at the end of the calendar month prior to the immediately preceding month. If the ceiling does not exceed US$5.0 million, this figure will be considered its floor. Institutions authorized to trade in foreign currency failing to comply with the GEP ceilings or the exchange reporting regulations should refrain from trading in foreign currency until they are in compliance with the above. Although certain exceptions are admitted, institutions authorized to trade in foreign currency require the Central Bank’s prior consent to perform their own purchases when payment is made against delivery of foreign currency or other foreign assets comprising the GEP. Foreign Currency Net Global Position All assets and liabilities from financial intermediation in foreign currency and securities in foreign currency (deriving from cash and term transactions) are within the scope of net global position (for ongoing and completed operations). In addition, forward transactions under master agreements entered into domestic self-regulated markets are also included, with settlement of the net amount without delivery of the underlying asset. Deductible assets for determining RPC are excluded from the ratio. Effective May 1, 2003 the Central Bank establishes two ratios (Communication “A” 3889): | •Negative foreign currency net global position (liabilities exceeding assets): the limit is 30% of the Computable Net Worth until December 31, 2006. As from January 1, 2007 (Communications “A” 4577 and 4598) the limit is 15%, but it can be extended up to 15 p.p. under certain circumstances: at the same time has recorded a) medium and long term financings in pesos to non-financial private sector under certain conditions for an amount equivalent to the increase of said limit; and b) an increase in the minimum capital requirement equivalent to the increase of the general limit of the negative foreign currency net global position.
Positive net global position (assets exceeding liabilities): this limit cannot exceed the lesser of: | | | • Positive net global position (assets exceeding liabilities): this limit cannot exceed the lesser of :
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| 1. | | 30% of the Computable Net Worth. | | | 2. | | Own liquid resources (refer to RPC minus “fixed assets” and loans to related clients). |
By Communication “A” 4350, the Central Bank suspended as of May 1, 2005 the limits for the positive net global position. The excesses of these ratios are subject to a charge equal to twice the nominal interest rate of the US dollar denominated LEBAC or two times the US dollar 30-day LIBO rate for the last business day of the month, which ever is greater. Fixed assets and other items The Central Bank determines that the fixed assets and other items maintained by the financial entities must not exceed 100% of the entity’s RPC. Such fixed assets and other items include the following: | • | | Shares of local companies | | | • | | Miscellaneous receivables | | | • | | Property and equipment | |
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| • | | Other assets | | | • | | Organization and development expenses | | | • | | Goodwill | | | • | | Financing transactions to related clients. |
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The calculation of such assets will be effected according to the month end balances, net of depreciations, accumulated amortizations and bad debt risk allowances. Any excesses in this relationship generate an equivalent increase of the minimum capital requirements (100% of the excess on the ratio). Differences arising from the fulfillment of court injunctions “amparos” ordering the repayment of deposits in their original foreign currency will not be computed for this ratio up to December 31st, 2008. Debt classification and loan loss provisions Credit portfolio The regulations on debt classification are designed to establish clear guidelines for identifying and classifying the quality of assets, as well as evaluating the actual or potential risk of a lender sustaining losses on principal and/or interest, in order to determine, taking into account any loan security, whether the provisions against such contingencies are adequate. Banks must classify their loan portfolios into two different categories: (i) consumer or housing loans and (ii) commercial loans. Consumer and housing loans include housing loans, consumer loans, credit-card financings and other types of installment credits to individuals. All other loans are considered commercial loans. Consumer or housing loans in excess of Ps.500,000 the repayment of which is linked to its projected cash flows are classified as commercial loans. Central Bank regulations allow financial institutions to apply the consumer and housing loan classification criteria to commercial loans of up to Ps.500,000, given with or without guarantees. If a customer has both kinds of loans (commercial and consumer and housing loans), the consumer and housing loans will be added to the commercial portfolio to determine under which portfolio they should be classified based on the amount indicated. In these cases, the credit backed by preferred guarantees is considered to be at 50% of its face value. Under the current debt classification system, each customer, as well as the customer’s outstanding debts, are included within one of six sub-categories. The debt classification criteria applied to the consumer loan portfolio are primarily based on objective factors related to customers’ performance on their obligations or their legal standing, while the key criterion for classifying the commercial loan portfolio is each borrower’s paying ability based on its future cash flow. Commercial loans classification The principal criterion to evaluate a loan pertaining to the commercial portfolio is its borrower’s ability to repay it, whose ability is mainly measured by such borrower’s future cash flow. Pursuant to Central Bank regulations, commercial loans are classified as follows: | | | Classification | | Criteria | NormalIn normal situation | | Borrowers for whom there is no doubt as to their ability to comply with their payment obligations. | | | | Special tracking underSubject to special monitoring In observation | | Borrowers that among other criteria are up to 90 days past due and, although considered to be able to meet all their financial obligations, are sensitive to changes that could compromise their ability to honor debts absent timely corrective measures. | | | | Special trackingSubject to special monitoring Tracking under negotiation or with refinancing agreement | | Borrowers who are unable to comply with their obligations as agreed with the bank and therefore, formally state, at least 60 days before the date on which the payment of their obligations is due, their intention to refinance such debts. The borrower must enter into an agreement with the lender within 90 days (if up to two lenders are involved) or 180 days (if more than two lenders are involved) after the date on which the obligations became overdue. If no agreement has been reached within the established deadline, the borrower must be reclassified to the next category below according to the indicators established for each level. | | | | With problemsTroubled | | Borrowers with difficulties honoring their financial obligations under the loan on a regular basis, which, if uncorrected, may result in losses to the bank. | | | | With high risk of insolvency | | Borrowers who are highly unlikely to honor their financial obligations under the loan. | | | | Irrecoverable | | Loans classified as unrecoverable at the time they are reviewed (although the possibility might exist that such loans might be collected in the future). The borrower will not meet its financial obligations to the classifying bank. |
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| | | Classification | | Criteria | Irrecoverable by technical decisionaccording to Central Bank’s rules | | (a) Borrower has defaulted on its payment obligations under a loan for more than 180 calendar days according to the corresponding report provided by the Central Bank, which report includes (1) financial institutions liquidated by the Central Bank, (2) residual entities created as a result of the privatization of public financial institutions, or in the privatization or dissolution process, (3) financial institutions whose licenses have been revoked by the Central Bank and find themselves subject to judicial liquidation or bankruptcy proceedings and (4) trusts in which SEDESA is a beneficiary, and/or (b) certain kinds of foreign borrowers (including banks or other financial institutions that are not subject to the supervision of the Central Bank or similar authority of the country in which they are incorporated) that are not classified as “investment grade” by any of the rating agencies approved by the Central Bank. |
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Consumer and housing loans classification The principal criterion applied to loans in the consumer and housing portfolio is the length of its duration. Under the Central Bank regulations, consumer and housing borrowers are classified as follows: | | | Classification | | Criteria | NormalPerforming | | If all payments on loans are current or less than 31 calendar days overdue and, in the case of checking account overdrafts, less than 61 calendar days overdue. | | | | Low Risk | | Loans upon which payment obligations are overdue for a period of more than 31 and up to 90, calendar days. | | | | Medium Risk | | Loans upon which payment obligations are overdue for a period of more than 90 and up to 180 calendar days. | | | | High Risk | | Loans having payment obligations overdue for more than 180 calendar days and up to one year or if it is subject to judicial proceedings for default on any of those loans. | | | | Irrecoverable | | Loans in which payment obligations are more than one year overdue or the debtor is insolvent or in bankruptcy or liquidation. | | | | Irrecoverable by technical decisionaccording to Central Bank’s rules | | Same criteria as for commercial loans in the “Irrecoverable by technical decision” category. |
Minimum credit provisions The following minimum credit provisions are required to be made by Argentine banks in relation to the credit portfolio category: | | | | | | | | | | | With Preferred | | | Without Preferred | | Category | | Guarantees | | | Guarantees | | “Normal” | | | 1 | % | | | 1 | % | “Under observation” and “Low risk” | | | 3 | % | | | 5 | % | “Under negotiation or refinancing agreement” | | | 6 | % | | | 12 | % | “With Problems” and “Medium Risk” | | | 12 | % | | | 25 | % | “With high risk of insolvency” and “High Risk” | | | 25 | % | | | 50 | % | “Irrecoverable” | | | 50 | % | | | 100 | % | “Irrecoverable by technical decision” | | | 100 | % | | | 100 | % |
The Superintendence may require additional provisioning if it determines that the current level is inadequate. Minimum frequency for classification review We are required to classify loans at least once a year in accordance with the Central Bank Rules. Nevertheless, a quarterly review is required for credits that amount to 5% or more of our RPC and mid-year review for credits that amount to the lower of: (i) Ps.1 million or (ii) range between 1% and 5% of our RPC. In addition, we have to review the rating assigned to a debtor when another financial institution reduces the debtor classification in the “Credit Information Database” and grants 10% or more of the debtor’s total financing in the financial system. Only one-level discrepancy is allowed in relation to the information submitted by financial institutions to the “Credit Information Database”; and the lower classification awarded by at least two other banks and total lending from such banks account for 40% or more of the total informed; if there is a greater discrepancy the bank will be required to reclassify the debtor. Allowances for loan losses The allowance for loan losses is maintained in accordance with applicable regulatory requirements of the Central Bank. Increases in the allowance are based on the level of growth of the loan portfolio, as well as on the deterioration of the quality of existing loans, while decreases in the allowance are based on regulations requiring the write-off of non-performing loans classified as “irrecoverable” after a certain period of time and on decisions of the management to write off non-performing loans evidencing a very low probability of recovery. 38
Priority rights of depositors Under Section 49 of the Financial Institutions Law (the “FIL”), in the event of judicial liquidation or bankruptcy of a bank, depositors have a general and absolute priority right to collect their claims over all other creditors, except claims secured by pledges or mortgages and certain employee liens. Additionally, the holders of any type of deposit have a special priority right over all other creditors of the bank, except certain employee creditors, to be paid out of (i) any funds of the branch that may be in the possession of the Central Bank as Minimum Cash Reserve, (ii) any other funds of the bank existing as of the date on which the bank’s license is revoked, or (iii) any proceeds resulting from the mandatory transfer of certain assets of the financial institution to another as determined by the Central Bank pursuant to Section 35 of the Argentine Financial Institutions Law, according to the following order of priority: (a) deposits of up to Ps.50,000 per person (including all amounts such person deposited in one financial entity), or its equivalent in foreign currency, (b) all deposits of an amount higher than Ps.50,000, or its equivalent in foreign currency, and (c) all other deposits on apro ratabasis.the liabilities originated in commercial lines granted to the bank and which directly affect international commerce. 35
Mandatory deposit insurance system Law No. 24,485, as amended by Law No. 25,089 and Decree No. 540, passed on April 12, 1995, created a Deposit Insurance System, or SSGD, which is mandatory for bank deposits, and delegated the responsibility for organizing and implementing the system to the Central Bank. The SSGD has been implemented through the establishment of a Deposit Guarantee Fund, or FGD, managed by a private-sector corporation calledSeguro de Depósitos Sociedad Anónima,or Deposit Insurance Corporation, or SEDESA. The shareholders of SEDESA are the federal government and a trust set up by the participating financial institutions. These institutions must pay into the FGD a monthly contribution determined by Central Bank regulations. The SSGD is financed through regular and additional contributions made by financial institutions, as provided for in Central Bank Communication A 3068, dated January 28, 2000. The SSGD covers deposits made by individuals and legal entities in Argentine or foreign currency and maintained in accounts with the participating financial institutions, including checking accounts, savings accounts, and time deposits up to the amount of Ps.30,000. Effective payment on this guarantee will be made within 30 business days after revocation of the license of the financial institution in which the funds are held; such payment is subsidiary, that is, not cumulative, to the exercise of the depositor’s priority rights. In view of the circumstances affecting the financial system, Decree No. 214/2002 provided that SEDESA may issue registered securities for the purpose of offering them to depositors in payment of the guarantee in the event it should not have sufficient funds available. The SSGD does not cover: (i) deposits maintained by financial institutions in other financial institutions, including certificates of deposit bought in the secondary market, (ii) deposits made by persons directly or indirectly affiliated with the institution, (iii) time deposits of securities, acceptances or guarantees, (iv) any transferable time deposits that have been transferred by endorsement, (v) any deposits benefiting from some incentive (e.g., car raffles) in addition to the agreed upon interest rate, and (vi) any deposits in which the agreed-upon interest rate is higher than the reference interest rates periodically released by the Central Bank for time deposits and demand deposit account balances. Capital markets Commercial banks are authorized to subscribe and sell debt securities. At present, there are no statutory limitations as to the amount of securities a bank may undertake to subscribe. However, under Central Bank regulations, underwriting of debt securities by a bank would be treated as “financial assistance” and, accordingly, until the securities are sold to third parties, such underwriting would be subject to limitations. In 1990, the Buenos Aires securities market authorized firms organized as brokerage houses, orsociedades de bolsa,to operate as brokers on the Buenos Aires Stock Exchange in addition to individual stockbrokers. There are currently no restrictions on ownership of asociedad de bolsaby a commercial bank, and, in fact, most of the principal commercial banks operating in Argentina have established their ownsociedad de bolsa.All brokers, whether individuals or firms, are required to own at least one share of the Mercado de Valores S.A. (“MERVAL”) to be allowed to operate as brokers on the Buenos Aires Stock Exchange. An agreement between the Buenos Aires Stock Exchange and representatives of the Mercado Abierto Electrónico (“MAE”) dealers provides that trading in shares and other equity securities will be conducted exclusively on the Buenos Aires Stock Exchange and that all debt securities listed on the Buenos Aires Stock Exchange may also be traded on the MAE. Trading in Argentine government securities, which are not covered by the agreement, is conducted mainly on the MAE. The agreement does not extend to other Argentine exchanges. Commercial banks may operate as both managers and custodians of Argentinefondos comunes de inversiónor mutual funds; provided, however, that a bank may not act simultaneously as manager and custodian for the same fund. 39
Financial institutions in economic difficulties The Argentine Financial Institutions Law provides that any financial institution, including a commercial bank, operating at less than certain required technical ratios and minimum net worth levels or, in the judgment of the Central Bank, with impaired solvency or liquidity, must prepare aplan de regularización y saneamiento,or a restructuring plan. The plan must be submitted to the Central Bank on a specified date, not later than 30 calendar days from the date on which a request to that effect is made by the Central Bank. The Central Bank can appoint aninterventor,or comptroller, to the financial institution and restrict the distribution of dividends. In addition, to help ensure the feasibility of the plan, the Central Bank is empowered to grant a temporary exemption from compliance with technical regulations and/or payment of any fines that may arise from such non-compliance. Upon the institution’s failure to submit, secure regulatory approval of, or comply with, a restructuring plan, the Central Bank will be empowered to revoke the institution’s license to operate as such. 36
Dissolution and liquidation of financial institutions As provided in the Argentine Financial Institutions Law, the Central Bank must be notified of any decision adopted by a financial institution’s legal or corporate authorities concerning its dissolution. The Central Bank, in turn, must then notify such decision to a competent court, which would then determine who will liquidate the entity: the corporate authorities or an independent liquidator appointed for the purpose. The court’s decision will be based on whether or not there is sufficient assurance that the corporate authorities are capable of carrying out such liquidation properly. Pursuant to the FIL, the Central Bank no longer acts as liquidator of financial institutions. However, if a restructuring plan has failed or is not deemed feasible, or violations of local laws and regulations have been incurred, or significant changes have occurred in the institution’s condition since the original authorization was granted, then the Central Bank may revoke a bank’s license to operate as a financial institution. In this event, the law allows for judicial or extrajudicial liquidation. During the liquidation process and once the license to operate as a financial institution has been revoked, a court of competent jurisdiction may adjudge the former financial institution in bankruptcy or a petition in bankruptcy may be filed by any creditor of the bank after a period of 60 calendar days has elapsed since the license was revoked. Money laundering The concept of money laundering is generally used to denote transactions intended to introduce criminal proceeds into the institutional system and thus to transform profits from illegal activities into assets of a seemingly legitimate origin. On April 13, 2000, the Argentine Congress passed Law No. 25,246, which defines money laundering as a type of crime. In addition, the law, which supersedes several sections of the Argentine criminal code, created the so-called Financial Information Unit (“FIU”), establishing an administrative criminal system. Money laundering is defined as a crime under the criminal code, which states that a crime will be committed whenever a person converts, transfers, manages, sells, encumbers, or otherwise uses money, or any other assets, stemming from a crime in which that person has not participated, with the possible result that the original or substituted assets may appear to be of a legitimate origin, provided the value of the assets exceeds Ps.50,000, whether such amount results from one or more transactions. The main purpose of Law 25,246 is to prevent money laundering. In line with internationally accepted practice, it does not attribute responsibility for controlling these criminal transactions only to government agencies, but also assigns certain duties to diverse private sector entities such as banks, stockbrokers, brokerage houses and insurance companies. These duties consist basically in information capturing functions. In addition, financial institutions are required to report to the FIU any transaction that looks suspicious or unusual, or lacks economic or legal justification, or is unnecessarily complex, whether performed on isolated occasions or repeatedly. Law 26268 on “Terrorist Criminal Associations and Financing of Terrorism” promulgated on July 4, 2007, amended Law 25246 on “Concealment and Laundering of Proceeds of Crime”, and established the duties and powers of the FIU as well as severe penalties for anyone participating in any such criminal activities. The Central Bank regulation requires banks to take certain minimum precautions to prevent money laundering. Each institution must appoint a senior management officer as the person responsible for money laundering prevention in charge of centralizing any information the Central Bank may require on its own initiative or at the request of any competent authority. In addition, this officer, or other person reporting to the general manager, the board of directors, or equivalent authority, will be responsible for the implementation, tracking and control of internal procedures to ensure compliance with the regulations. In addition, financial institutions are required to report to the Superintendency any transaction that looks suspicious or unusual, or lacks economic or legal justification, or is unnecessarily complex, whether performed on isolated occasions or repeatedly. In July 2001, the Central Bank released a list of “non cooperative” jurisdictions so that financial institutions would pay special attention to transactions to and from Myanmar.
We comply with all applicable money laundering regulations as provided for by the Central Bank and the Financial Information Unit;FIU; in particular with Resolution N°2/2002 of the Financial Information Unit, dated October 25, 2002, as amended and supplemented by Resolution N° 2/2007228/07 dated June 13,December 5, 2007, which regulates Section 21 paragraphs a) and b) of Law 25,246 that provides for the gathering of information regarding suspicious operations and its report to the authorities. Merger, consolidation and transfer of goodwill Merger, consolidation and transfer of goodwill may be arranged between entities of the same or different type and will be subject to the prior approval of the Central Bank. The new entity must submit a financial-economic structure profile supporting the project in order to obtain authorization from the Central Bank. 40
Financial System Restructuring Unit The Financial System Restructuring Unit was created to oversee the implementation of a strategic approach for those banks benefiting from assistance provided by the Central Bank. This unit is in charge of rescheduling maturities, determining restructuring strategies and action plans, approving transformation plans, and accelerating repayment of the facilities granted by the Central Bank. 37
C. Organizational Structure Subsidiaries We have eightsix subsidiaries (i) Macro Bank Limited (previously Sud Bank & Trust), our subsidiary in the Bahamas through which we provide primarily private banking services; (ii) Macro Securities S.A. Sociedad de Bolsa, which is a member of the Buenos Aires Stock Exchange, and through which we provide investment research, securities trading and custodial services to our customers; (iii) Sud Inversiones & Análisis S.A., our subsidiary that acts as trustee and provides financial advisory and analysis services;(iv) Macro Fondos S.G.F.C.I.S.A. our asset management subsidiary; (v) Macro Valores S.A.; (vi) Banco del Tucumán, our acquired retail and commercial banking subsidiary in the province of Tucumán; (vii)n and (vi) Nuevo Banco Bisel, our acquired retail and commercial banking subsidiary in the central provinces of Argentina and (vii) Red Innova Administradora de Fondos de Inversión S.A. On March 19, 2008, the Bank sold its interest in Macro Valores S.A. On and on March 31, 2008, the ordinary and extraordinary general shareholder’s meeting of Red Innova Administradora de Fondos de Inversión S.A. resolved its dissolution and liquidation from such date.
| | | | | | | Banco Macro S.A.’s | | | | direct and indirect equity interest | | | | Percentage of | | Subsidiary | | Capital Stock and possible votes | | | | | | | Nuevo Banco Bisel S.A. (1) | | | 99.997 | % | | | | | | Banco del Tucumán S.A. (1) | | | 89.932 | % | | | | | | Macro Bank Limited (former Sud Bank & Trust Company Limited) (2) | | | 99.999 | % | | | | | | Macro Securities S.A. Sociedad de Bolsa (1) | | | 99.921 | % | | | | | | Sud Inversiones & Análisis S.A. (1) | | | 98.605 | % | | | | | | Macro Fondos S.G.F.C.I. S.A. (1) | | | 99.936 | % |
| | | (1) | | Country of residence: Argentina | | (2) | | Country of residence: Bahamas |
D. Property, plants and equipment Property We own 17,10923,226 square meters of office space at Sarmiento 341-355, 401-447 and 731-735, in Buenos Aires, Argentina, the headquarters for our management, accounting, administrative and investor relations personnel. As of December 31, 20072008 our branch network consisted of 427416 branches in Argentina, of which 192171 are leased properties. Selected Statistical Information The following information is included for analytical purposes and should be read in conjunction with the Consolidated Financial Statements as well as item 5-“Operating and Financial Review and Prospects”Prospects". This information has been prepared from our financial records, which are maintained in accordance with the regulations established by the Central Bank and do not reflect adjustments necessary to state the information in accordance with U.S. GAAP. See Note 35 to the Consolidated Financial Statements as offor the three years ended on December 31, 20072008 for a summary of the significant differences between Central Bank Rules and U.S. GAAP. 41
Average balance sheets, interest earned on interest-earning assets and interest paid on interest-bearing liabilities The following tables show average balances, interest amounts and nominal rates for our interest-earning assets and interest-bearing liabilities for the years ended December 31, 2005, 2006, 2007 and 2007.2008. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | Years Ended December 31, | | | | 2005 | | 2006 | | 2007 | | | 2006 (1) | | 2007 (1) | | 2008 | | | | Interest | | Average | | Interest | | Average | | Interest | | Average | | | Interest | | Average | | Interest | | Average | | Interest | | Average | | | | Average | | Earned/ | | Nominal | | Average | | Earned/ | | Nominal | | Average | | Earned/ | | Nominal | | | Average | | Earned/ | | Nominal | | Average | | Earned/ | | Nominal | | Average | | Earned/ | | Nominal | | | | Balance | | (Paid) | | Rate | | Balance | | (Paid) | | Rate | | Balance | | (Paid) | | Rate | | | Balance | | (Paid) | | Rate | | Balance | | (Paid) | | Rate | | Balance | | (Paid) | | Rate | | | | (in thousands of pesos, except percentages) | | | (in thousands of pesos, except percentages) | | | ASSETS | | | Interest-earning assets | | | Government securities(1)(2) | | | Pesos | | 2,554,126 | | 204,538 | | | 8.01 | % | | 2,428,667 | | 284,121 | | | 11.70 | % | | 3,923,881 | | 421,477 | | | 10.74 | % | | 2,428,667 | | 284,121 | | | 11.70 | % | | 3,923,881 | | 421,477 | | | 10.74 | % | | 4,346,565 | | 540,302 | | | 12.43 | % | Dollars | | 143,283 | | | (11,203 | ) | | | (7.82 | %) | | 230,924 | | | (9,971 | ) | | | (4.32 | %) | | 181,080 | | 15,598 | | | 8.61 | % | | 230,924 | | | (9,971 | ) | | | (4.32 | %) | | 181,080 | | 15,598 | | | 8.61 | % | | 215,732 | | | (5,785 | ) | | | (2.68 | %) | | | | | | | | | | | | | | | | | | | | | | Total | | 2,697,409 | | 193,335 | | | 7.17 | % | | 2,659,591 | | 274,150 | | | 10.31 | % | | 4,104,961 | | 437,075 | | | 10.65 | % | | 2,659,591 | | 274,150 | | | 10.31 | % | | 4,104,961 | | 437,075 | | | 10.65 | % | | 4,562,297 | | 534,517 | | | 11.72 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans | | | Private Sector | | | Private and financial Sector | | | Pesos | | 1,990,060 | | 285,439 | | | 14.34 | % | | 3,798,073 | | 576,243 | | | 15.17 | % | | 6,162,786 | | 1,041,645 | | | 16.90 | % | | 3,798,073 | | 576,243 | | | 15.17 | % | | 6,162,786 | | 1,041,645 | | | 16.90 | % | | 8,552,950 | | 1,786,608 | | | 20.89 | % | Dollars | | 468,063 | | 21,889 | | | 4.68 | % | | 715,551 | | 39,204 | | | 5.48 | % | | 1,228,829 | | 78,815 | | | 6.41 | % | | 715,551 | | 39,204 | | | 5.48 | % | | 1,228,829 | | 78,815 | | | 6.41 | % | | 1,821,403 | | 143,916 | | | 7.90 | % | | | | | | | | | | | | | | | | | | | | | | Total | | 2,458,123 | | 307,328 | | | 12.50 | % | | 4,513,624 | | 615,447 | | | 13.64 | % | | 7,391,615 | | 1,120,460 | | | 15.16 | % | | 4,513,624 | | 615,447 | | | 13.64 | % | | 7,391,615 | | 1,120,460 | | | 15.16 | % | | 10,374,353 | | 1,930,524 | | | 18.61 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Public Sector | | | Pesos | | 714,207 | | 102,217 | | | 14.31 | % | | 694,938 | | 93,427 | | | 13.44 | % | | 767,970 | | 51,575 | | | 6.72 | % | | 694,938 | | 93,427 | | | 13.44 | % | | 767,970 | | 51,575 | | | 6.72 | % | | 755,364 | | 38,058 | | | 5.04 | % | | | | | | | | | | | | | | | | | | | | | | Total | | 714,207 | | 102,217 | | | 14.31 | % | | 694,938 | | 93,427 | | | 13.44 | % | | 767, 970 | | 51,575 | | | 6.72 | % | | 694,938 | | 93,427 | | | 13.44 | % | | 767,970 | | 51,575 | | | 6.72 | % | | 755,364 | | 38,058 | | | 5.04 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deposits with the Central Bank | | | Pesos | | | 733,687 | | 2,825 | | | 0.39 | % | | 1,377,853 | | 10,908 | | | 0.79 | % | | 1,677,710 | | 9,386 | | | 0.56 | % | Dollars | | | 441,288 | | 7,561 | | | 1.71 | % | | 568,821 | | 7,474 | | | 1.31 | % | | 598,344 | | 4,998 | | | 0.84 | % | | | | | | | | | | | | | | | | | | | | | | Total | | | 1,174,975 | | 10,386 | | | 0.88 | % | | 1,946,674 | | 18,382 | | | 0.94 | % | | 2,276,054 | | 14,384 | | | 0.63 | % | | | | | | | | | | | | | | | | | | | | | | | | | �� | | Other assets | | | Pesos | | | 1,055,424 | | 95,937 | | | 9.09 | % | | 1,289,250 | | 138,041 | | | 10.71 | % | | 1,078,256 | | 174,081 | | | 16.14 | % | Dollars | | | 478,870 | | 20,592 | | | 4.30 | % | | 417,109 | | 23,663 | | | 5.67 | % | | 539,237 | | 46,871 | | | 8.69 | % | | | | | | | | | | | | | | | | | | | | | | Total | | | 1,534,294 | | 116,529 | | | 7.59 | % | | 1,706,359 | | 161,704 | | | 9.48 | % | | 1,617,493 | | 220,952 | | | 13.66 | % | | | | | | | | | | | | | | | | | | | | | | | | | Total interest-earning assets | | | Pesos | | | 8,710,789 | | 1,052,553 | | | 12.08 | % | | 13,521,740 | | 1,663,646 | | | 12.30 | % | | 16,410,845 | | 2,548,435 | | | 15.53 | % | Dollars | | | 1,866,633 | | 57,386 | | | 3.07 | % | | 2,395,839 | | 125,550 | | | 5.24 | % | | 3,174,716 | | 190,000 | | | 5.98 | % | | | | | | | | | | | | | | | | | | | | | | Total | | | 10,577,422 | | 1,109,939 | | | 10.49 | % | | 15,917,579 | | 1,789,196 | | | 11.24 | % | | 19,585,561 | | 2,738,435 | | | 13.98 | % | | | | | | | | | | | | | | | | | | | | | | | | | Non interest-earning assets | | | Cash and due from banks | | | Pesos | | | 325,154 | | — | | 404,796 | | — | | 539,344 | | — | | Dollars | | | 353,051 | | — | | 455,163 | | — | | 286,879 | | — | | Euros | | | 8,955 | | — | | 14,590 | | — | | 8,589 | | — | | Other | | | 1,481 | | 2,002 | | — | | 1,405 | | — | | | | | | | | | | | | | | | | | | | | | | | Total | | | 688,641 | | — | | 876,551 | | 836,217 | | | | | | | | | | | | | | Investments in other companies | | | Pesos | | | 9,176 | | — | | 9,215 | | — | | 11,636 | | — | | Dollars | | | 1,025 | | — | | 1,552 | | — | | 1,275 | | — | | | | | | | | | | | | | | | | | | | | | | | Total | | | 10,201 | | — | | 10,767 | | — | | 12,911 | | — | | | | | | | | | | | | | | | | Property and equipment and miscellaneous and intangible assets and items pending of allocation | | | Pesos | | | 578,243 | | — | | 771,073 | | — | | 801,674 | | — | | | | | | | | | | | | | | | | | | | | | | | Total | | | 578,243 | | — | | 771,073 | | — | | 801,674 | | — | | | | | | | | | | |
3842
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | Years Ended December 31, | | | | 2005 | | 2006 | | 2007 | | | 2006 (1) | | 2007 (1) | | 2008 | | | | Interest | | Average | | Interest | | Average | | Interest | | Average | | | Interest | | Average | | Interest | | Average | | Interest | | Average | | | | Average | | Earned/ | | Nominal | | Average | | Earned/ | | Nominal | | Average | | Earned/ | | Nominal | | | Average | | Earned/ | | Nominal | | Average | | Earned/ | | Nominal | | Average | | Earned/ | | Nominal | | | | Balance | | (Paid) | | Rate | | Balance | | (Paid) | | Rate | | Balance | | (Paid) | | Rate | | | Balance | | (Paid) | | Rate | | Balance | | (Paid) | | Rate | | Balance | | (Paid) | | Rate | | | | (in thousands of pesos, except percentages) | | | (in thousands of pesos, except percentages) | | | Deposits with the Central Bank | | | Pesos | | 513,602 | | 3,318 | | | 0.65 | % | | 733,687 | | 2,825 | | | 0.39 | % | | 1,377,853 | | 10,908 | | | 0.79 | % | | Dollars | | 300,533 | | 4,523 | | | 1.50 | % | | 441,288 | | 7,561 | | | 1.71 | % | | 568,821 | | 7,474 | | | 1.31 | % | | Total | | 814,135 | | 7,841 | | | 0.96 | % | | 1,174,975 | | 10,386 | | | 0.88 | % | | 1,946,674 | | 18,382 | | | 0.94 | % | | | | | | | | | | | | | | | | | | | | | | | | | | Other assets | | | Pesos | | 975,249 | | 80,724 | | | 8.28 | % | | 1,055,424 | | 95,937 | | | 9.09 | % | | 1,289,250 | | 138,041 | | | 10.71 | % | | Dollars | | 705,907 | | 13,622 | | | 1.93 | % | | 478,870 | | 20,592 | | | 4.30 | % | | 417,109 | | 23,663 | | | 5.67 | % | | Total | | 1,681,156 | | 94,346 | | | 5.61 | % | | 1,534,294 | | 116,529 | | | 7.59 | % | | 1,706,359 | | 161,704 | | | 9.48 | % | | | | | | | | | | | | | | | | | | | | | | | | | | Total interest-earning assets | | | Pesos | | 6,747,244 | | 676,236 | | | 10.02 | % | | 8,710,789 | | 1,052,553 | | | 12.08 | % | | 13,521,740 | | 1,663,646 | | | 12.30 | % | | Dollars | | 1,617,786 | | 28,831 | | | 1.78 | % | | 1,866,633 | | 57,386 | | | 3.07 | % | | 2,395,839 | | 125,550 | | | 5.24 | % | | Total | | 8,365,030 | | 705,067 | | | 8.43 | % | | 10,577,422 | | 1,109,939 | | | 10.49 | % | | 15,917,579 | | 1,789,196 | | | 11.24 | % | | | | | | | | | | | | | | | | | | | | | | | | | | Non interest-earning assets | | | Cash and due from banks | | | Pesos | | 234,109 | | — | | 325,154 | | — | | 404,796 | | | Dollars | | 295,552 | | — | | 353,051 | | — | | 455,163 | | | Euros | | 6,294 | | — | | 8,955 | | — | | 14,590 | | | Other | | 1,238 | | 1,481 | | 2,002 | | | Total | | 537,193 | | — | | 688,641 | | — | | 876,551 | | | | | | | | | | | | | | | Investments in other companies | | �� | | | Pesos | | 58 | | — | | 9,176 | | — | | 9,215 | | | Dollars | | 636 | | — | | 1,025 | | — | | 1,552 | | | Total | | 694 | | — | | 10,201 | | — | | 10,767 | | | | | | | | | | | | | | | Property and equipment and miscellaneous and intangible assets and items pending of allocation | | | Pesos | | 435,210 | | — | | 578,243 | | — | | 771,073 | | | Total | | 435,210 | | — | | 578,243 | | — | | 771,073 | | | | | | | | | | | | | | | Allowance for loan losses | | | Pesos | | | (196,888 | ) | | — | | | (287,893 | ) | | — | | | (174,992 | ) | | | | (287,893 | ) | | — | | | (174,992 | ) | | — | | | (203,344 | ) | | — | | Dollars | | | (43,587 | ) | | — | | | (44,945 | ) | | — | | | (27,271 | ) | | | | (44,945 | ) | | — | | | (27,271 | ) | | — | | | (39,776 | ) | | — | | | | | | | | | | | | | Total | | | (240,475 | ) | | — | | | (332,838 | ) | | — | | | (202,263 | ) | | | | (332,838 | ) | | — | | | (202,263 | ) | | — | | | (243,120 | ) | | — | | | | | | | | | | | | | | | | | | | | | | Other assets | | | Pesos | | 220,946 | | — | | 166,439 | | — | | 298,889 | | | 166,439 | | — | | 271,428 | | 578,682 | | — | | Dollars | | 38,727 | | — | | 103,471 | | — | | 41,280 | | | 103,471 | | — | | 41,280 | | 288,686 | | — | | Euros | | 76 | | — | | 43 | | — | | 40 | | | 43 | | — | | 40 | | 66 | | — | | | | | | | | | | | | | Total | | 259,749 | | — | | 269,953 | | — | | 340,209 | | | 269,953 | | — | | 312,748 | | 867,434 | | — | | | | | | | | | | | | | | | | | | | | Total non interest-earning assets | | | | | Pesos | | 693,435 | | — | | 791,119 | | — | | 1,308,981 | | | 791,119 | | — | | 1,281,520 | | — | | 1,727,992 | | — | | Dollars | | 291,328 | | — | | 412,602 | | — | | 470,724 | | | 412,602 | | — | | 470,724 | | — | | 537,064 | | — | | Euros | | 6,370 | | — | | 8,998 | | — | | 14,630 | | | 8,998 | | — | | 14,630 | | — | | 8,655 | | — | | Other | | 1,238 | | 1,481 | | 2,002 | | | 1,481 | | 2,002 | | — | | 1,405 | | — | | | | | | | | | | | | | Total | | 992,371 | | — | | 1,214,200 | | — | | 1,796,337 | | | 1,214,200 | | — | | 1,768,876 | | — | | 2,275,116 | | — | | | | | | | | | | | | | | | | | | | | | �� | | | TOTAL ASSETS | | | Pesos | | 7,440,679 | | 9,501,908 | | — | | 14,830,721 | | | 9,501,908 | | — | | 14,803,260 | | 18,138,837 | | — | | Dollars | | 1,909,114 | | 2,279,235 | | — | | 2,866,563 | | | 2,279,235 | | — | | 2,866,563 | | — | | 3,711,780 | | — | | Euros | | 6,370 | | 8,998 | | — | | 14,630 | | | 8,998 | | — | | 14,630 | | — | | 8,655 | | — | | Other | | 1,238 | | 1,481 | | 2,002 | | | 1,481 | | 2,002 | | — | | 1,405 | | — | | | | | | | | | | | | | Total | | 9,357,401 | | 11,791,622 | | — | | 17,713,916 | | | 11,791,622 | | — | | 17,686,455 | | 21,860,677 | | — | | | | | | | | | | | | | | | | | | | | LIABILITIES | | | Interest-bearing liabilities | | | Savings accounts | | | Pesos | | | 1,474,473 | | 15,410 | | | 1.05 | % | | 2,486,927 | | 27,313 | | | 1.10 | % | | 2,822,961 | | 29,508 | | | 1.05 | % | Dollars | | | 216,176 | | 1,013 | | | 0.47 | % | | 378,907 | | 3,070 | | | 0.81 | % | | 451,892 | | 2,734 | | | 0.61 | % | | | | | | | | | | | | | | | | | | | | | | Total | | | 1,690,649 | | 16,423 | | | 0.97 | % | | 2,865,834 | | 30,383 | | | 1.06 | % | | 3,274,853 | | 32,242 | | | 0.98 | % | | | | | | | | | | | | | | | | | | | | | | | | | Certificates of deposits | | | Pesos | | | 3,056,186 | | 252,927 | | | 8.28 | % | | 4,589,993 | | 421,823 | | | 9.19 | % | | 6,556,086 | | 873,787 | | | 13.33 | % | Dollars | | | 1,190,185 | | 31,167 | | | 2.62 | % | | 1,437,841 | | 47,923 | | | 3.33 | % | | 1,717,511 | | 63,970 | | | 3.72 | % | | | | | | | | | | | | | | | | | | | | | | Total | | | 4,246,371 | | 284,094 | | | 6.69 | % | | 6,027,834 | | 469,746 | | | 7.79 | % | | 8,273,597 | | 937,757 | | | 11.33 | % | | | | | | | | | | | | | | | | | | | | | | | | | Borrowing from the Central Bank | | | Pesos | | | 305,108 | | 12,423 | | | 4.07 | % | | 370,182 | | 37,344 | | | 10.09 | % | | 330,532 | | 33,713 | | | 10.20 | % | | | | | | | | | | | | | | | | | | | | | | Total | | | 305,108 | | 12,423 | | | 4.07 | % | | 370,182 | | 37,344 | | | 10.09 | % | | 330,532 | | 33,713 | | | 10.20 | % | | | | | | | | | | | | | | | | | | | | | | | | | Borrowings from other financial institutions | | | Pesos | | | 99,907 | | 8,310 | | | 8.32 | % | | 223,845 | | 20,394 | | | 9.11 | % | | 121,897 | | 11,847 | | | 9.72 | % | Dollars | | | 148,962 | | 19,963 | | | 13.40 | % | | 202,259 | | 13,967 | | | 6.91 | % | | 287,667 | | 19,539 | | | 6.79 | % | | | | | | | | | | | | | | | | | | | | | | Total | | | 248,869 | | 28,273 | | | 11.36 | % | | 426,104 | | 34,361 | | | 8.06 | % | | 409,564 | | 31,386 | | | 7.66 | % | | | | | | | | | | | | | | | | | | | | | | | | | Corporate Bonds | | | Pesos | | | 6,338 | | 1,015 | | | 16.01 | % | | 178,101 | | 19,082 | | | 10.71 | % | | 309,263 | | 34,055 | | | 11.01 | % | Dollars | | | 38,863 | | 1,612 | | | 4.15 | % | | 918,054 | | 86,444 | | | 9.42 | % | | 915,000 | | 83,911 | | | 9.17 | % | | | | | | | | | | | | | | | | | | | | | | Total | | | 45,201 | | 2,627 | | | 5.81 | % | | 1,096,155 | | 105,526 | | | 9.63 | % | | 1,224,263 | | 117,966 | | | 9.64 | % | | | | | | | | | | | | | | | | | | | | | | | | | Other liabilities | | | Pesos | | | 338,408 | | 13,769 | | | 4.07 | % | | 412,865 | | 21,096 | | | 5.11 | % | | 450,926 | | 29,528 | | | 6.55 | % | Dollars | | | 312,636 | | 648 | | | 0.21 | % | | 217,335 | | 2,470 | | | 1.14 | % | | 31,530 | | 3,183 | | | 10.10 | % | | | | | | | | | | | | | | | | | | | | | | Total | | | 651,044 | | 14,417 | | | 2.21 | % | | 630,200 | | 23,566 | | | 3.74 | % | | 482,456 | | 32,711 | | | 6.78 | % | | | | | | | | | | | | | | | | | | | | | | | | | Total Interest-bearing liabilities | | | Pesos | | | 5,280,420 | | 303,854 | | | 5.75 | % | | 8,261,913 | | 547,052 | | | 6.62 | % | | 10,591,665 | | 1,012,438 | | | 9.56 | % | Dollars | | | 1,906,822 | | 54,403 | | | 2.85 | % | | 3,154,396 | | 153,874 | | | 4.88 | % | | 3,403,600 | | 173,337 | | | 5.09 | % | | | | | | | | | | | | | | | | | | | | | | Total | | | 7,187,242 | | 358,257 | | | 4.98 | % | | 11,416,309 | | 700,926 | | | 6.14 | % | | 13,995,265 | | 1,185,775 | | | 8.47 | % | | | | | | | | | | | | | | | | | | | | | |
3943
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | | 2005 | | | 2006 | | | 2007 | | | | | | | | Interest | | | Average | | | | | | | Interest | | | Average | | | | | | | Interest | | | Average | | | | Average | | | Earned/ | | | Nominal | | | Average | | | Earned/ | | | Nominal | | | Average | | | Earned/ | | | Nominal | | | | Balance | | | (Paid) | | | Rate | | | Balance | | | (Paid) | | | Rate | | | Balance | | | (Paid) | | | Rate | | | | (in thousands of pesos, except percentages) | | | LIABILITIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest-bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Savings accounts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pesos | | | 635,072 | | | | 4,144 | | | | 0.65 | % | | | 950,338 | | | | 7,126 | | | | 0.75 | % | | | 1,444,795 | | | | 10,757 | | | | 0.74 | % | Dollars | | | 85,130 | | | | 159 | | | | 0.19 | % | | | 130,478 | | | | 316 | | | | 0.24 | % | | | 174,476 | | | | 698 | | | | 0.40 | % | Total | | | 720,202 | | | | 4,303 | | | | 0.60 | % | | | 1,080,816 | | | | 7,442 | | | | 0.69 | % | | | 1,619,271 | | | | 11,455 | | | | 0.71 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Certificates of deposits | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pesos | | | 2,652,277 | | | | 198,917 | | | | 7.50 | % | | | 3,056,186 | | | | 252,927 | | | | 8.28 | % | | | 4,589,993 | | | | 421,823 | | | | 9.19 | % | Dollars | | | 828,236 | | | | 14,685 | | | | 1.77 | % | | | 1,190,185 | | | | 31,167 | | | | 2.62 | % | | | 1,437,841 | | | | 47,923 | | | | 3.33 | % | Total | | | 3,480,513 | | | | 213,602 | | | | 6.14 | % | | | 4,246,371 | | | | 284,094 | | | | 6.69 | % | | | 6,027,834 | | | | 469,746 | | | | 7.79 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Borrowing from the Central Bank | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pesos | | | 491,462 | | | | 16,588 | | | | 3.38 | % | �� | | 305,108 | | | | 12,423 | | | | 4.07 | % | | | 370,182 | | | | 37,344 | | | | 10.09 | % | Dollars | | | 14,772 | | | | 294 | | | | 1.99 | % | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Total | | | 506,234 | | | | 16,882 | | | | 3.33 | % | | | 305,108 | | | | 12,423 | | | | 4.07 | % | | | 370,182 | | | | 37,344 | | | | 10.09 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Borrowings from other financial institutions | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pesos | | | 53,566 | | | | 5,831 | | | | 10.89 | % | | | 99,907 | | | | 8,310 | | | | 8.32 | % | | | 223,845 | | | | 20,394 | | | | 9.11 | % | Dollars | | | 189,293 | | | | 11,558 | | | | 6.11 | % | | | 148,962 | | | | 19,963 | | | | 13.40 | % | | | 202,259 | | | | 13,967 | | | | 6.91 | % | Total | | | 242,859 | | | | 17,389 | | | | 7.16 | % | | | 248,869 | | | | 28,273 | | | | 11.36 | % | | | 426,104 | | | | 34,361 | | | | 8.06 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate Bonds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pesos | | | 15,920 | | | | 1,962 | | | | 12.32 | % | | | 6,338 | | | | 1,015 | | | | 16.01 | % | | | 178,101 | | | | 19,082 | | | | 10.71 | % | Dollars | | | — | | | | — | | | | — | | | | 38,863 | | | | 1,612 | | | | 4.15 | % | | | 918,054 | | | | 86,444 | | | | 9.42 | % | Total | | | 15,920 | | | | 1,962 | | | | 12.32 | % | | | 45,201 | | | | 2,627 | | | | 5.81 | % | | | 1,096,155 | | | | 105,526 | | | | 9.63 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pesos | | | 495,792 | | | | 4,648 | | | | 0.94 | % | | | 862,543 | | | | 22,053 | | | | 2.56 | % | | | 1,454,997 | | | | 37,652 | | | | 2.59 | % | Dollars | | | 376,472 | | | | 8,680 | | | | 2.31 | % | | | 398,334 | | | | 1,345 | | | | 0.34 | % | | | 421,766 | | | | 4,842 | | | | 1.15 | % | Total | | | 872,264 | | | | 13,328 | | | | 1.53 | % | | | 1,260,877 | | | | 23,398 | | | | 1.86 | % | | | 1,876,763 | | | | 42,494 | | | | 2.26 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Interest-bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pesos | | | 4,344,089 | | | | 232,090 | | | | 5.34 | % | | | 5,280,420 | | | | 303,854 | | | | 5.75 | % | | | 8,261,913 | | | | 547,052 | | | | 6.62 | % | Dollars | | | 1,493,903 | | | | 35,376 | | | | 2.37 | % | | | 1,906,822 | | | | 54,403 | | | | 2.85 | % | | | 3,154,396 | | | | 153,874 | | | | 4.88 | % | Total | | | 5,837,992 | | | | 267,466 | | | | 4.58 | % | | | 7,187,242 | | | | 358,257 | | | | 4.98 | % | | | 11,416,309 | | | | 700,926 | | | | 6.14 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
40
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | Years Ended December 31, | | | | 2005 | | 2006 | | 2007 | | | 2006 (1) | | 2007 (1) | | 2008 | | | | Interest | | Average | | Interest | | Average | | Interest | | Average | | | Interest | | Average | | Interest | | Average | | Interest | | Average | | | | Average | | Earned/ | | Nominal | | Average | | Earned/ | | Nominal | | Average | | Earned/ | | Nominal | | | Average | | Earned/ | | Nominal | | Average | | Earned/ | | Nominal | | Average | | Earned/ | | Nominal | | | | Balance | | (Paid) | | Rate | | Balance | | (Paid) | | Rate | | Balance | | (Paid) | | Rate | | | Balance | | (Paid) | | Rate | | Balance | | (Paid) | | Rate | | Balance | | (Paid) | | Rate | | | | (in thousands of pesos, except percentages) | | | (in thousands of pesos, except percentages) | | | Non-interest bearing liabilities and Stockholders’ equity | | | Demand deposits | | | Non-interest bearing liabilities and Stockholders’ equity Demand deposits | | | Pesos | | 1,691,837 | | — | | 2,014,468 | | — | | — | | 3,069,049 | | — | | — | | | 2,014,468 | | — | | — | | 3,069,049 | | — | | — | | 3,665,895 | | — | | Dollars | | 45,955 | | — | | 3,502 | | — | | — | | 6,680 | | — | | — | | | 3,502 | | — | | — | | 6,680 | | — | | — | | 8,059 | | — | | | | | | | | | | | Total | | 1,737,792 | | — | | 2,017,970 | | — | | — | | 3,075,729 | | — | | — | | | 2,017,970 | | — | | — | | 3,075,729 | | — | | — | | 3,673,954 | | — | | | | | | | | | | | | | | | | | | | | Other liabilities | | | Pesos | | 341,890 | | — | | 493,194 | | — | | — | | 539,333 | | — | | — | | | 493,194 | | — | | — | | 511,872 | | — | | — | | 906,423 | | — | | Dollars | | 102,240 | | — | | 140,127 | | — | | — | | 185,904 | | — | | — | | | 140,127 | | — | | — | | 185,904 | | — | | — | | 490,452 | | — | | Euros | | 3,830 | | — | | 2,623 | | — | | 6,045 | | | 2,623 | | — | | 6,045 | | 6,916 | | — | | Other | | 439 | | 124 | | 130 | | | 124 | | 130 | | 75 | | — | | | | | | | | | | | Total | | 448,399 | | — | | 636,068 | | — | | 731,412 | | | 636,068 | | — | | 703,951 | | 1,403,866 | | — | | | | | | | | | | | | | | | | | | | | Minority Interest | | | Pesos | | 55 | | — | | 35,097 | | — | | 34,112 | | | 35,097 | | — | | 34,112 | | — | | 14,333 | | — | | | | | | | | | | | Total | | 55 | | — | | 35,097 | | — | | 34,112 | | | 35,097 | | — | | 34,112 | | — | | 14,333 | | — | | | | | | | | | | | | | | | | | | | | Stockholders equity | | | Pesos | | 1,333,163 | | — | | 1,915,245 | | — | | 2,456,353 | | | 1,915,245 | | — | | 2,456,353 | | — | | 2,773,259 | | — | | | | | | | | | | | Total | | 1,333,163 | | — | | 1,915,245 | | — | | 2,456,353 | | | 1,915,245 | | — | | 2,456,353 | | — | | 2,773,259 | | — | | | | | | | | | | | | | | | | | | | | Total non-interest bearing liabilities and stockholders equity | | | Pesos | | 3,366,945 | | — | | 4,458,004 | | — | | 6,098,847 | | | 4,458,004 | | — | | 6,071,386 | | 7,359,910 | | Dollars | | 148,195 | | — | | 143,629 | | — | | 192,584 | | | 143,629 | | — | | 192,584 | | 498,511 | | Euros | | 3,830 | | — | | 2,623 | | — | | 6,045 | | | 2,623 | | — | | 6,045 | | 6,916 | | Other | | 439 | | 124 | | 130 | | | 124 | | 130 | | 75 | | | | | | | | | | | Total | | 3,519,409 | | — | | 4,604,380 | | — | | 6,297,606 | | | 4,604,380 | | — | | 6,270,145 | | 7,865,412 | | | | | | | | | | | | | | | | | | | | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY | | | Pesos | | 7,711,034 | | — | | 9,738,424 | | — | | 14,360,760 | | | 9,738,424 | | — | | 14,333,299 | | — | | 17,951,575 | | — | | Dollars | | 1,642,098 | | — | | 2,050,451 | | — | | 3,346,980 | | | 2,050,451 | | — | | 3,346,980 | | — | | 3,902,111 | | — | | Euros | | 3,830 | | — | | 2,623 | | — | | 6,045 | | | 2,623 | | — | | 6,045 | | — | | 6,916 | | — | | Other | | 439 | | — | | 124 | | — | | 130 | | | 124 | | — | | 131 | | — | | 74 | | — | | | | | | | | | | | Total | | 9,357,401 | | — | | 11,791,622 | | — | | 17,713,915 | | | 11,791,622 | | — | | 17,686,455 | | — | | 21,860,677 | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | ((1)1) | | See note 4.2 to our audited consolidated financial statements for the year ended December 31, 2008. | | (2) | | Includes instruments issued by the Central Bank. |
41
Changes in interest income and interest expense; volume and rate analysis The following tables allocate, by currency of denomination, changes in our interest income and interest expense between changes in the average volume of interest-earning assets and interest-bearing liabilities and changes in their respective nominal interest rates for the fiscal year ended December 31, 2005 compared to the fiscal year ended December 31, 2004; for the fiscal year ended December 31, 2006 compared to the fiscal year ended December 31, 2005; and for the fiscal year ended December 31, 2007 compared to the fiscal year ended December 31, 2006.2006; and for the fiscal year ended December 31, 2008 compared to the fiscal year ended December 31, 2007. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 2005/December 2004 | | December 2006/December 2005 | | December 2007/December 2006 | | | December 2006/December 2005 | | December 2007/December 2006 | | December 2008/December 2007 | | | | Increase (Decrease) Due to | | Increase (Decrease) Due to | | Increase (Decrease) Due to | | | Increase (Decrease) Due to | | Increase (Decrease) Due to | | Increase (Decrease) Due to | | | | Changes in | | Changes in | | Changes in | | | Changes in | | Changes in | | Changes in | | | | Net | | Net | | Net | | | Net | | Net | | Net | | | | Volume | | Rate | | Change | | Volume | | Rate | | Change | | Volume | | Rate | | Change | | | Volume | | Rate | | Change | | Volume | | Rate | | Change | | Volume | | Rate | | Change | | | | (in thousand of pesos) | | | (in thousand of pesos) | | ASSETS | | | Interest-earning assets | | | Government securities | | | Pesos | | 71,850 | | | (60,559 | ) | | 11,291 | | | (14,677 | ) | | 94,260 | | 79,583 | | 160,606 | | | (23,250 | ) | | 137,356 | | | | (14,677 | ) | | 94,260 | | 79,583 | | 160,606 | | | (23,250 | ) | | 137,356 | | 52,542 | | 66,283 | | 118,825 | | Dollars | | 1,447 | | | (8,817 | ) | | | (7,370 | ) | | | (3,784 | ) | | 5,016 | | 1,232 | | | (4,293 | ) | | 29,862 | | 25,569 | | | | (3,784 | ) | | 5,016 | | 1,232 | | | (4,293 | ) | | 29,862 | | 25,569 | | | (929 | ) | | | (20,454 | ) | | | (21,383 | ) | | | | | | | | | | | | | | | | | | | | | | Total | | 73,297 | | | (69,376 | ) | | 3,921 | | | (18,461 | ) | | 99,276 | | 80,815 | | 156,313 | | 6,612 | | 162,925 | | | | (18,461 | ) | | 99,276 | | 80,815 | | 156,313 | | 6,612 | | 162,925 | | 51,613 | | 45,829 | | 97,442 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans | | | Private sector | | | Pesos | | 135,531 | | 34,443 | | 169,974 | | 274,311 | | 16,493 | | 290,804 | | 399,688 | | 65,714 | | 465,402 | | | Dollars | | 11,272 | | | (621 | ) | | 10,651 | | 13,560 | | 3,755 | | 17,315 | | 32,921 | | 6,690 | | 39,611 | | | | | | Total | | 146,803 | | 33,822 | | 180,625 | | 287,871 | | 20,248 | | 308,119 | | 432,609 | | 72,404 | | 505,013 | | | | | | | | | | | | | | | | | | | | | | | | | | | Public sector | | | Pesos | | 47,662 | | 19,842 | | 67,504 | | | (2,591 | ) | | | (6,199 | ) | | | (8,790 | ) | | 4,905 | | | (46,757 | ) | | | (41,852 | ) | | Dollars | | — | | — | | — | | — | | — | | — | | | | | | Total | | 47,662 | | 19,842 | | 67,504 | | | (2,591 | ) | | | (6,199 | ) | | | (8,790 | ) | | 4,905 | | | (46,757 | ) | | | (41,852 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Deposits with the Central Bank | | | Pesos | | 2,810 | | | (3,203 | ) | | | (393 | ) | | 847 | | | (1,340 | ) | | | (493 | ) | | 5,100 | | 2,983 | | 8,083 | | | Dollars | | 4,485 | | 13 | | 4,498 | | 2,412 | | 626 | | 3,038 | | 1,676 | | | (1,763 | ) | | | (87 | ) | | | | | Total | | 7,295 | | | (3,190 | ) | | 4,105 | | 3,259 | | | (714 | ) | | 2,545 | | 6,776 | | 1,220 | | 7,996 | | | | | | | | | | | | | | | | | | | | | | | | | | | Other assets | | | Pesos | | 46,326 | | 9,336 | | 55,662 | | 7,288 | | 7,925 | | 15,213 | | 25,036 | | 17,068 | | 42,104 | | | Dollars | | 5,505 | | 6,633 | | 12,138 | | | (9,763 | ) | | 16,760 | | 6,997 | | | (3,504 | ) | | 6,575 | | 3,071 | | | | | | Total | | 51,831 | | 15,969 | | 67,800 | | | (2,475 | ) | | 24,685 | | 22,210 | | 21,532 | | 23,643 | | 45,175 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total interest-earning assets | | | Pesos | | 304,179 | | | (141 | ) | | 304,038 | | 265,178 | | 111,139 | | 376,317 | | 595,335 | | 15,758 | | 611,093 | | | Dollars | | 22,709 | | | (2,792 | ) | | 19,917 | | 2,425 | | 26,157 | | 28,582 | | 26,800 | | 41,364 | | 68,164 | | | | | | Total | | 326,888 | | | (2,933 | ) | | 323,955 | | 267,603 | | 137,296 | | 404,899 | | 622,135 | | 57,122 | | 679,257 | | | | | | | | | | | | | | | | | | | | | | | |
4244
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 2005/December 2004 | | December 2006/December 2005 | | December 2007/December 2006 | | | December 2006/December 2005 | | December 2007/December 2006 | | December 2008/December 2007 | | | | Increase (Decrease) Due to | | Increase (Decrease) Due to | | Increase (Decrease) Due to | | | Increase (Decrease) Due to | | Increase (Decrease) Due to | | Increase (Decrease) Due to | | | | Changes in | | Changes in | | Changes in | | | Changes in | | Changes in | | Changes in | | | | Net | | Net | | Net | | | Net | | Net | | Net | | | | | Volume | | Rate | | Change | | Volume | | Rate | | Change | | Volume | | Rate | | Change | | | | | (in thousand of pesos) | | Loans Private and financial sector | | | Pesos | | | 274,311 | | 16,493 | | 290,804 | | 399,688 | | 65,714 | | 465,402 | | 499,276 | | 245,687 | | 744,963 | | Dollars | | | 13,560 | | 3,755 | | 17,315 | | 32,921 | | 6,690 | | 39,611 | | 46,822 | | 18,279 | | 65,101 | | | | | | | | | | | | | | | | | | | | | | | Total | | | 287,871 | | 20,248 | | 308,119 | | 432,609 | | 72,404 | | 505,013 | | 546,098 | | 263,966 | | 810,064 | | | | | | | | | | | | | | | | | | | | | | | | | | Public sector | | | Pesos | | | | (2,591 | ) | | | (6,199 | ) | | | (8,790 | ) | | 4,905 | | | (46,757 | ) | | | (41,852 | ) | | | (635 | ) | | | (12,882 | ) | | | (13,517 | ) | Dollars | | | — | | — | | — | | | | | | | | | | | | | | | | | | | | | | | Total | | | | (2,591 | ) | | | (6,199 | ) | | | (8,790 | ) | | 4,905 | | | (46,757 | ) | | | (41,852 | ) | | | (635 | ) | | | (12,882 | ) | | | (13,517 | ) | | | | | | | | | | | | | | | | | | | | | | | | | Deposits with the Central Bank | | | Pesos | | | 847 | | | (1,340 | ) | | | (493 | ) | | 5,100 | | 2,983 | | 8,083 | | 1,678 | | | (3,200 | ) | | | (1,522 | ) | Dollars | | | 2,412 | | 626 | | 3,038 | | 1,676 | | | (1,763 | ) | | | (87 | ) | | 247 | | | (2,723 | ) | | | (2,476 | ) | | | | | | | | | | | | | | | | | | | | | | Total | | | 3,259 | | | (714 | ) | | 2,545 | | 6,776 | | 1,220 | | 7,996 | | 1,925 | | | (5,923 | ) | | | (3,998 | ) | | | | | | | | | | | | | | | | | | | | | | | | | Other assets | | | Pesos | | | 7,288 | | 7,925 | | 15,213 | | 25,036 | | 17,068 | | 42,104 | | | (34,064 | ) | | 70,104 | | 36,040 | | Dollars | | | | (9,763 | ) | | 16,760 | | 6,997 | | | (3,504 | ) | | 6,575 | | 3,071 | | 10,615 | | 12,593 | | 23,208 | | | | | | | | | | | | | | | | | | | | | | | Total | | | | (2,475 | ) | | 24,685 | | 22,210 | | 21,532 | | 23,643 | | 45,175 | | | (23,449 | ) | | 82,697 | | 59,248 | | | | | | | | | | | | | | | | | | | | | | | | | | Total interest-earning assets | | | Pesos | | | 265,178 | | 111,139 | | 376,317 | | 595,335 | | 15,758 | | 611,093 | | 518,797 | | 365,992 | | 884,789 | | Dollars | | | 2,425 | | 26,157 | | 28,582 | | 26,800 | | 41,364 | | 68,164 | | 56,755 | | 7,695 | | 64,450 | | | | | | | | | | | | | | | | | | | | | | | Total | | | 267,603 | | 137,296 | | 404,899 | | 622,135 | | 57,122 | | 679,257 | | 575,552 | | 373,687 | | 949,239 | | | | Volume | | Rate | | Change | | Volume | | Rate | | Change | | Volume | | Rate | | Change | | | | | | | | | | | | | | | | | | | | | | | (in thousand of pesos) | | | LIABILITIES | | | �� | | Interest-bearing liabilities | | | Savings accounts | | | Pesos | | 2,395 | | | (1,408 | ) | | 987 | | 2,364 | | 618 | | 2,982 | | 3,681 | | | (50 | ) | | 3,631 | | | 2,364 | | 618 | | 2,982 | | 3,681 | | | (50 | ) | | 3,631 | | 3,513 | | | (1,318 | ) | | 2,195 | | Dollars | | 102 | | 53 | | 155 | | 110 | | 47 | | 157 | | 176 | | 206 | | 382 | | | 110 | | 47 | | 157 | | 176 | | 206 | | 382 | | 442 | | | (778 | ) | | | (336 | ) | | | | | | | | | | | | | | | | | | | | | | Total | | 2,497 | | | (1,355 | ) | | 1,142 | | 2,474 | | 665 | | 3,139 | | 3,857 | | 156 | | 4,013 | | | 2,474 | | 665 | | 3,139 | | 3,857 | | 156 | | 4,013 | | 3,955 | | | (2,096 | ) | | 1,859 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Certificates of deposits | | | Pesos | | 96,945 | | 46,971 | | 143,916 | | 33,427 | | 20,583 | | 54,010 | | 140,958 | | 27,938 | | 168,896 | | | 33,427 | | 20,583 | | 54,010 | | 140,958 | | 27,938 | | 168,896 | | 262,038 | | 189,926 | | 451,964 | | Dollars | | 4,593 | | 1,943 | | 6,536 | | 9,478 | | 7,004 | | 16,482 | | 8,254 | | 8,502 | | 16,756 | | | 9,478 | | 7,004 | | 16,482 | | 8,254 | | 8,502 | | 16,756 | | 10,417 | | 5,630 | | 16,047 | | | | | | | | | | | | | | | | | | | | | | | Total | | 101,538 | | 48,914 | | 150,452 | | 42,905 | | 27,587 | | 70,492 | | 149,212 | | 36,440 | | 185,652 | | | 42,905 | | 27,587 | | 70,492 | | 149,212 | | 36,440 | | 185,652 | | 272,455 | | 195,556 | | 468,011 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Borrowings from the Central Bank | | | Pesos | | 16,256 | | | (565 | ) | | 15,691 | | | (7,587 | ) | | 3,422 | | | (4,165 | ) | | 6,565 | | 18,356 | | 24,921 | | | | (7,587 | ) | | 3,422 | | | (4,165 | ) | | 6,565 | | 18,356 | | 24,921 | | | (4,044 | ) | | 413 | | | (3,631 | ) | Dollars | | 294 | | — | | 294 | | — | | | (294 | ) | | | (294 | ) | | — | | — | | — | | | — | | | (294 | ) | | | (294 | ) | | — | | — | | — | | — | | — | | — | | | | | | | | | | | | | | | | | | | | | | | Total | | 16,550 | | | (565 | ) | | 15,985 | | | (7,587 | ) | | 3,128 | | | (4,459 | ) | | 6,565 | | 18,356 | | 24,921 | | | | (7,587 | ) | | 3,128 | | | (4,459 | ) | | 6,565 | | 18,356 | | 24,921 | | | (4,044 | ) | | 413 | | | (3,631 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Borrowings from other financial institutions | | | Pesos | | 1,227 | | 2,019 | | 3,246 | | 3,855 | | | (1,376 | ) | | 2,479 | | 11,292 | | 792 | | 12,084 | | | 3,855 | | | (1,376 | ) | | 2,479 | | 11,292 | | 792 | | 12,084 | | | (9,908 | ) | | 1,361 | | | (8,547 | ) | Dollars | | 7,822 | | 1,797 | | 9,619 | | | (5,405 | ) | | 13,810 | | 8,405 | | 3,680 | | | (9,676 | ) | | | (5,996 | ) | | | (5,405 | ) | | 13,810 | | 8,405 | | 3,680 | | | (9,676 | ) | | | (5,996 | ) | | 5,801 | | | (229 | ) | | 5,572 | | | | | | | | | | | | | | | | | | | | | | | Total | | 9,049 | | 3,816 | | 12,865 | | | (1,550 | ) | | 12,434 | | 10,884 | | 14,972 | | | (8,884 | ) | | 6,088 | | | | (1,550 | ) | | 12,434 | | 10,884 | | 14,972 | | | (8,884 | ) | | 6,088 | | | (4,107 | ) | | 1,132 | | | (2,975 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate Bonds | | | Pesos | | | (24,541 | ) | | 12,193 | | | (12,348 | ) | | | (1,535 | ) | | 588 | | | (947 | ) | | 18,403 | | | (336 | ) | | 18,067 | | | Dollars | | 1,612 | | 1,612 | | 82,785 | | 2,047 | | 84,832 | | | | | | Total | | | (24,541 | ) | | 12,193 | | | (12,348 | ) | | 77 | | 588 | | 665 | | 101,188 | | 1,711 | | 102,899 | | | | | | | | | | | | | | | | | | | | | | | | | | | Other liabilities | | | Pesos | | 1,090 | | | (1,719 | ) | | | (629 | ) | | 9,373 | | 8,032 | | 17,405 | | 15,331 | | 268 | | 15,599 | | | Dollars | | 4,634 | | | (6,486 | ) | | | (1,852 | ) | | 74 | | | (7,409 | ) | | | (7,335 | ) | | 269 | | 3,228 | | 3,497 | | | Euro | | | | | | Total | | 5,724 | | | (8,205 | ) | | | (2,481 | ) | | 9,447 | | 623 | | 10,070 | | 15,600 | | 3,496 | | 19,096 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total interest-bearing liabilities | | | Pesos | | 93,372 | | 57,491 | | 150,863 | | 39,898 | | 31,866 | | 71,764 | | 196,230 | | 46,968 | | 243,198 | | | Dollars | | 17,445 | | | (2,693 | ) | | 14,752 | | 5,869 | | 13,158 | | 19,027 | | 95,164 | | 4,307 | | 99,471 | | | Euro | | | | | | Total | | 110,817 | | 54,798 | | 165,615 | | 45,767 | | 45,024 | | 90,791 | | 291,394 | | 51,275 | | 342,669 | | | | | | | | | | | | | | | | | | | | | | | |
45
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 2006/December 2005 | | | December 2007/December 2006 | | | December 2008/December 2007 | | | | Increase (Decrease) Due to | | | Increase (Decrease) Due to | | | Increase (Decrease) Due to | | | | Changes in | | | Changes in | | | Changes in | | | | | | | | | | | | Net | | | | | | | | | | | Net | | | | | | | | | | | Net | | | | Volume | | | Rate | | | Change | | | Volume | | | Rate | | | Change | | | Volume | | | Rate | | | Change | | | | (in thousand of pesos) | | Corporate Bonds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pesos | | | (1,535 | ) | | | 588 | | | | (947 | ) | | | 18,403 | | | | (336 | ) | | | 18,067 | | | | 14,443 | | | | 530 | | | | 14,973 | | Dollars | | | 1,612 | | | | — | | | | 1,612 | | | | 82,785 | | | | 2,047 | | | | 84,832 | | | | (280 | ) | | | (2,253 | ) | | | (2,533 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 77 | | | | 588 | | | | 665 | | | | 101,188 | | | | 1,711 | | | | 102,899 | | | | 14,163 | | | | (1,723 | ) | | | 12,440 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pesos | | | 9,373 | | | | 8,032 | | | | 17,405 | | | | 15,331 | | | | 268 | | | | 15,599 | | | | 2,492 | | | | 5,940 | | | | 8,432 | | Dollars | | | 74 | | | | (7,409 | ) | | | (7,335 | ) | | | 269 | | | | 3,228 | | | | 3,497 | | | | (18,757 | ) | | | 19,470 | | | | 713 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 9,447 | | | | 623 | | | | 10,070 | | | | 15,600 | | | | 3,496 | | | | 19,096 | | | | (16,265 | ) | | | 25,410 | | | | 9,145 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total interest-bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pesos | | | 39,898 | | | | 31,866 | | | | 71,764 | | | | 196,230 | | | | 46,968 | | | | 243,198 | | | | 268,534 | | | | 196,852 | | | | 465,386 | | Dollars | | | 5,869 | | | | 13,158 | | | | 19,027 | | | | 95,164 | | | | 4,307 | | | | 99,471 | | | | (2,377 | ) | | | 21,840 | | | | 19,463 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 45,767 | | | | 45,024 | | | | 90,791 | | | | 291,394 | | | | 51,275 | | | | 342,669 | | | | 266,157 | | | | 218,692 | | | | 484,849 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-earning assets: net interest margin and spread The following table analyzes, by currency of denomination, our levels of average interest-earning assets and net interest income, and illustrates the comparative margins and spreads for each of the years indicated. | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | Year Ended December 31, | | | | 2005 | | 2006 | | 2007 | | | 2006 | | 2007 | | 2008 | | | | (in thousands of pesos, except percentages) | | | (in thousands of pesos, except percentages) | | Average interest-earning assets | | | Pesos | | 6,747,244 | | 8,710,789 | | 13,521,740 | | | 8,710,789 | | 13,521,740 | | 16,410,845 | | Dollars | | 1,617,786 | | 1,866,633 | | 2,395,839 | | | 1,866,633 | | 2,395,839 | | 3,174,716 | | | | | | | | | | | Total | | 8,365,030 | | 10,577,422 | | 15,917,579 | | | 10,577,422 | | 15,917,579 | | 19,585,561 | | | | | | | | | | | | | | | | | Net interest income (1) | | | Pesos | | 444,146 | | 748,699 | | 1,116,594 | | | 748,699 | | 1,116,594 | | 1,535,997 | | Dollars | | | (6,545 | ) | | 2,983 | | | (26,403 | ) | | 2,983 | | | (28,324 | ) | | 16,663 | | | | | | | | | | | Total | | 437,601 | | 751,682 | | 1,090,191 | | | 751,682 | | 1,088,270 | | 1,552,660 | | | | | | | | | | | | | | | | | Net interest margin (2) | | | Pesos | | | 6.58 | % | | | 8.60 | % | | | 8.26 | % | | | 8.60 | % | | | 8.26 | % | | | 9.36 | % | Dollars | | | (0.40 | )% | | | 0.16 | % | | | (1.10 | )% | | | 0.16 | % | | | (1.18 | )% | | | 0.52 | % | Weighted average rate | | | 5.23 | % | | | 7.11 | % | | | 6.85 | % | | | 7.11 | % | | | 6.84 | % | | | 7.93 | % | Yield spread nominal basis (3) | | | Pesos | | | 4.68 | % | | | 6.33 | % | | | 5.68 | % | | | 6.33 | % | | | 5.68 | % | | | 5.97 | % | Dollars | | | (0.59 | )% | | | 0.22 | % | | | 0.42 | % | | | 0.22 | % | | | 0.42 | % | | | 0.90 | % | Weighted average rate | | | 3.85 | % | | | 5.51 | % | | | 5.12 | % | | | 5.51 | % | | | 5.12 | % | | | 5.51 | % |
| | | (1) | | Defined as interest earned less interest paid. Trading results from our portfolio of government securities are included in interest. | | (2) | | Net interest income stated as a percentage of average interest-earning assets. | | (3) | | Defined as the difference between the average nominal rate on interest-earning assets and the average nominal rate on interest-bearinginterest- bearing liabilities. |
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Investment portfolio: government and private securities
We own, manage and trade a portfolio of securities issued by the Argentine and other governments and private issuers. The following table analyzes, by currency of denomination, our investments in Argentine and other governments and private securities as of December 31, 2005, 20062008, 2007 and 2007.2006. Securities are stated before deduction of allowances.
| | | | | | | | | | | | | | | As of December 31, | | | | 2005(1) | | | 2006(1) | | | 2007 | | | | (in thousands of pesos) | | Government Securities | | | | | | | | | | | | | In Pesos: | | | | | | | | | | | | | Holdings in Investment Accounts | | | | | | | | | | | | | Federal Government Bonds, maturity 2007 — Compensation (BODEN) | | | 10,705 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal Holdings in Investment Accounts | | | 10,705 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | Holdings for Trading or Intermediation | | | | | | | | | | | | | Social Security Consolidation Bonds payables in Pesos | | | 9,110 | | | | 4,151 | | | | 70,670 | | Secured Bonds Decree 1,579/02 | | | 22,391 | | | | 36,414 | | | | 38,299 | | Discount Bonds | | | 13,378 | | | | 4,143 | | | | 18,746 | | Federal Government Bonds (maturity 2007, 2008 and 2014) (BODEN) | | | 644 | | | | 104,502 | | | | 13,840 | | Consolidation Bonds | | | 2,906 | | | | 1,971 | | | | 10,236 | | Province of Tucumán Bonds | | | — | | | | 1,905 | | | | 2,828 | | Par Bonds | | | — | | | | 439 | | | | 1,590 | | GDP-Related Securities (maturity 2035) | | | — | | | | 2,337 | | | | 1,109 | | Quasi-Par Securities (maturity 2045) | | | — | | | | 2,920 | | | | — | | Other | | | 2,069 | | | | 298 | | | | 197 | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal Holdings for Trading or Intermediation | | | 50,498 | | | | 159,080 | | | | 157,515 | | | | | | | | | | | | | | | | | | | | | | | | | Unlisted Government Securities | | | | | | | | | | | | | Secured Bonds Decree 1,579/02 | | | 197,771 | | | | — | | | | — | | Federal Government Bonds (maturity 2013 — BODEN) | | | — | | | | 13,254 | | | | 11,987 | | Other | | | 587 | | | | 18 | | | | 38 | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal Unlisted Government Securities | | | 198,358 | | | | 13,272 | | | | 12,025 | | | | | | | | | | | | | | | | | | | | | | | | | Instruments Issued by B.C.R.A. | | | | | | | | | | | | | Listed Central Bank External bills and notes (Lebacs/Nobacs) | | | 2,165,609 | | | | 2,787,019 | | | | 3,478,246 | | Unlisted Central Bank External bills and notes (Lebacs/Nobacs) | | | 297,493 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal Instruments Issued by B.C.R.A. | | | 2,463,102 | | | | 2,787,019 | | | | 3,478,246 | | | | | | | | | | | | | | | | | | | | | | | | | Total Government Securities in pesos | | | 2,722,663 | | | | 2,959,371 | | | | 3,647,786 | | | | | | | | | | | | | | | | | | | | | | | | | In Foreign Currency: | | | | | | | | | | | | | Holdings in Investment Accounts | | | | | | | | | | | | | Federal Government Bonds maturity 2012 — Compensation (BODEN) | | | 94,711 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal Holdings in Investment Accounts | | | 94,711 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | Holding for Trading or Intermediation | | | | | | | | | | | | | Federal Government Bonds (maturity 2012 and 2013) (BODEN) | | | 109,658 | | | | 111,263 | | | | 145,269 | | Argentine Government Bonds (maturity 2011 — Bonar X) | | | — | | | | — | | | | 45,954 | | Province of Mendoza (maturity 2018) | | | — | | | | — | | | | 7,533 | | Argentine Government Bonds (maturity 2011 — Bonar V) | | | — | | | | 2,128 | | | | 1,462 | | Par Bonds | | | — | | | | 280 | | | | 368 | | Treasury Bills (maturity 2007 and 2008) | | | 4,543 | | | | 31,276 | | | | — | | Other | | | 87 | | | | 38 | | | | 312 | | | | | | | | | | | | | | | | | | | | | | | | | Subtotal Holding for Trading or Intermediation | | | 114,288 | | | | 144,985 | | | | 200,898 | | | | | | | | | | | |
| | | | | | | | | | | | | | | As of December 31, | | | | 2006 (1) | | | 2007 (1) | | | 2008 | | | | (in thousands of pesos) | | Government Securities | | | | | | | | | | | | | In Pesos: | | | | | | | | | | | | | Holdings in Investment Accounts | | | | | | | | | | | | | Consolidation bonds of social security payable — Third series at 2% and Fourth series | | | — | | | | — | | | | 83,847 | | Secured bonds Decree 1,579/02 | | | — | | | | — | | | | 23,769 | | Discount bonds — Maturity 2033 | | | — | | | | — | | | | 22,201 | | Consolidation bonds — Sixth series | | | — | | | | — | | | | 4,122 | | Federal Government bonds — Maturity 2014 | | | — | | | | — | | | | 3,582 | | Subtotal Holdings in Investment Accounts | | | — | | | | — | | | | 137,521 | |
4446
| | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | | As of December 31, | | | | 2005(1) | | 2006(1) | | 2007 | | | 2006 (1) | | 2007 (1) | | 2008 | | | | (in thousands of pesos) | | | (in thousands of pesos) | | Holdings for Trading or Intermediation | | | Consolidation bonds of social security payable | | | 4,151 | | 70,670 | | 3,604 | | Secured Bonds Decree 1,579/02 | | | 36,414 | | 38,299 | | 652 | | Discount Bonds — Maturity 2033 | | | 4,143 | | 18,746 | | 209,277 | | Federal Government Bonds — Maturity 2007, 2008, 2013 and 2014 | | | 104,502 | | 13,840 | | — | | Consolidation Bonds | | | 1,971 | | 10,236 | | 8,479 | | Province of Tucumán Bonds — maturity 2018 | | | 1,905 | | 2,828 | | — | | Par Bonds, maturity: 2038 | | | 439 | | 1,590 | | 181 | | GDP-Related Securities — Maturity 2035 | | | 2,337 | | 1,109 | | 96 | | Quasi-Par Securities — Maturity 2045 | | | 2,920 | | — | | — | | Other | | | 298 | | 197 | | 82 | | | | | Subtotal Holdings for Trading or Intermediation | | | 159,080 | | 157,515 | | 222,371 | | | | | Unlisted Government Securities | | | Province of Tucuman Bonds (maturity 2015) | | — | | 169 | | 8,112 | | | Argentine Government bonds — Maturity 2013 | | | — | | — | | 51,864 | | Federal Government Bonds — Maturity 2013 | | | 13,254 | | 11,987 | | 10,385 | | Province of Tucuman bonds — Maturity 2018 | | | — | | — | | 2,290 | | Other | | | 18 | | 52 | | — | | | | | Subtotal Unlisted Government Securities | | | 13,272 | | 12,039 | | 64,539 | | | | | Instruments Issued by Central Bank | | | Listed Central Bank bills and notes (Lebacs/Nobacs) | | | 2,787,019 | | 3,478,246 | | 772,496 | | Unlisted Central Bank bills and notes (Lebacs/Nobacs) | | | — | | — | | 3,066,415 | | | | | | | | | | | | | | Subtotal Instruments Issued by Central Bank | | | 2,787,019 | | 3,478,246 | | 3,838,911 | | | | | | | | | | | | | | Total Government Securities in pesos | | | 2,959,371 | | 3,647,800 | | 4,263,342 | | | | | | | | | | | In Foreign Currency: | | | Holdings in Investment Accounts | | | Federal Government bonds — Maturity 2012 and 2013 | | | — | | — | | 236,110 | | Federal Government bonds at 7% — Maturity 2015 | | | — | | — | | 49,590 | | Federal Government bonds at 7% — Maturity 2017 | | | — | | — | | 23,252 | | Par bonds — Maturity 2038, (governed by Arg. Legislation) | | | — | | — | | 1,450 | | Par bonds-Maturity 2038, (governed by New York legislation) | | | — | | — | | 382 | | | | | Subtotal Holdings in Investment Accounts | | | — | | — | | 310,784 | | | | | | | | | | | | | | Holding for Trading or Intermediation | | | Treasury Bills — Maturity 2007 and 2008 | | | 31,276 | | — | | — | | Federal Government Bonds — Maturity 2012 and 2013 | | | 111,263 | | 145,269 | | 98,719 | | Argentine Government Bonds at 7% — Maturity 2017 | | | — | | 45,954 | | 1,633 | | Province of Mendoza — Maturity 2018 | | | — | | 7,533 | | — | | Argentine Government Bonds at 7% — Maturity 2015 | | | — | | — | | 9,627 | | Argentine Government Bonds at 7% — Maturity 2011 | | | 2,128 | | 1,462 | | 1,565 | | Par Bonds, Maturity: 2038 | | | 280 | | 368 | | 255 | | Discount bonds-Governed by NY State legislation | | | — | | — | | 9,975 | | Discount bonds-Governed by Argentine Legislation | | | — | | — | | 161 | | Other | | | 38 | | 298 | | 161 | | | | | | | | | | | | | | Subtotal Holding for Trading or Intermediation | | | 144,985 | | 200,884 | | 122,096 | | | | | | | | | | | | | | Unlisted Government Securities | | | Province of Tucuman Bonds -Maturity 2015 | | | 169 | | 8,112 | | 5,419 | | | | | | | | | | | | | | | | | | | | Subtotal Unlisted Government Securities | | — | | 169 | | 8,112 | | | 169 | | 8,112 | | 5,419 | | | | | | | | | | | | | | | | | | | | Total Government Securities in foreign currency | | 208,999 | | 145,154 | | 209,010 | | | 145,154 | | 208,996 | | 438,299 | | | | | | | | | | | | | | | | | | | | Total Government Securities | | 2,931,662 | | 3,104,525 | | 3,856,796 | | | 3,104,525 | | 3,856,796 | | 4,701,641 | | | | | | | | | | | | | | | | | | | | Investments in Listed Private Securities | | | In Pesos: | | | Mutual Funds | | 547 | | 11,437 | | 19,424 | | | 11,437 | | 11,617 | | 5,544 | | Commercial Paper | | — | | — | | — | | | Corporate Bonds | | 7,532 | | — | | — | | | Shares | | 6,093 | | 1,445 | | 2,971 | | | 1,445 | | 2,971 | | 378 | | Certificates of Participation in Financial Trusts | | 19,005 | | — | | — | | | Debt Securities in Financial Trusts | | 3,448 | | 1,035 | | — | | | 1,035 | | — | | — | | Other | | | — | | — | | 1 | | In Foreign Currency: | | | Mutual Funds | | 4,815 | | 17,925 | | 11,883 | | | 17,925 | | 19,690 | | 8,133 | | Commercial Paper | | — | | — | | 30,402 | | | — | | 30,402 | | — | | Corporate Bonds | | 16,484 | | 80,482 | | 23,595 | | | 80,482 | | 23,595 | | 63,629 | | Shares | | 1,978 | | 6,135 | | 5,681 | | | 6,135 | | 5,681 | | — | | | | | Total Private Securities | | 59,902 | | 118,459 | | 93,956 | | | Total listed and private Securities | | | 118,459 | | 93,956 | | 77,685 | | | | | | | | | | | | | | | | | | | | Total Government and Private Securities | | 2,991,564 | | 3,222,984 | | 3,950,752 | | | 3,222,984 | | 3,950,752 | | 4,779,326 | | | | | | | | | | | | | | | | | | | | Investments in Unlisted Private Securities | | | In Pesos: | | | Certificates of Participation in Financial Trusts (2) | | 147,993 | | 413,612 | | 438,331 | | | Debt Securities in Financial Trusts | | 124,700 | | 90,133 | | 77,030 | | | Corporate Bonds (3) | | 536 | | 534 | | 190 | | | | | | In Foreign Currency: | | | Certificates of Participation in Financial Trusts (2) | | 45,069 | | 38,100 | | 33,611 | | | Corporate Bonds (3) | | 391 | | 12,127 | | 44,067 | | | | | | | | | | | | | | | Total Investments in Unlisted Private Securities | | 318,689 | | 554,406 | | 593,229 | | | | | | | | | | | | Total | | 3,310,253 | | 3,777,390 | | 4,543,981 | | | | | | | | | | | |
47
| | | | | | | | | | | | | | | As of December 31, | | | | 2006 (1) | | | 2007 (1) | | | 2008 | | | | (in thousands of pesos) | | Investments in Unlisted Private Securities | | | | | | | | | | | | | In Pesos: | | | | | | | | | | | | | Certificates of Participation in Financial Trusts (2) | | | 413,612 | | | | 438,331 | | | | 304,660 | | Debt Securities in Financial Trusts | | | 90,133 | | | | 77,030 | | | | 185,381 | | Corporate Bonds (3) (4) | | | 534 | | | | 190 | | | | 22,390 | | | | | | | | | | | | | | | In Foreign Currency: | | | | | | | | | | | | | Certificates of Participation in Financial Trusts (2) | | | 38,100 | | | | 33,611 | | | | 33,149 | | Corporate Bonds (3) (4) | | | 12,127 | | | | 44,067 | | | | 60,104 | | Debt Securities in financial Trust | | | | | | | | | | | 41,766 | | | | | | | | | | | | Total Investments in Unlisted Private Securities | | | 554,506 | | | | 593,229 | | | | 647,450 | | | | | | | | | | | | Total | | | 3,777,490 | | | | 4,543,981 | | | | 5,426,776 | | | | | | | | | | | |
| | | (1) | | See note 4.2. to our audited consolidated financial statements for the year ended December 31, 2007.2008. | | (2) | | The bank booked allowances for impairment in value amounting to 223,893, 203,797 169,097 and 19,749169,097 as of December 31, 2008, 2007 2006 and 20052006 respectively. | | (3) | | The bank booked allowances for impairment in value amounting to 321319 as of December 31, 2007.2008. | | (4) | | Includes Repurchased Corporate Bonds by Ps. 9,051 and US$ 20,054. |
45
Remaining maturity of government and private securities The following table analyzes the remaining maturities of our investment portfolio as of December 31, 20072008 in accordance with issuance terms (before allowances). We assume that those securities in default will expire after the coming ten years. | | | | | | | | | | | | | | | | | | | | | | | | | | | Maturing | | | | | | | | After | | | After | | | | | | | | | | | | | | | | | 1 year | | | 5 years | | | | | | | | | | | | | Within | | | but within | | | but within | | | After 10 | | | Without | | | | | | | 1 year | | | 5 years | | | 10 years | | | years | | | due date | | | Total | | | | Book value (in thousands of pesos) | | In Pesos: | | | | | | | | | | | | | | | | | | | | | | | | | Holding for Trading or Intermediation | | | | | | | | | | | | | | | | | | | | | | | | | Consolidation Bonds of Social Security payables in Pesos | | | 28,299 | | | | 38,808 | | | | 3,563 | | | | — | | | | — | | | | 70,670 | | Secured Bonds Decree 1,579/02 | | | 2,127 | | | | 11,525 | | | | 23,707 | | | | 940 | | | | — | | | | 38,299 | | Discount Bonds | | | — | | | | — | | | | — | | | | 18,746 | | | | | | | | 18,746 | | Federal Government Bonds (maturity 2008 and 2014) | | | 1,138 | | | | 7,489 | | | | 5,213 | | | | — | | | | — | | | | 13,840 | | Consolidation Bonds | | | 1,786 | | | | 4,664 | | | | 2,105 | | | | 1,681 | | | | — | | | | 10,236 | | Province of Tucumán Bonds | | | 158 | | | | 851 | | | | 1,750 | | | | 69 | | | | | | | | 2,828 | | Par Bonds | | | — | | | | — | | | | — | | | | 1,590 | | | | — | | | | 1,590 | | GDP-Related Securities (maturity 2035) | | | — | | | | — | | | | — | | | | 1,109 | | | | — | | | | 1,109 | | Other | | | 52 | | | | 83 | | | | 62 | | | | — | | | | — | | | | 197 | | Unlisted Government Securities | | | | | | | | | | | | | | | | | | | | | | | | | Federal Government Bonds (maturity 2013 - BODEN) | | | 3,996 | | | | 7,991 | | | | — | | | | — | | | | — | | | | 11,987 | | Other | | | 37 | | | | 1 | | | | — | | | | — | | | | — | | | | 38 | | Instruments Issued by B.C.R.A. | | | | | | | | | | | | | | | | | | | | | | | | | Listed B.C.R.A. External Notes (1) | | | 2,919,442 | | | | 528,505 | | | | — | | | | — | | | | — | | | | 3,447,947 | | Listed B.C.R.A. External Bills (1) | | | 21,694 | | | | 8,605 | | | | — | | | | — | | | | — | | | | 30,299 | | Total Government securities in pesos | | | 2,978,729 | | | | 608,522 | | | | 36,400 | | | | 24,135 | | | | — | | | | 3,647,786 | | | | | | | | | | | | | | | | | | | | | | | | | | | In Foreign Currency: | | | | | | | | | | | | | | | | | | | | | | | | | Holding for Trading or Intermediation | | | | | | | | | | | | | | | | | | | | | | | | | Federal Government Bonds in US$ (maturity 2012 and 2013) | | | 20,674 | | | | 82,697 | | | | 41,898 | | | | — | | | | — | | | | 145,269 | | Argentine Government Bonds in US$ (maturity 2017 - Bonar X) | | | — | | | | — | | | | 45,954 | | | | — | | | | — | | | | 45,954 | | Province of Mendoza Bonds in US$ Maturity 2018 | | | 515 | | | | 2,361 | | | | 3,772 | | | | 885 | | | | — | | | | 7,533 | | Argentine Government Bonds in US$ (maturity 2011 - Bonar V) | | | — | | | | 1,462 | | | | — | | | | — | | | | — | | | | 1,462 | | Par Bonds in US$ | | | — | | | | — | | | | — | | | | 368 | | | | — | | | | 368 | | Other | | | — | | | | — | | | | — | | | | 312 | | | | — | | | | 312 | | | | | | | | | | | | | | | | | | | | | | | | | | | Unlisted Government Securities | | | | | | | | | | | | | | | | | | | | | | | | | Province of Tucumán Bonds in US$- Maturity 2015 | | | 2,704 | | | | 5,408 | | | | — | | | | — | | | | — | | | | 8,112 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Government securities in foreign currency | | | 23,893 | | | | 91,928 | | | | 91,624 | | | | 1,565 | | | | — | | | | 209,010 | | | | | | | | | | | | | | | | | | | | | Total Government securities | | | 3,002,622 | | | | 700,450 | | | | 128,024 | | | | 25,700 | | | | — | | | | 3,856,796 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Maturing | | | | | | | | After | | | After | | | | | | | | | | | | | | | | | 1 year | | | 5 years | | | | | | | | | | | | | Within | | | but within | | | but within | | | After 10 | | | Without | | | | | | | 1 year | | | 5 years | | | 10 years | | | years | | | due date | | | Total | | | | Book value (in thousands of pesos) | | In Pesos: | | | | | | | | | | | | | | | | | | | | | | | | | Holding in Investment accounts | | | | | | | | | | | | | | | | | | | | | | | | | Consolidation Bonds of Social Security payables Third series at 2 % and Fourth series | | | 71,481 | | | | 11,785 | | | | 581 | | | | — | | | | — | | | | 83,847 | | Secured Bonds Decree 1,579/02 | | | 1,398 | | | | 8,273 | | | | 14,098 | | | | — | | | | — | | | | 23,769 | | Discount Bonds — Maturity 2033 | | | — | | | | — | | | | — | | | | 22,201 | | | | — | | | | 22,201 | | Consolidation bonds — Sixth series | | | — | | | | — | | | | 1,950 | | | | 2,172 | | | | — | | | | 4,122 | | Federal Government bonds — Maturity 2014 | | | — | | | | 2,686 | | | | 896 | | | | — | | | | — | | | | 3,582 | | Holding for Trading or Intermediation | | | | | | | | | | | | | | | | | | | | | | | , | | Consolidation bonds of social security payables | | | 2,337 | | | | 1,164 | | | | 103 | | | | — | | | | — | | | | 3,604 | | Secured bonds Decree 1,579/02 | | | 38 | | | | 227 | | | | 387 | | | | — | | | | — | | | | 652 | | Discount bonds — Maturity 2033 | | | — | | | | — | | | | — | | | | 209,277 | | | | — | | | | 209,277 | | Consolidation bonds | | | 3,800 | | | | 4,232 | | | | 441 | | | | 6 | | | | — | | | | 8,479 | | Par bonds — Maturity 2038 | | | — | | | | — | | | | — | | | | 181 | | | | — | | | | 181 | | GDP-Related securities — maturity 2035 | | | — | | | | — | | | | — | | | | 96 | | | | — | | | | 96 | | Other | | | 55 | | | | — | | | | — | | | | — | | | | 27 | | | | 82 | | Unlisted Government Securities | | | | | | | | | | | | | | | | | | | | | | | | | Federal Government Bonds (maturity 2013) | | | 3,462 | | | | 6,923 | | | | — | | | | — | | | | — | | | | 10,385 | | Argentine Government bonds at private Badlar +3.5 — Maturity 2013 | | | — | | | | 51,864 | | | | — | | | | — | | | | — | | | | 51,864 | | Province of Tucuman bonds — Maturity 2018 | | | 103 | | | | 809 | | | | 1,378 | | | | — | | | | — | | | | 2,290 | | Other | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Instruments Issued by the Central Bank(1) | | | | | | | | | | | | | | | | | | | | | | | | | Listed Central Bank Internal Notes | | | 673,268 | | | | 99,228 | | | | — | | | | — | | | | — | | | | 772,496 | | Listed Central Bank Internal Bills | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Unlisted Central Bank Notes | | | 2,425,592 | | | | 214,860 | | | | — | | | | — | | | | — | | | | 2,640,452 | | Unlisted Central Bank Internal Bills | | | 425,963 | | | | — | | | | — | | | | — | | | | — | | | | 425,963 | | Total Government securities in pesos | | | 3,607,497 | | | | 402,051 | | | | 19,834 | | | | 233,933 | | | | 27 | | | | 4,263,342 | | | | | | | | | | | | | | | | | | | | | | | | | | | In Foreign Currency: | | | | | | | | | | | | | | | | | | | | | | | | | Holding en Investment Accounts | | | | | | | | | | | | | | | | | | | | | | | | | Federal Government bonds at Libor — Maturity 2012 | | | 58,998 | | | | 177,112 | | | | — | | | | — | | | | — | | | | 236,110 | | Federal Government bonds at 7% — Maturity 2015 | | | — | | | | — | | | | 49,590 | | | | — | | | | — | | | | 49,590 | | Federal Government bonds at 7% — Maturity 2017 | | | — | | | | — | | | | 23,252 | | | | — | | | | — | | | | 23,252 | | Par bonds — Maturity 2038 (governed by Arg. Legislation) | | | — | | | | — | | | | — | | | | 1,450 | | | | — | | | | 1,450 | | Par bonds — Maturity 2038 (governed by New York legislation) | | | — | | | | — | | | | — | | | | 382 | | | | — | | | | 382 | |
4648
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maturing | | | Maturing | | | | After | | After | | | | | | | | | After | | After | | | | | | | | | | 1 year | | 5 years | | | | | | | | | 1 year | | 5 years | | | | | | | | | | Within | | but within | | but within | | After 10 | | Without | | | | | Within | | but within | | but within | | After 10 | | Without | | | | | | | 1 year | | 5 years | | 10 years | | years | | due date | | Total | | | | | Book value (in thousands of pesos) | | Holding for Trading or Intermediation | | | Federal Government Bonds (maturity 2012 and 2013) | | | 24,565 | | 74,154 | | — | | — | | — | | 98,719 | | Argentine Government Bonds at 7% (maturity 2017) | | | — | | — | | 1,633 | | — | | — | | 1,633 | | Argentine Government bonds at 7% — Maturity 2011 | | | — | | 1,565 | | — | | — | | — | | 1,565 | | Par Bonds — maturity 2038 | | | — | | — | | — | | 255 | | — | | 255 | | Discount bonds — Governed by NY State Legislation | | | — | | — | | — | | 9,975 | | — | | 9,975 | | Discount bonds — Governed by Argentine Legislation | | | — | | — | | — | | 161 | | — | | 161 | | Argentine government bonds at 7% — Maturity 2015 | | | — | | — | | 9,627 | | — | | — | | 9,627 | | Other | | | 7 | | — | | — | | 154 | | — | | 161 | | | | | Unlisted Government Securities | | | Province of Tucumán Bonds — Maturity 2015 | | | 775 | | 3,096 | | 1,548 | | — | | — | | 5,419 | | | | Total Government securities in foreign currency | | | 84,345 | | 255,927 | | 85,650 | | 12,377 | | — | | 438,299 | | | | | | | | | | | | | | | | | Total Government securities | | | 3,691,842 | | 657,978 | | 105,484 | | 246,310 | | 27 | | 4,701,641 | | | | 1 year | | 5 years | | 10 years | | years | | due date | | Total | | | | | | | | | | | | | | | | | Book value (in thousands of pesos) | | | Private Securities | | | | | | Investments in listed private securities | | | In Pesos: | | | Mutual Funds | | 19,424 | | — | | — | | — | | — | | 19,424 | | | 5,544 | | — | | — | | — | | — | | 5,544 | | Shares | | 2,971 | | — | | — | | — | | — | | 2,971 | | | 378 | | — | | — | | — | | — | | 378 | | Other | | | 1 | | — | | — | | — | | — | | 1 | | In foreign currency: | | | Commercial Paper | | 30,402 | | — | | — | | — | | — | | 30,402 | | | — | | — | | — | | — | | — | | — | | Corporate bonds | | 17,359 | | 6,236 | | — | | — | | — | | 23,595 | | | 37,927 | | 25,702 | | — | | — | | — | | 63,629 | | Mutual Funds | | 11,883 | | — | | — | | — | | — | | 11,883 | | | 8,133 | | — | | — | | — | | — | | 8,133 | | Shares | | 5,681 | | — | | — | | — | | — | | 5,681 | | | — | | — | | — | | — | | — | | — | | | | | Investments in unlisted private securities | | | In Pesos: | | | Certificates of Participation in Financial Trusts(2) | | 45,258 | | 142,304 | | — | | 150,575 | | 100,194 | | 438,331 | | | Certificates of Participation in Financial Trusts (2) | | | 1,963 | | 6,018 | | — | | 61,996 | | 234,683 | | 304,660 | | Debt Securities in Financial Trusts | | 68,088 | | 8,942 | | — | | — | | — | | 77,030 | | | 167,246 | | 18,135 | | — | | — | | — | | 185,381 | | Corporate Bonds(3) | | — | | — | | — | | — | | 190 | | 190 | | | Corporate Bonds (3) (4) | | | 22,200 | | 190 | | — | | — | | 22,390 | | In foreign currency: | | | Certificates of Participation in Financial Trusts(2) | | — | | 33,611 | | — | | — | | — | | 33,611 | | | Corporate Bonds(3) | | 5,342 | | 38,457 | | 199 | | 69 | | — | | 44,067 | | | Certificates of Participation in Financial Trusts | | | — | | 33,149 | | — | | — | | — | | 33,149 | | Debt Securities in Financial Trust (2) | | | — | | 41,766 | | — | | — | | — | | 41,766 | | Corporate Bonds (3) (4) | | | 35,153 | | 23,487 | | 1,464 | | — | | — | | 60,104 | | | | | | | | | | | | | | | | | | | | Total Private securities | | 206,408 | | 229,550 | | 199 | | 150,644 | | 100,384 | | 687,185 | | | 278,545 | | 148,447 | | 1,464 | | 61,996 | | 234,683 | | 725,135 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | (1) | | As of December 31, 2007,2008, “Instruments Issued by B.C.R.A.” includes Ps. 119,468420,303 to fall due in 30 days, Ps. 446,075655,353 to fall due in 60 days, Ps. 885,4531,653,296 to fall due from 12060 to 180 days, Ps. 1,490,140795,871 to fall due from 181 to 365 days and Ps.537,110Ps.314,088 more than 365 days. | | (2) | | The bank booked allowances for impairment in value amounting to 203,797, 169,097 and 19,749223,893 as of December 31, 20072008 | | (3) | | The bank booked allowances for impairment in value amounting to 321319 as of December 31, 2007.2008. | | (4) | | Includes Repurchased Corporate Bonds by Ps. 9,051 and US$ 20,054. |
Loan portfolio The following table analyzes our loan portfolio (without considering leasing agreements) by type as of December 31, 2005, 2006, 2007 and 2007.2008. | | | | | | | | | | | �� | | | | | | | | | | | | | | | | As of December 31, | | | As of December 31, | | | | 2005(1) | | 2006(1) | | 2007 | | | 2006 (1) | | 2007 | | 2008 | | | | (in thousands of pesos) | | | (in thousands of pesos) | | To the non-financial government sector | | 645,342 | | 774,273 | | 732,481 | | | 774,273 | | 732,481 | | 744,507 | | To the financial sector (2) | | 80,511 | | 436,930 | | 161,702 | | | 436,930 | | 161,702 | | 80,423 | | To the non-financial private sector and foreign residents | | | Overdrafts (3) | | 432,772 | | 1,103,270 | | 1,504,657 | | | 1,029,679 | | 1,375,075 | | 1,556,433 | | Documents (4) | | 433,748 | | 543,734 | | 1,081,675 | | | 618,739 | | 1,213,669 | | 1,348,585 | | Mortgages loans | | 298,060 | | 426,138 | | 619,781 | | | 426,138 | | 619,781 | | 738,592 | | Pledged loans (5) | | 230,321 | | 300,949 | | 347,989 | | | 300,949 | | 347,989 | | 339,895 | | Consumer loans (6) | | 718,261 | | 1,928,977 | | 3,929,579 | | | 1,928,977 | | 3,929,579 | | 4,675,543 | | Other loans | | 779,237 | | 1,131,315 | | 1,718,978 | | | 1,131,315 | | 1,718,978 | | 2,071,927 | | Less: Unearned discount | | | (10,411 | ) | | | (11,505 | ) | | | (20,836 | ) | | | (12,919 | ) | | | (23,248 | ) | | | (32,596 | ) | Less: Unposted payment | | | (6,050 | ) | | | (139 | ) | | | (69 | ) | | | (139 | ) | | | (69 | ) | | | (29 | ) | Plus: Interest, adjustments and listed price differences accrued pending collection | | 72,861 | | 101,744 | | 153,902 | | | Plus: Interest, adjustments, and listed price differences accrued funding collection | | | 101,744 | | 153,902 | | 195,026 | | Less: Allowances | | | (247,532 | ) | | | (208,581 | ) | | | (220,422 | ) | | | (208,581 | ) | | | (220,422 | ) | | | (438,348 | ) | | | | | | | | | | Total Loans | | 3,427,120 | | 6,527,105 | | 10,009,417 | | | 6,527,105 | | 10,009,417 | | 11,279,958 | | | | | | | | | | | | | | | | |
| | | (1) | | See note 4.2. to our audited consolidated financial statements for the year ended December 31, 2007.2008. | | (2) | | Includes loans to financial institutions. |
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| | | (3) | | Overdrafts include overdraft lines of credit resulting from checking accounts. | | (4) | | Includes the face values of drafts, promissory notes and other bills transferred to us by endorsement for which the assignor is liable, whenever the latter is an Argentine resident within the financial sector. The difference between the face value of the bill and the amount effectively disbursed will be credited to “Loans-“Loans In Argentine pesos-Argentine residents-Financial Sector-Principals-(Unearned discount).” | | (5) | | Includes the principal amounts actually lent of automobile and other collateral loans granted, for which the obligator is part of the non-financial private sector. | | (6) | | Consumer loans include credit card loans and other consumer loans. Overdrafts to individuals are included under “Overdrafts”. |
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Maturity composition of the loan portfolio The following table analyzes our loan portfolio as of December 31, 20072008 by type and by the time remaining to maturity. Loans are stated before deduction of the allowance for loan losses. We expect most loans to be repaid at maturity in cash or through refinancing at market terms. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maturing | | | Maturing | | | | After | | | | | After | | | | | | Amount as of | | 1 Year but | | | | | 1 Year but | | | | | | December 31, | | Within | | Within | | After | | | Amount as of | | Within | | Within | | After | | | | 2007 | | 1 Year | | 5 Years | | 5 Years | | | December 31, 2008 | | 1 Year | | 5 Years | | 5 Years | | | | (in thousands of pesos, except percentages) | | | (in thousands of pesos, except percentages) | | To the non-financial government sector | | 732,481 | | 21,598 | | 450,461 | | 260,422 | | | 744,507 | | 222,043 | | 285,028 | | 237,436 | | To the financial sector (1) | | 161,702 | | 152,475 | | 9,227 | | — | | | 80,423 | | 79,681 | | 742 | | — | | To the non-financial private sector and foreign residents | | | Overdrafts (2) | | 1,521,884 | | 1,517,132 | | 4,752 | | — | | | 1,595,835 | | 1,592,323 | | 3,512 | | — | | Documents (3) | | 1,090,591 | | 987,483 | | 97,130 | | 5,978 | | | 1,358,264 | | 1,294,208 | | 61,159 | | 2,897 | | Mortgages loans | | 648,312 | | 130,795 | | 306,287 | | 211,230 | | | 760,052 | | 163,863 | | 376,765 | | 219,424 | | Pledged loans (4) | | 361,712 | | 170,422 | | 191,146 | | 144 | | | 354,612 | | 170,161 | | 184,387 | | 64 | | Consumer loans (5) | | 3,964,492 | | 1,624,110 | | 2,166,162 | | 174,220 | | | 4,718,327 | | 2,064,974 | | 2,604,165 | | 49,188 | | Other loans | | 1,748,665 | | 1,398,025 | | 280,637 | | 70,003 | | | 2,106,286 | | 1,597,753 | | 467,217 | | 41,316 | | | | | | | | | | | | | | | | | | | | | | | | Total loans | | 10,229,839 | | 6,002,040 | | 3,505,802 | | 721,997 | | | 11,718,306 | | 7,185,006 | | 3,982,975 | | 550,325 | | | | | | | | | | | | | | | | | | | | | | | | Percentage of total loan portfolio | | | 100.00 | % | | | 59.00 | % | | | 34.00 | % | | | 7.00 | % | | | 100 | % | | | 61 | % | | | 34 | % | | | 5 | % |
| | | (1) | | Includes loans to financial institutions. | | (2) | | Overdrafts include overdrafts lines of credit resulting from checking accounts. | | (3) | | Includes the face value of drafts, promissory notes and other bills transferred to us by endorsement for which the assignor is liable, whenever the latter is an Argentine resident within the financial sector. The difference between the face value of the bill and the amount effectively disbursed will be credited “Loans-In Argentina Pesos-Argentine residents-Financial sector-Principals-(Unearned discount).” | | (4) | | Includes the principal amount actually lent of automobile and personal loansother collateral granted, for which the obligor is part of the non-financial private sector. | | (5) | | Consumer loans include credit card loans and other consumer loans. Overdrafts to individuals are included under “Overdrafts.” |
Loans—portfolio classification The following table presents our loan portfolio, before deduction of the allowance for loan losses, using the classification system of the Central Bank in effect at the end of each year: | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | | | 2005 | | | % | | | 2006 | | | % | | | 2007 | | | % | | | | (in thousands of pesos, except percentages) | | Loan Portfolio | | | | | | | | | | | | | | | | | | | | | | | | | Categories | | | | | | | | | | | | | | | | | | | | | | | | | 1 - Normal | | | 3,442,625 | | | | 93.69 | % | | | 6,550,389 | | | | 97.25 | % | | | 9,927,876 | | | | 97.05 | % | 2 - Low risk / Under observation — Under negotiation or subject to refinancing agreements | | | 35,891 | | | | 0.98 | % | | | 50,077 | | | | 0.74 | % | | | 143,128 | | | | 1.40 | % | 3 - Medium Risk/With problems | | | 26,711 | | | | 0.73 | % | | | 45,603 | | | | 0.68 | % | | | 52,059 | | | | 0.51 | % | 4 - High Risk /With high risk of insolvency | | | 33,979 | | | | 0.92 | % | | | 34,503 | | | | 0.51 | % | | | 62,856 | | | | 0.61 | % | 5 - Irrecoverable | | | 126,189 | | | | 3.43 | % | | | 51,086 | | | | 0.76 | % | | | 36,526 | | | | 0.36 | % | 6 - Irrecoverable by technical decision | | | 9,257 | | | | 0.25 | % | | | 4,028 | | | | 0.06 | % | | | 7,394 | | | | 0.07 | % | | | | | | | | | | | | | | | | | | | | | | | | | | Total loans | | | 3,674,652 | | | | 100 | % | | | 6,735,686 | | | | 100 | % | | | 10,229,839 | | | | 100 | % | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | | | 2006 | | | % | | | 2007 | | | % | | | 2008 | | | % | | | | | | | | | | | | | | | | | | | | | | | | | | | Loan Portfolio | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Categories | | | | | | | | | | | | | | | | | | | | | | | | | 1 — In normal situation/ performing | | | 6,550,389 | | | | 97.25 | % | | | 9,927,876 | | | | 97.05 | % | | | 11,292,177 | | | | 96.36 | % | 2 — Subject to special monitoring — in observation — in negotiation or subject to refinancing agreements/ low risk | | | 50,077 | | | | 0.74 | % | | | 143,128 | | | | 1.40 | % | | | 117,023 | | | | 1.00 | % | 3 — Troubled/Medium risk | | | 45,603 | | | | 0.68 | % | | | 52,059 | | | | 0.51 | % | | | 86,288 | | | | 0.74 | % | 4 — With high risk of insolvency/ High risk | | | 34,503 | | | | 0.51 | % | | | 62,856 | | | | 0.61 | % | | | 172,949 | | | | 1.48 | % | 5 — Irrecoverable | | | 51,086 | | | | 0.76 | % | | | 36,526 | | | | 0.36 | % | | | 48,434 | | | | 0.41 | % | 6 — Irrecoverable according to Central Bank’s rules | | | 4,028 | | | | 0.06 | % | | | 7,394 | | | | 0.07 | % | | | 1,435 | | | | 0.01 | % | | | | | | | | | | | | | | | | | | | | Total loans | | | 6,735,686 | | | | 100 | % | | | 10,229,839 | | | | 100 | % | | | 11,718,306 | | | | 100 | % | | | | | | | | | | | | | | | | | | | |
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Analysis of the allowance for loan losses The table below sets forth the activity in the allowance for loan losses for the years ended December 31, 2003, 2004, 2005, 2006, 2007 and 2007.2008. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | Year Ended December 31, | | | | 2003(1) | | 2004 | | 2005 | | 2006 | | 2007 | | | 2004 | | 2005 | | 2006 | | 2007 | | 2008 | | | | (in thousands of pesos, except percentages) | | | (in thousands of pesos, except percentages) | | Balance at the beginning of the year | | 116,125 | | 56,279 | | 225,340 | | 247,532 | | 208,581 | | | 56,279 | | 225,340 | | 247,532 | | 208,581 | | 220,422 | | Provisions for loan losses | | 35,504 | | | 201,253 | (4) | | | 142,045 | (5) | | | 102,538 | (6) | | 93,498 | | | | 201,253 | (3) | | | 142,045 | (4) | | | 102,538 | (5) | | 93,498 | | 314,532 | | Write offs and reversals | | | (95,350 | ) | | | (32,192 | ) | | | (119,853 | ) | | | (141,489 | ) | | | (81,657 | ) | | | (32,192 | ) | | | (119,853 | ) | | | (141,489 | ) | | | (81,657 | ) | | | (96,606 | ) | Overdrafts | | | (24,709 | ) | | | (4,374 | ) | | | (4,777 | ) | | | (31,584 | ) | | | (13,889 | ) | | | (4,374 | ) | | | (4,777 | ) | | | (31,584 | ) | | | (13,889 | ) | | | (9,314 | ) | Personal loans | | | (3,765 | ) | | | (3,181 | ) | | | (1,657 | ) | | | (4,411 | ) | | | (10,929 | ) | | | (3,181 | ) | | | (1,657 | ) | | | (4,411 | ) | | | (10,929 | ) | | | (47,527 | ) | Credit Cards | | | (7,436 | ) | | | (865 | ) | | | (993 | ) | | | (2,184 | ) | | | (5,751 | ) | | | (865 | ) | | | (993 | ) | | | (2,184 | ) | | | (5,751 | ) | | | (12,134 | ) | Mortgage loans | | | (4,331 | ) | | | (1,252 | ) | | | (41,518 | ) | | | (25,825 | ) | | | (8,071 | ) | | | (1,252 | ) | | | (41,518 | ) | | | (25,825 | ) | | | (8,071 | ) | | | (5,087 | ) | Pledge loans | | | (8,298 | ) | | | (7,185 | ) | | | (26,758 | ) | | | (4,323 | ) | | | (674 | ) | | | (7,185 | ) | | | (26,758 | ) | | | (4,323 | ) | | | (674 | ) | | | (2,686 | ) | Documents | | | (5,020 | ) | | | (8,696 | ) | | | (25,469 | ) | | | (39,974 | ) | | | (6,931 | ) | | | (8,696 | ) | | | (25,469 | ) | | | (39,974 | ) | | | (6,931 | ) | | | (5,296 | ) | Other | | | (41,791 | ) | | | (6,639 | ) | | | (18,681 | ) | | | (33,188 | ) | | | (35,412 | ) | | | (6,639 | ) | | | (18,681 | ) | | | (33,188 | ) | | | (35,412 | ) | | | (14,562 | ) | Balance at the end of year | | 56,279 | | 225,340 | | 247,532 | | 208,581 | | 220,422 | | | 225,340 | | 247,532 | | 208,581 | | 220,422 | | 438,348 | | | | | | | | | | | | | | | | | | | | | | | | | Charge-off/average loans(2)(1) | | | 3.26 | % | | | 2.22 | % | | | 2.22 | % | | | 1.15 | % | | | 1.16 | % | | | 2.22 | % | | | 2.22 | % | | | 1.15 | % | | | 1.16 | % | | | 2.67 | % | Net charge-off/average loans(3)(2) | | | (4.58 | )% | | | 1.29 | % | | | (0.78 | )% | | | (1.14 | )% | | | (0.47 | )% | | | 1.29 | % | | | (0.78 | )% | | | (1.14) | % | | | (0.47 | )% | | | 1.82 | % |
| | | (1) | | In constant pesos as of February 28, 2003.
| | (2) | | Defined as charge-offs plus direct charge-offs divided by average loans. | | (3)(2) | | Defined as charge-offs plus direct charge-offs minus bad debts recovered and reversals divided by average loans. | | (4)(3) | | Includes Ps. 143,457 thousand of Nuevo Banco Suquía. | | (5)(4) | | Includes Ps. 74,775 thousand for the incorporation of Banco Empresario de Tucumán. | | (6)(5) | | Includes Ps. 13,993 thousand and Ps. 28,443 thousand for the incorporations of Banco del Tucumán and Nuevo Banco Bisel, respectively. |
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Allocation of the allowances for loan losses The following table allocates the allowance for loan losses by each category of loans and sets forth the percentage distribution of the total allowance for each of the years ended December 31, 2005, 2006, 2007 and 2007.2008. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | Year Ended December 31, | | | | 2005 | | 2006 | | 2007 | | | 2006 | | 2007 | | 2008 | | | | (in thousands of pesos, except percentages) | | | (in thousands of pesos, except percentages) | | Overdrafts | | 39,074 | | | 15.79 | % | | 24,987 | | | 11.98 | % | | 25,510 | | | 11.57 | % | | 24,987 | | | 11.98 | % | | 25,510 | | | 11.57 | % | | 64,107 | | | 14.62 | % | Documents | | 62,508 | | | 25.25 | % | | 20,326 | | | 9.75 | % | | 23,215 | | | 10.53 | % | | 20,326 | | | 9.75 | % | | 23,215 | | | 10.53 | % | | 42,003 | | | 9.58 | % | Mortgage loans | | 43,747 | | | 17.67 | % | | 22,640 | | | 10.86 | % | | 20,210 | | | 9.17 | % | | 22,640 | | | 10.86 | % | | 20,210 | | | 9.17 | % | | 26,378 | | | 6.02 | % | Pledged loans | | 9,337 | | | 3.77 | % | | 8,433 | | | 4.04 | % | | 8,608 | | | 3.91 | % | | 8,433 | | | 4.04 | % | | 8,608 | | | 3.91 | % | | 9,512 | | | 2.17 | % | Personal loans | | 13,736 | | | 5.55 | % | | 40,364 | | | 19.35 | % | | 70,375 | | | 31.93 | % | | 40,364 | | | 19.35 | % | | 70,375 | | | 31.93 | % | | 174,398 | | | 39.79 | % | Credit cards | | 6,783 | | | 2.74 | % | | 12,752 | | | 6.11 | % | | 17,658 | | | 8.01 | % | | 12,752 | | | 6.11 | % | | 17,658 | | | 8.01 | % | | 34,281 | | | 7.82 | % | Other | | 72,347 | | | 29.23 | % | | 79,079 | | | 37.91 | % | | 54,846 | | | 24.88 | % | | 79,079 | | | 37.91 | % | | 54,846 | | | 24.88 | % | | 87,669 | | | 20.00 | % | | | | | | | | | | | | | | | | TOTAL | | 247,532 | | | 100 | % | | 208,581 | | | 100 | % | | 220,422 | | | 100 | % | | 208,581 | | | 100 | % | | 220,422 | | | 100 | % | | 438,348 | | | 100 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans by Economic Activities The table below analyzes our loan portfolio according to the borrowers’ main economic activity as of December 31, 2005, 2006, 2007 and 2007.2008. | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | | | 2005 | | | 2006 | | | 2007 | | | | Loan | | | % of Loan | | | Loan | | | % of Loan | | | Loan | | | % of Loan | | | | Portfolio | | | Portfolio | | | Portfolio | | | Portfolio | | | Portfolio | | | Portfolio | | | | (in thousands of pesos, except percentages) | | Animals keeping, cattle services (except veterinary and trading) | | | 166,627 | | | | 4.53 | | | | 180,901 | | | | 2.69 | | | | 197,089 | | | | 1.93 | | Construction | | | 220,663 | | | | 6.01 | | | | 320,484 | | | | 4.76 | | | | 411,725 | | | | 4.02 | | Crops, agricultural services and trading | | | 270,960 | | | | 7.37 | | | | 440,961 | | | | 6.55 | | | | 709,766 | | | | 6.94 | | Elaboration and trading of chemical substances and products | | | 39,604 | | | | 1.08 | | | | 49,797 | | | | 0.74 | | | | 174,557 | | | | 1.71 | | Elaboration and trading of foodstuff and beverages | | | 235,114 | | | | 6.4 | | | | 537,905 | | | | 7.99 | | | | 700,917 | | | | 6.85 | | Electricity, gas, steam and hot water | | | 14,631 | | | | 0.4 | | | | 21,860 | | | | 0.32 | | | | 69,884 | | | | 0.68 | | Extraction, exploitation and trading of petroleum’s related products | | | 21,466 | | | | 0.58 | | | | 250,632 | | | | 3.72 | | | | 165,893 | | | | 1.62 | | Financial trading and other financial services | | | 240,097 | | | | 6.53 | | | | 593,423 | | | | 8.80 | | | | 408,002 | | | | 3.99 | | Fishing, related services, elaboration and trading | | | 1,099 | | | | 0.03 | | | | 629 | | | | 0.01 | | | | 1,161 | | | | 0.01 | | Given to persons non-included in the other categories | | | 678,891 | | | | 18.47 | | | | 1,719,736 | | | | 25.53 | | | | 3,410,361 | | | | 33.34 | | Hotels and restaurants | | | 48,586 | | | | 1.32 | | | | 43,196 | | | | 0.64 | | | | 39,365 | | | | 0.38 | | Hunting and seizure of alive animals, resettlement of hunting animals and related services, forestry, wood extraction and related services | | | 1,686 | | | | 0.05 | | | | 2,710 | | | | 0.04 | | | | 2,422 | | | | 0.02 | | Manufacturing Industry | | | 345 | | | | 0.01 | | | | — | | | | — | | | | — | | | | 0.00 | | Mass and retail trading, reparation of automotive vehicles, motorbikes, personal effects and domestic chattels | | | 17 | | | | — | | | | — | | | | — | | | | — | | | | 0.00 | | Mass elaboration and production of machinery and equipments (all), electrical devices, radio equipment and devices, television and communications, medical, optical and pinpoint devices, watches | | | 20,639 | | | | 0.56 | | | | 64,505 | | | | 0.96 | | | | 60,266 | | | | 0.59 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2006 | | | 2007 | | | 2008 | | | | Loan | | | % of Loan | | | Loan | | | % of Loan | | | Loan | | | % of Loan | | | | Portfolio | | | Portfolio | | | Portfolio | | | Portfolio | | | Portfolio | | | Portfolio | | | | (in thousands of pesos, except percentages) | | Retail Loans | | | 1,719,736 | | | | 25.53 | % | | | 3,410,359 | | | | 33.34 | % | | | 4,023,725 | | | | 34.34 | % | Agricultural livestock- Forestry- Fishing- Mining- Hunting | | | 650,405 | | | | 9.66 | % | | | 1,050,102 | | | | 10.27 | % | | | 1,538,027 | | | | 13.12 | % | Governmental services | | | 844,814 | | | | 12.54 | % | | | 861,852 | | | | 8.42 | % | | | 886,749 | | | | 7.57 | % | Other services | | | 474,325 | | | | 7.04 | % | | | 970,585 | | | | 9.49 | % | | | 852,658 | | | | 7.28 | % | Retail and consumer products | | | 550,359 | | | | 8.17 | % | | | 703,063 | | | | 6.87 | % | | | 831,741 | | | | 7.10 | % | Chemicals | | | 300,429 | | | | 4.46 | % | | | 340,450 | | | | 3.33 | % | | | 608,157 | | | | 5.19 | % | Construction | | | 320,484 | | | | 4.76 | % | | | 411,725 | | | | 4.02 | % | | | 563,526 | | | | 4.81 | % | Foodstuff and beverages | | | 537,905 | | | | 7.99 | % | | | 700,917 | | | | 6.85 | % | | | 521,849 | | | | 4.45 | % |
4951
| | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | | | 2005 | | | 2006 | | | 2007 | | | | Loan | | | % of Loan | | | Loan | | | % of Loan | | | Loan | | | % of Loan | | | | Portfolio | | | Portfolio | | | Portfolio | | | Portfolio | | | Portfolio | | | Portfolio | | | | (in thousands of pesos, except percentages) | | Mass elaboration and production of automotive vehicles, trailers and semi trailers and transportation | | | 5,035 | | | | 0.14 | | | | 49,198 | | | | 0.73 | | | | 60,416 | | | | 0.59 | | Mass elaboration and production of textile products and dresses, finishing and staining of skins, leathering and finishing of leathers, elaboration of footwear and saddlery articles and their parts | | | 50,161 | | | | 1.37 | | | | 33,425 | | | | 0.50 | | | | 45,488 | | | | 0.44 | | Mass trading and/or on commission or consignment except automotive vehicles and motorbikes trading | | | 77,002 | | | | 2.10 | | | | 179,075 | | | | 2.66 | | | | 212,318 | | | | 2.08 | | Mines and quarries exploitation and selling and making of extracted products (except petroleum and gas) | | | 1,333 | | | | 0.04 | | | | 255 | | | | — | | | | 56,446 | | | | 0.55 | | Mines and quarries exploitation. Selling and making of extracted products | | | 3,102 | | | | 0.08 | | | | 24,949 | | | | 0.37 | | | | 83,218 | | | | 0.81 | | Other | | | 172,268 | | | | 4.69 | | | | 288,241 | | | | 4.28 | | | | 851,836 | | | | 8.33 | | Other services | | | 275,376 | | | | 7.49 | | | | 474,325 | | | | 7.04 | | | | 970,585 | | | | 9.49 | | Public administration, compulsory guard and social security | | | 669,267 | | | | 18.21 | | | | 771,797 | | | | 11.46 | | | | 747,570 | | | | 7.31 | | Real estate, owners and leasing | | | 57,698 | | | | 1.57 | | | | 39,087 | | | | 0.58 | | | | 59,512 | | | | 0.58 | | Retail trading except automotive vehicles, motorbikes, personal effects and domestic chattels trading | | | 169,129 | | | | 4.60 | | | | 307,413 | | | | 4.56 | | | | 409,231 | | | | 4.00 | | Teaching, social and healthcare | | | 47,846 | | | | 1.30 | | | | 73,017 | | | | 1.08 | | | | 114,281 | | | | 1.12 | | Trading, maintenance and reparation of automotive vehicles, motorbikes, personal effects and domestic chattels | | | 35,022 | | | | 0.95 | | | | 63,871 | | | | 0.95 | | | | 81,513 | | | | 0.80 | | Transportation, storage and communications | | | 141,039 | | | | 3.84 | | | | 195,094 | | | | 2.90 | | | | 181,646 | | | | 1.78 | | Water catchment, purifying and distribution | | | 9,949 | | | | 0.28 | | | | 9,200 | | | | 0.14 | | | | 4,371 | | | | 0.04 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 3,674,652 | | | | 100.00 | | | | 6,735,686 | | | | 100.00 | | | | 10,229,839 | | | | 100.00 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2006 | | | 2007 | | | 2008 | | | | Loan | | | % of Loan | | | Loan | | | % of Loan | | | Loan | | | % of Loan | | | | Portfolio | | | Portfolio | | | Portfolio | | | Portfolio | | | Portfolio | | | Portfolio | | | | (in thousands of pesos, except percentages) | | Financial Services | | | 593,423 | | | | 8.81 | % | | | 408,002 | | | | 3.99 | % | | | 289,450 | | | | 2.47 | % | Manufacturing and wholesales | | | 147,127 | | | | 2.18 | % | | | 166,169 | | | | 1.62 | % | | | 283,555 | | | | 2.42 | % | Real estate, business and leases | | | 39,087 | | | | 0.58 | % | | | 59,512 | | | | 0.58 | % | | | 267,604 | | | | 2.28 | % | Transportation, storage and communications | | | 195,094 | | | | 2.90 | % | | | 181,646 | | | | 1.78 | % | | | 263,999 | | | | 2.25 | % | Electricity, oil, water | | | 31,061 | | | | 0.46 | % | | | 74,256 | | | | 0.73 | % | | | 170,950 | | | | 1.46 | % | Hotels and restaurants | | | 43,196 | | | | 0.64 | % | | | 39,365 | | | | 0.38 | % | | | 32,325 | | | | 0.28 | % | Other | | | 288,241 | | | | 4.28 | % | | | 851,836 | | | | 8.33 | % | | | 583,991 | | | | 4.98 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 6,735,686 | | | | 100.00 | % | | | 10,229,839 | | | | 100.00 | % | | | 11,718,306 | | | | 100.00 | % | | | | | | | | | | | | | | | | | | | |
Composition of deposits The following table sets out the composition of each category of deposits that exceeded 10% of average total deposits in each of the years ended December 31, 2005, 2006, 2007, and 2007.2008. | | | | | | | | | | | | | | | Year ended December 31, | | | | 2005 | | | 2006 | | | 2007 | | | | (in thousands of pesos) | | Deposits in Domestic Bank Offices | | | | | | | | | | | | | Non-interest-bearing Demand | | | | | | | | | | | | | Deposits(1) | | | | | | | | | | | | | Average | | | | | | | | | | | | | Pesos | | | 1,691,599 | | | | 2,014,003 | | | | 3,067,834 | | Dollars | | | 45,936 | | | | 3,266 | | | | 6,180 | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 1,737,535 | | | | 2,017,269 | | | | 3,074,014 | | | | | | | | | | | | | | | | | | | | | | | | | Saving Accounts | | | | | | | | | | | | | Average | | | | | | | | | | | | | Pesos | | | 635,072 | | | | 950,338 | | | | 1,444,795 | | Dollars | | | 85,130 | | | | 130,478 | | | | 174,476 | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 720,202 | | | | 1,080,816 | | | | 1,619,271 | | | | | | | | | | | | | | | | | | | | | | | | | Certificates of Deposits | | | | | | | | | | | | | Average | | | | | | | | | | | | | Pesos | | | 2,652,277 | | | | 3,056,186 | | | | 4,589,993 | | Dollars | | | 609,708 | | | | 909,362 | | | | 1,211,832 | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 3,261,985 | | | | 3,965,548 | | | | 5,801,825 | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, | | | Year ended December 31, | | | | 2005 | | 2006 | | 2007 | | | 2006 | | 2007 | | 2008 | | | | (in thousands of pesos) | | | (in thousands of pesos) | | Interest-Bearing Demand Deposits | | | Deposits in Domestic Bank Offices | | | Non-interest-bearing Demand Deposits (1) | | | Average | | | Pesos | | | 2,014,003 | | 3,067,834 | | 3,665,382 | | Dollars | | | 3,266 | | 6,180 | | 8,044 | | | | | | | | | | | | | Total | | | 2,017,269 | | 3,074,014 | | 3,673,426 | | | | | | | | | | | | | | Saving Accounts | | | Average | | | Pesos | | | 1,474,473 | | 2,486,927 | | 2,822,961 | | Dollars | | | 184,617 | | 297,472 | | 361,324 | | | | | | | | | | | | | | Total | | | 1,659,090 | | 2,784,399 | | 3,184,285 | | | | | | | | | | | | | | Certificates of Deposits | | | Average | | | Pesos | | — | | 524,135 | | 1,042,132 | | | 3,056,186 | | 4,589,993 | | 6,556,086 | | Dollars | | — | | 54,139 | | 122,996 | | | 909,362 | | 1,211,832 | | 1,490,885 | | | | | | | | | | | | | | | | | | | Total | | — | | 578,274 | | 1,165,128 | | | 3,965,548 | | 5,801,825 | | 8,046,971 | | | | | | | | | | | | | | | | | | | | Deposits in Foreign Bank Offices | | | Non-interest-bearing Demand Deposits | | | Average | | | Pesos | | 238 | | 465 | | 1,215 | | | 465 | | 1,215 | | 513 | | Dollars | | 19 | | 236 | | 500 | | | 236 | | 500 | | 15 | | | | | | | | | | | | | | | | | | | Total | | 257 | | 701 | | 1,715 | | | 701 | | 1,715 | | 528 | | | | | | | | | | | | | | | | | | | | Saving Accounts | | | Average | | | Pesos | | | — | | — | | — | | Dollars | | | 31,559 | | 81,435 | | 90,568 | | | | | | | | | | | | | Total | | | 31,559 | | 81,435 | | 90,568 | | | | | | | | | | | | | | Certificates of Deposits | | | Average | | | Dollars | | 218,528 | | 280,823 | | 226,009 | | | 280,823 | | 226,009 | | 226,626 | | | | | | | | | | | | | | | | | | | Total | | 218,528 | | 280,823 | | 226,009 | | | 280,823 | | 226,009 | | 226,626 | | | | | | | | | | | | | | | | | | | | Interest-bearing Demand Deposits | | | Average | | | Dollars | | 27,828 | | 31,559 | | 81,435 | | | | | | | | | | | | | | | Total | | 27,828 | | 31,559 | | 81,435 | | | | | | | | | | | |
| | | (1) | | Non-interest-bearing demand deposits consist of checking accounts. |
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Maturity of deposits at December 31, 20072008 The following table sets forth information regarding the maturity of our deposits at December 31, 2007.2008. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maturing | | | Maturing | | | | After 3 | | After 6 | | | | | After 3 | | After 6 | | | | | | Within 3 | | but Within | | but Within | | After 12 | | | Within 3 | | but Within | | but Within | | After 12 | | | | Total | | Months | | 6 Months | | 12 Months | | Months | | | Total | | Months | | 6 Months | | 12 Months | | Months | | | | (in thousands of pesos) | | | (in thousands of pesos) | | Checking accounts | | 3,560,390 | | 3,560,390 | | — | | — | | — | | | 3,566,625 | | 3,566,625 | | — | | — | | — | | Savings accounts | | 2,845,965 | | 2,845,965 | | — | | — | | — | | | 2,881,686 | | 2,881,686 | | — | | — | | — | | Time deposits | | 6,645,504 | | 5,631,022 | | 518,470 | | 474,331 | | 21,681 | | | 8,745,500 | | 7,216,637 | | 615,522 | | 910,906 | | 2,435 | | Investment accounts | | 116,313 | | 6,079 | | 81,221 | | 22,902 | | 6,111 | | | 262,523 | | 121,685 | | 28,512 | | 105,248 | | 7,078 | | Other | | 422,977 | | 420,043 | | 950 | | 1,984 | | — | | | 372,023 | | 368,771 | | 1,065 | | 2,187 | | — | | | | | | | | | | | | | | | | | | | | | | | | | Total | | 13,591,149 | | 12,463,499 | | 600,641 | | 499,217 | | 27,792 | | | 15,828,357 | | 14,155,404 | | 645,099 | | 1,018,341 | | 9,513 | | | | | | | | | | | | | | | | | | | | | | | | |
Maturity of deposits at December 31, 20072008 of outstanding time deposits and investment accounts The following table sets forth information regarding the maturity of our time deposits and investment accounts in denominations of Ps.100,000 or more at December 31, 2007.2008. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maturing | | | Maturing | | | | After 3 | | After 6 | | | | | After 3 | | After 6 | | | | | | Within 3 | | but Within | | but Within | | After 12 | | | Within 3 | | but Within | | but Within | | After 12 | | | | Total | | Months | | 6 Months | | 12 Months | | Months | | | Total | | Months | | 6 Months | | 12 Months | | Months | | | | (in thousands of pesos) | | | (in thousands of pesos) | | Domestic bank offices | | 4,000,698 | | 3,022,471 | | 470,002 | | 481,284 | | 26,941 | | | 6,134,706 | | 4,561,513 | | 559,671 | | 1,004,853 | | 8,669 | | Foreign bank offices | | 208,609 | | 190,991 | | 17,127 | | — | | 491 | | | 201,134 | | 193,348 | | 6,353 | | 1,433 | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | Total | | 4,209,307 | | 3,213,462 | | 487,129 | | 481,284 | | 27,432 | | | 6,335,840 | | 4,754,861 | | 566,024 | | 1,006,286 | | 8,669 | | | | | | | | | | | | | | | | | | | | | | | | |
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Short-term borrowings Our short-term borrowings totaled approximately Ps.205,600,000,thousands of Ps. 420,960,000420,959, Ps. 647,169 and Ps. 646,000,000734,963 for the years ended December 31, 2005, 2006, 2007 and 2007,2008, respectively. The table below shows those amounts at the end of each year. | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2005 | | | 2006 | | | 2007 | | | | | | | | Annualized | | | | | | | Annualized | | | | | | | Annualized | | | | Amount | | | Rate | | | Amount | | | Rate | | | Amount | | | Rate | | | | (in thousands of pesos, except percentages | | Central Bank of the Argentine Republic(1): | | | | | | | | | | | | | | | | | | | | | | | | | Total amount outstanding at the end of the reported period | | | 34,353 | | | | 3.6 | % | | | 69,062 | | | | 1.95 | % | | | 72,526 | | | | 1.97 | % | Average during year | | | 35,495 | | | | 3.5 | % | | | 51,248 | | | | 1.95 | % | | | 70,068 | | | | 1.97 | % | Maximum quarter-end balance | | | 42,379 | | | | | | | | 69,062 | | | | | | | | 72,526 | | | | | | Banks and international organizations: | | | | | | | | | | | | | | | | | | | | | | | | | Total amount outstanding at the end of the reported period | | | 158,544 | | | | 5.6 | % | | | 28,930 | | | | 5.92 | % | | | 7,279 | | | | 7.11 | % | Average during year(3) | | | 122,741 | | | | 4.7 | % | | | 55,445 | | | | 6.28 | % | | | 125,827 | | | | 7.35 | % | Maximum quarter-end balance | | | 160,235 | | | | | | | | 158,699 | | | | | | | | 166,178 | | | | | | Corporate Bonds | | | | | | | | | | | | | | | | | | | | | | | | | Total amount outstanding at the end of the reported period | | | — | | | | — | | | | — | | | | — | | | | 18,947 | | | | 8.76 | % | Average during year(3) | | | — | | | | — | | | | — | | | | — | | | | 15,343 | | | | 8.97 | % | Maximum quarter-end balance | | | — | | | | | | | | — | | | | | | | | 18,947 | | | | | | Financing received from Argentine financial institutions: | | | | | | | | | | | | | | | | | | | | | | | | | Total amount outstanding at the end of the reported period | | | 3,480 | | | | 3.0 | % | | | 27,721 | | | | 6.40 | % | | | 119,038 | | | | 6.75 | % | Average during year(3) | | | 20,524 | | | | 2.5 | % | | | 10,627 | | | | 4.35 | % | | | 68,801 | | | | 6.56 | % | Maximum quarter-end balance | | | 35,908 | | | | | | | | 27,721 | | | | | | | | 119,038 | | | | | | Other(2) | | | | | | | | | | | | | | | | | | | | | | | | | Total amount outstanding at the end of the reported period | | | — | | | | — | | | | 250,096 | | | | — | | | | 412,161 | | | | 0.03 | % | Average during year(3) | | | 29,654 | | | | 1.8 | % | | | 209,294 | | | | — | | | | 341,471 | | | | 0.01 | % | Maximum quarter-end balance | | | 60,300 | | | | | | | | 250,096 | | | | | | | | 412,161 | | | | | | Subordinated corporate bonds: | | | | | | | | | | | | | | | | | | | | | | | | | Total amount outstanding at the end of the reported period | | | 9,299 | | | | 7.2 | % | | | 45,150 | | | | 7.61 | % | | | 16,404 | | | | 8.03 | % | Average during year(3) | | | 8,449 | | | | 7.4 | % | | | 29,835 | | | | 7.73 | % | | | 29,651 | | | | 8.25 | % | Maximum quarter-end balance | | | 9,299 | | | | | | | | 54,588 | | | | | | | | 59,288 | | | | | | Total Short Term | | | 205,676 | | | | | | | | 420,959 | | | | | | | | 646,355 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2006 | | | 2007 | | | 2008 | | | | | | | | Annualized | | | | | | | Annualized | | | | | | | Annualized | | | | Amount | | | Rate | | | Amount | | | Rate | | | Amount | | | Rate | | | | (in thousands of pesos, except percentages) | | Central Bank of the Argentine Republic: | | | | | | | | | | | | | | | | | | | | | | | | | Total amount outstanding at the end of the reported period | | | 69,062 | | | | 1.95 | % | | | 72,526 | | | | 1.97 | % | | | 78,939 | | | | 1.95 | % | Average during year | | | 51,248 | | | | 1.95 | % | | | 70,068 | | | | 1.97 | % | | | 76,023 | | | | 1.96 | % | Maximum month-end balance | | | 69,062 | | | | | | | | 72,526 | | | | | | | | 78,939 | | | | | | Banks and international organizations: | | | | | | | | | | | | | | | | | | | | | | | | | Total amount outstanding at the end of the reported period | | | 28,930 | | | | 5.97 | % | | | 7,279 | | | | 5.58 | % | | | 59,737 | | | | 4.92 | % | Average during year (2) | | | 55,445 | | | | 6.08 | % | | | 125,827 | | | | 6.96 | % | | | 55,054 | | | | 4.38 | % | Maximum month-end balance | | | 158,699 | | | | | | | | 166,178 | | | | | | | | 86,762 | | | | | | Corporate Bonds | | | | | | | | | | | | | | | | | | | | | | | | | Total amount outstanding at the end of the reported period | | | — | | | | — | | | | 18,947 | | | | 8.76 | % | | | 16,518 | | | | 9.46 | % | Average during year (2) | | | — | | | | — | | | | 15,343 | | | | 8.97 | % | | | 16,612 | | | | 9.45 | % | Maximum month-end balance | | | — | | | | | | | | 18,947 | | | | | | | | 17,063 | | | | | | Financing received from Argentine financial institutions: | | | | | | | | | | | | | | | | | | | | | | | | | Total amount outstanding at the end of the reported period | | | 27,721 | | | | 6.40 | % | | | 119,038 | | | | 6.75 | % | | | 31,846 | | | | 10.33 | % | Average during year (2) | | | 10,627 | | | | 4.35 | % | | | 68,801 | | | | 6.56 | % | | | 96,294 | | | | 5.47 | % | Maximum month-end balance | | | 27,721 | | | | | | | | 119,038 | | | | | | | | 166,146 | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2006 | | | 2007 | | | 2008 | | | | | | | | Annualized | | | | | | | Annualized | | | | | | | Annualized | | | | Amount | | | Rate | | | Amount | | | Rate | | | Amount | | | Rate | | | | (in thousands of pesos, except percentages) | | Other (1) | | | | | | | | | | | | | | | | | | | | | | | | | Total amount outstanding at the end of the reported period | | | 250,096 | | | | — | | | | 412,975 | | | | 0.03 | % | | | 545,183 | | | | 0.02 | % | Average during year (2) | | | 209,294 | | | | — | | | | 341,471 | | | | 0.01 | % | | | 524,019 | | | | 0.02 | % | Maximum month-end balance | | | 250,096 | | | | | | | | 412,161 | | | | | | | | 599,063 | | | | | | Subordinated corporate bonds: | | | | | | | | | | | | | | | | | | | | | | | | | Total amount outstanding at the end of the reported period | | | 45,150 | | | | 7.61 | % | | | 16,404 | | | | 8.03 | % | | | 2,740 | | | | 4.00 | % | Average during year (2) | | | 29,835 | | | | 7.73 | % | | | 29,651 | | | | 8.25 | % | | | 21,056 | | | | 7.02 | % | Maximum month-end balance | | | 54,588 | | | | | | | | 59,288 | | | | | | | | 36,987 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Short Term | | | 420,959 | | | | | | | | 647,169 | | | | | | | | 734,963 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | (1) | | On February 2, 2005, Nuevo Banco Suquía made the early repayment of the remainder of such credit lines.
| | (2) | | Includes liability to the Central Bank to acquire Boden 2012. | | (3)(2) | | Average balances are calculated from quarterly- endmonth-end balances. |
Return on equity and assets
The following table presents certain selected financial information and ratios for the years indicated.
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | Year Ended December 31, | | | | 2005 | | 2006 | | 2007 | | | 2006 | | 2007 | | 2008 | | | | (in thousands of pesos, except percentages) | | | (in thousands of pesos, except percentages) | | Net income | | 262,746 | | 424,340 | | 495,200 | | | 424,340 | | 495,200 | | 660,050 | | Average total assets | | 9,357,401 | | 11,791,622 | | 17,713,916 | | | 11,791,622 | | 17,686,455 | | 21,860,677 | | Average shareholders’ equity | | 1,333,163 | | 1,915,245 | | 2,456,353 | | | 1,915,245 | | 2,456,353 | | 2,773,259 | | Shareholders’ equity at the end of the fiscal year | | 1,489,652 | | 2,315,097 | | 2,707,706 | | | 2,315,097 | | 2,707,706 | | 2,816,597 | | Net income as a percentage of: | | | Average total assets | | | 2.81 | % | | | 3.60 | % | | | 2.80 | % | | | 3.60 | % | | | 2.80 | % | | | 3.02 | % | Average shareholders’ equity | | | 19.71 | % | | | 22.16 | % | | | 20.16 | % | | | 22.16 | % | | | 20.16 | % | | | 23.80 | % | Declared cash dividends | | 30,447 | | 68,395 | | 102,591 | | | 68,395 | | 102,591 | | 170,995 | | Dividend payout ratio(1) | | | 11.59 | % | | | 16.12 | % | | | 20,72 | % | | Dividend payout ratio (1) | | | | 16.12 | % | | | 20,72 | % | | | 25.91 | % | Average shareholders’ equity as a percentage of Average Total Assets | | | 14.25 | % | | | 16.24 | % | | | 13.87 | % | | | 16.24 | % | | | 13.89 | % | | | 12.69 | % |
| | | (1) | | Declared cash dividends stated as percentage of net income when they are paid. |
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Interest rate sensitivity The interest rate sensitivity measures the impact on the gross intermediation margin in response to a change in market interest rates. For any given period, the pricing structure is matched when an equal amount of assets and liabilities reprice. Any mismatch of interest-earning assets and interest-bearing liabilities is known as a gap position and is shown in the following tables. A negative gap denotes liability sensitivity and normally means that a decline in interest rates would have a positive effect on net interest income while an increase in interest rates would have a negative effect on interest income. The following table shows the interest rate sensitivity of our interest-earning assets and interest-bearing liabilities based on contractual maturities. Variations in interest rate sensitivity may also arise within the repricing periods presented. | | | | | | | | | | | | | | | | | | | | | | | | | | | Remaining Maturity at December 31, 2007 | | | | | | | | | | | | | | | | Over 10 | | | Without due | | | Total | | | | 0-1 Year | | | 1-5 Years | | | 5-10 Years | | | years | | | date | | | (2) | | Interest-earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest-bearing deposits in Central Bank | | | 2,022,430 | | | | — | | | | — | | | | — | | | | — | | | | 2,022,430 | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest-bearing deposits in other banks | | | 224,179 | | | | — | | | | — | | | | — | | | | — | | | | 224,179 | | | | | | | | | | | | | | | | | | | | | | | | | | | Government and private securities | | | 3,002,622 | | | | 700,450 | | | | 128,024 | | | | 25,700 | | | | — | | | | 3,856,796 | | | | | | | | | | | | | | | | | | | | | | | | | | | Goods in financial leasing | | | 142,570 | | | | 214,932 | | | | 15,364 | | | | — | | | | — | | | | 372,866 | | Loans to non-financial government sector(1) | | | 21,598 | | | | 450,461 | | | | 240,512 | | | | 19,910 | | | | — | | | | 732,481 | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans to private and financial sector(1) | | | 5,980,442 | | | | 3,055,341 | | | | 352,743 | | | | 108,834 | | | | — | | | | 9,497,360 | | Other assets | | | 122,994 | | | | 95,332 | | | | 199 | | | | 150,644 | | | | 278,411 | | | | 647,580 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Interest-Earning Assets | | | 11,516,835 | | | | 4,516,516 | | | | 736,842 | | | | 305,088 | | | | 278,411 | | | | 17,353,692 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest-bearing liabilities: | | | �� | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Savings accounts | | | 2,845,965 | | | | — | | | | — | | | | — | | | | — | | | | 2,845,965 | | | | | | | | | | | | | | | | | | | | | | | | | | | Time deposits | | | 6,621,190 | | | | 21,671 | | | | 10 | | | | — | | | | — | | | | 6,642,871 | | | | | | | | | | | | | | | | | | | | | | | | | | | Investment accounts | | | 110,202 | | | | 6,101 | | | | 10 | | | | — | | | | — | | | | 116,313 | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate Bonds | | | 18,947 | | | | 307,940 | | | | 472,650 | | | | — | | | | — | | | | 799,537 | | | | | | | | | | | | | | | | | | | | | | | | | | | Subordinated corporate bonds | | | 16,404 | | | | 1,641 | | | | — | | | | 472,650 | | | | — | | | | 490,695 | | | | | | | | | | | | | | | | | | | | | | | | | | | Liabilities with Central Bank | | | 71,532 | | | | 274,836 | | | | — | | | | 534 | | | | — | | | | 346,902 | | Liabilities with local financial institutions | | | 119,038 | | | | 13,146 | | | | 27,040 | | | | 1,072 | | | | — | | | | 160,296 | | Liabilities with bank and international institutions | | | 7,279 | | | | 157,550 | | | | — | | | | — | | | | — | | | | 164,829 | | | | | | | | | | | | | | | | | | | | | | | | | | | Other liabilities | | | 243,092 | | | | — | | | | — | | | | — | | | | — | | | | 243,092 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Interest-Bearing Liabilities | | | 10,053,649 | | | | 782,885 | | | | 499,710 | | | | 474,256 | | | | — | | | | 11,810,500 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Asset/Liability Gap | | | 1,463,186 | | | | 3,733,631 | | | | 237,132 | | | | (169,168 | ) | | | 278,411 | | | | 5,543,192 | | | | | | | | | | | | | | | | | | | | | | | | | | | Cumulative Asset/Liability Gap | | | 1,463,186 | | | | 5,196,817 | | | | 5,433,949 | | | | 5,264,781 | | | | 5,543,192 | | | | | | Cumulative sensitivity gap as a percentage of total interest-earning assets | | | 8.43 | % | | | 29.95 | % | | | 31.31 | % | | | 30.34 | % | | | 31.94 | % | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | Remaining Maturity at December 31, 2007 | | | | | | | | | | | | | | | | Over 10 | | | Without due | | | Total | | | | 0-1 Year | | | 1-5 Years | | | 5-10 Years | | | years | | | date | | | (2) | | Interest-earning assets in Pesos: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest-bearing deposits in Central Bank | | | 1,445,938 | | | | — | | | | — | | | | — | | | | — | | | | 1,445,938 | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest-bearing deposits in other banks | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Government and private securities | | | 2,978,729 | | | | 608,522 | | | | 36,400 | | | | 24,135 | | | | — | | | | 3,647,786 | | | | | | | | | | | | | | | | | | | | | | | | | | | Goods in financial leasing | | | 141,122 | | | | 207,707 | | | | 3,490 | | | | — | | | | — | | | | 352,319 | | Loans to non-financial government sector(1) | | | 21,598 | | | | 450,461 | | | | 240,512 | | | | 19,910 | | | | — | | | | 732,481 | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans to private and financial sector(1) | | | 4,526,284 | | | | 2,956,267 | | | | 322,518 | | | | 98,433 | | | | — | | | | 7,903,502 | | | | | | | | | | | | | | | | | | | | | | | | | | | Other assets | | | 69,891 | | | | 17,028 | | | | — | | | | 150,575 | | | | 278,199 | | | | 515,693 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Interest-Earning Assets | | | 9,183,562 | | | | 4,239,985 | | | | 602,920 | | | | 293,053 | | | | 278,199 | | | | 14,597,719 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest-bearing liabilities in Pesos: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Saving accounts | | | 2,505,123 | | | | — | | | | — | | | | — | | | | — | | | | 2,505,123 | | | | | | | | | | | | | | | | | | | | | | | | | | | Time deposits | | | 5,002,552 | | | | 21,021 | | | | 9 | | | | — | | | | — | | | | 5,023,582 | | | | | | | | | | | | | | | | | | | | | | | | | | | Investment accounts | | | 102,577 | | | | — | | | | 10 | | | | — | | | | — | | | | 102,587 | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate bonds | | | 2,207 | | | | 307,940 | | | | — | | | | — | | | | — | | | | 310,147 | | | | | | | | | | | | | | | | | | | | | | | | | | | Subordinated corporate bonds | | | 862 | | | | 1,641 | | | | — | | | | — | | | | — | | | | 2,503 | | | | | | | | | | | | | | | | | | | | | | | | | | | Liabilities with Central Bank | | | 71,532 | | | | 274,836 | | | | — | | | | 534 | | | | — | | | | 346,902 | | Liabilities with local financial institutions | | | 48,611 | | | | 13,146 | | | | 27,040 | | | | 1,072 | | | | — | | | | 89,869 | | | | | | | | | | | | | | | | | | | | | | | | | | | Other liabilities | | | 182,681 | | | | — | | | | — | | | | — | | | | — | | | | 182,681 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Interest-Bearing Liabilities | | | 7,916,145 | | | | 618,584 | | | | 27,059 | | | | 1,606 | | | | — | | | | 8,563,394 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Asset/Liability Gap | | | 1,267,417 | | | | 3,621,401 | | | | 575,861 | | | | 291,447 | | | | 278,199 | | | | 6,034,325 | | | | | | | | | | | | | | | | | | | | | | | | | | | Cumulative Asset/Liability Gap | | | 1,267,417 | | | | 4,888,818 | | | | 5,464,679 | | | | 5,756,126 | | | | 6,034,325 | | | | | | Cumulative sensitivity gap as a percentage of total interest-earning assets | | | 8.68 | % | | | 33.49 | % | | | 37.44 | % | | | 39.43 | % | | | 41.34 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Remaining Maturity at December 31, 2007 | | | | | | | | | | | | | | | | Over 10 | | | Without due | | | Total | | | | 0-1 Year | | | 1-5 Years | | | 5-10 Years | | | years | | | date | | | (2) | | Interest-earning assets in foreign currency | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest-bearing deposits in Central Bank | | | 576,492 | | | | — | | | | — | | | | — | | | | — | | | | 576,492 | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest-bearing deposits in other banks | | | 224,179 | | | | — | | | | — | | | | — | | | | — | | | | 224,179 | | | | | | | | | | | | | | | | | | | | | | | | | | | Government securities | | | 23,893 | | | | 91,928 | | | | 91,624 | | | | 1,565 | | | | — | | | | 209,010 | | Goods in financial leasing | | | 1,448 | | | | 7,225 | | | | 11,874 | | | | — | | | | — | | | | 20,547 | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans to private and financial sector(1) | | | 1,454,155 | | | | 99,075 | | | | 30,225 | | | | 10,401 | | | | — | | | | 1,593,856 | | | | | | | | | | | | | | | | | | | | | | | | | | | Other assets | | | 53,103 | | | | 78,304 | | | | 199 | | | | 69 | | | | 211 | | | | 131,886 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Interest-Earning Assets | | | 2,333,270 | | | | 276,532 | | | | 133,922 | | | | 12,035 | | | | 211 | | | | 2,755,970 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Remaining Maturity at December 31, 2008 | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | 0-1 Year | | | 1-5 Years | | | 5-10 Years | | | Over 10 years | | | Without due date | | | (2) | | Interest-earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | Interest-bearing deposits in Central Bank | | | 2,059,041 | | | | — | | | | — | | | | — | | | | — | | | | 2,059,041 | | Interest-bearing deposits in other banks | | | 128,002 | | | | — | | | | — | | | | — | | | | — | | | | 128,002 | | Government Securities | | | 3,691,842 | | | | 657,978 | | | | 105,484 | | | | 246,310 | | | | 27 | | | | 4,701,641 | | Goods in financial leasing | | | 144,887 | | | | 202,594 | | | | 13,300 | | | | | | | | — | | | | 360,781 | | Loans to non-financial government sector (1) | | | 222,043 | | | | 285,028 | | | | 221,651 | | | | 15,785 | | | | — | | | | 744,507 | | Loans to the private and financial sector (1) | | | 6,962,963 | | | | 3,697,947 | | | | 206,935 | | | | 105,954 | | | | — | | | | 10,973,799 | | Other assets | | | 264,490 | | | | 148,447 | | | | 1,464 | | | | 61,996 | | | | 234,683 | | | | 711,080 | | | | | | | | | | | | | | | | | | | | | Total Interest-Earning Assets | | | 13,473,268 | | | | 4,991,994 | | | | 548,834 | | | | 430,045 | | | | 234,710 | | | | 19,678,851 | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Remaining Maturity at December 31, 2007 | | | Remaining Maturity at December 31, 2008 | | | | Over 10 | | Without due | | Total | | | Total | | | | 0-1 Year | | 1-5 Years | | 5-10 Years | | years | | date | | (2) | | | 0-1 Year | | 1-5 Years | | 5-10 Years | | Over 10 years | | Without due date | | (2) | | Interest-bearing liabilities in foreign currency: | | | | | | Saving accounts | | 340,842 | | — | | — | | — | | — | | 340,842 | | | | | | Interest-bearing liabilities: | | | Checking | | | 264,194 | | — | | — | | — | | — | | 264,194 | | Savings accounts | | | 2,881,686 | | — | | — | | — | | — | | 2,881,686 | | Time deposits | | 1,618,638 | | 650 | | 1 | | — | | — | | 1,619,289 | | | 8,743,065 | | 2,428 | | 7 | | — | | — | | 8,745,500 | | | | | Investment accounts | | 7,625 | | 6,101 | | — | | — | | — | | 13,726 | | | 255,445 | | 7,078 | | — | | — | | — | | 262,523 | | | | | Corporate bonds | | 16,740 | | — | | 472,650 | | — | | — | | 489,390 | | | | | | Corporate Bonds | | | 16,518 | | 303,321 | | 405,034 | | — | | — | | 724,873 | | Subordinated corporate bonds | | 15,542 | | — | | — | | 472,650 | | — | | 488,192 | | | 2,740 | | 886 | | — | | 518,055 | | — | | 521,681 | | | | | Liabilities with Central Bank | | — | | — | | — | | — | | — | | — | | | 76,859 | | 223,396 | | 108 | | 317 | | — | | 300,680 | | Liabilities with local financial institutions | | 70,427 | | — | | — | | — | | — | | 70,427 | | | Liabilities with banks and financial organizations | | 7,279 | | 157,550 | | — | | — | | — | | 164,829 | | | | | | Liabilities with local financial companies | | | 31,846 | | 15,516 | | 26,444 | | — | | — | | 73,806 | | Liabilities with bank and international Organizations | | | 59,737 | | 172,685 | | — | | — | | — | | 232,422 | | Other liabilities | | 60,411 | | — | | — | | — | | — | | 60,411 | | | 60,729 | | — | | — | | — | | — | | 60,729 | | | | | | | | | | | | | | | | | Total Interest-Bearing Liabilities | | 2,137,504 | | 164,301 | | 472,651 | | 472,650 | | — | | 3,247,106 | | | 12,392,819 | | 725,310 | | 431,593 | | 518,372 | | — | | 14,068,094 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Asset/Liability Gap | | 195,766 | | 112,231 | | (338,729 | ) | | (460,615 | ) | | 211 | | (491,136 | ) | | | | | Asset (Liability) Gap | | | 1,080,449 | | 4,266,684 | | 117,241 | | | (88,327 | ) | | 234,710 | | 5,610,757 | | Cumulative Asset/Liability Gap | | 195,766 | | 307,997 | | (30,732 | ) | | (491,347 | ) | | (491,136 | ) | | | 1,080,449 | | 5,347,133 | | 5,464,374 | | 5,376,047 | | 5,610,757 | | Cumulative sensitivity gap as a percentage of total interest-earning assets | | | 7.10 | % | | | 11.18 | % | | | (1.12 | )% | | | (17.83 | )% | | | (17.82 | )% | | | | 5.49 | % | | | 27.17 | % | | | 27.77 | % | | | 27.32 | % | | | 28,51 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Remaining Maturity at December 31, 2008 | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | 0-1 Year | | | 1-5 Years | | | 5-10 Years | | | Over 10 years | | | Without due date | | | (2) | | Interest-earning assets in Pesos: | | | | | | | | | | | | | | | | | | | | | | | | | Interest-bearing deposits in Central Bank | | | 1,392,307 | | | | — | | | | — | | | | — | | | | — | | | | 1,392,307 | | Interest-bearing deposits in other banks | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Government securities | | | 3,607,497 | | | | 402,051 | | | | 19,834 | | | | 233,933 | | | | 27 | | | | 4,263,342 | | Goods in financial leasing | | | 134,643 | | | | 154,476 | | | | 2,474 | | | | — | | | | — | | | | 291,593 | | Loans to non-financial government sector (1) | | | 222,043 | | | | 285,028 | | | | 221,651 | | | | 15,785 | | | | — | | | | 744,507 | | Loans to the private and financial sector (1) | | | 5,139,709 | | | | 3,424,983 | | | | 174,672 | | | | 105,954 | | | | — | | | | 8,845,318 | | Other assets | | | 191,410 | | | | 24,343 | | | | — | | | | 61,996 | | | | 234,683 | | | | 512,432 | | | | | | | | | | | | | | | | | | | | | Total Interest-Earning Assets | | | 10,687,609 | | | | 4,290,881 | | | | 418,631 | | | | 417,668 | | | | 234,710 | | | | 16,049,499 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest-bearing liabilities in Pesos: | | | | | | | | | | | | | | | | | | | | | | | | | Checking | | | 214,115 | | | | | | | | | | | | | | | | | | | | 214,115 | | Saving accounts | | | 2,465,078 | | | | — | | | | — | | | | — | | | | — | | | | 2,465,078 | | Time deposits | | | 6,788,003 | | | | 2,243 | | | | 7 | | | | — | | | | — | | | | 6,790,253 | | Investment accounts | | | 246,651 | | | | 11 | | | | — | | | | — | | | | — | | | | 246,662 | | Corporate bonds | | | 2,174 | | | | 303,321 | | | | — | | | | — | | | | — | | | | 305,495 | | Subordinated corporate bonds | | | 916 | | | | 886 | | | | — | | | | — | | | | — | | | | 1,802 | | Liabilities with Central Bank | | | 76,859 | | | | 223,396 | | | | 108 | | | | 317 | | | | — | | | | 300,680 | | Liabilities with local financial institutions | | | 29,482 | | | | 15,516 | | | | 26,444 | | | | — | | | | — | | | | 71,442 | | Other liabilities | | | 60,729 | | | | — | | | | — | | | | — | | | | | | | | 60,729 | | | | | | | | | | | | | | | | | | | | | Total Interest-Bearing Liabilities | | | 9,884,007 | | | | 545,373 | | | | 26,559 | | | | 317 | | | | — | | | | 10,456,256 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Asset(Liability) Gap | | | 803,602 | | | | 3,745,508 | | | | 392,072 | | | | 417,351 | | | | 234,710 | | | | 5,593,243 | | Cumulative Asset/Liability Gap | | | 803,602 | | | | 4,549,110 | | | | 4,941,182 | | | | 5,358,533 | | | | 5,593,243 | | | | | | Cumulative sensitivity gap as a percentage of total interest-earning assets | | | 5.01 | % | | | 28.34 | % | | | 30.79 | % | | | 33.39 | % | | | 34.85 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Remaining Maturity at December 31, 2008 | | | | | | | | | | | | | | | | | | | | Without due | | | Total | | | | 0-1 Year | | | 1-5 Years | | | 5-10 Years | | | Over 10 years | | | date | | | (2) | | Interest-earning assets in foreign currency: | | | | | | | | | | | | | | | | | | | | | | | | | Interest-bearing deposits in Central Bank | | | 666,734 | | | | — | | | | — | | | | — | | | | — | | | | 666,734 | | Interest-bearing deposits in other banks | | | 128,002 | | | | — | | | | — | | | | — | | | | — | | | | 128,002 | | Government securities | | | 84,345 | | | | 255,927 | | | | 85,650 | | | | 12,377 | | | | — | | | | 438,299 | | Goods in financial leasing | | | 10,244 | | | | 48,118 | | | | 10,826 | | | | — | | | | — | | | | 69,188 | | Loans to the private and financial sector (1) | | | 1,823,254 | | | | 272,964 | | | | 32,263 | | | | — | | | | — | | | | 2,128,481 | | Other assets | | | 73,080 | | | | 124,104 | | | | 1,464 | | | | — | | | | — | | | | 198,648 | | | | | | | | | | | | | | | | | | | | | Total Interest-Earning Assets | | | 2,785,659 | | | | 701,113 | | | | 130,203 | | | | 12,377 | | | | — | | | | 3,629,352 | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | Remaining Maturity at December 31, 2008 | | | | | | | | | | | | | | | | | | | | Without due | | | Total | | | | 0-1 Year | | | 1-5 Years | | | 5-10 Years | | | Over 10 years | | | date | | | (2) | | Interest-bearing liabilities in foreign currency: | | | | | | | | | | | | | | | | | | | | | | | | | Cheking | | | 50,079 | | | | — | | | | — | | | | | | | | | | | | 50,079 | | Saving accounts | | | 416,608 | | | | — | | | | — | | | | — | | | | — | | | | 416,608 | | Time deposits | | | 1,955,062 | | | | 185 | | | | — | | | | — | | | | — | | | | 1,955,247 | | Investment accounts | | | 8,794 | | | | 7,067 | | | | — | | | | — | | | | — | | | | 15,861 | | Corporate bonds | | | 14,344 | | | | — | | | | 405,034 | | | | — | | | | — | | | | 419,378 | | Subordinated corporate bonds | | | 1,824 | | | | — | | | | — | | | | 518,055 | | | | — | | | | 519,879 | | Liabilities with Central Bank | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Liabilities with local financial | | | 2,364 | | | | — | | | | — | | | | — | | | | — | | | | 2,364 | | Liabilities with banks and international organizations | | | 59,737 | | | | 172,685 | | | | — | | | | — | | | | — | | | | 232,422 | | Other liabilities | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | Total Interest-Bearing Liabilities | | | 2,508,812 | | | | 179,937 | | | | 405,034 | | | | 518,055 | | | | — | | | | 3,611,838 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Asset (Liability) Gap | | | 276,847 | | | | 521,176 | | | | (274,831 | ) | | | (505,678 | ) | | | — | | | | 17,514 | | Cumulative Asset/Liability Gap | | | 276,847 | | | | 798,023 | | | | 523,192 | | | | 17,514 | | | | 17,514 | | | | | | Cumulative sensitivity gap as a percentage of total interest-earning assets | | | 7.63 | % | | | 21.99 | % | | | 14.42 | % | | | 0.48 | % | | | 0.48 | % | | | | |
| | | (1) | | Loan amounts are stated before deducting the allowance for loan losses. Non-accrual loans are included with loans as interest-earning asset. | | (2) | | Includes instruments issued by the Central Bank. |
Item 4A. Unresolved Staff Comments Not applicable. Item 5. Operating and Financial Review and Prospects This section contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth in “Cautionary statement concerning forward-looking statements,” “Risk factors,” and the matters set forth in this annual report in general. The following discussion is based on, and should be read in conjunction with, our consolidated financial statements and related notes contained elsewhere in this annual report, as well as “Selected Financial data” and the other financial information appearing elsewhere in this annual report in general. A. Operating results FINANCIAL PRESENTATION Our audited consolidated financial statements as of December 31, 2008, 2007 2006 and 2005,2006, included elsewhere in this annual report, have been prepared in accordance with Central Bank Rules. Central Bank Rules differ in certain significant respects from U.S. GAAP. See note 35 to our audited financial statements for the three years ended December 31, 2007.2008, 2007 and 2006. As a result of the economic crisis, Argentina experienced very high rates of inflation in 2002. During that year, inflation, as measured by the wholesale price index, reached approximately 118%. As a result, Central Bank Rules reinstated inflation accounting at the beginning of 2002 until February 28, 2003. During 2003 and 2004, inflation levels returned to much lower levels and inflation accounting was discontinued. Therefore, all the financial statement data in this annual report for periods prior to February 28, 2003 have been restated in constant pesos as of such date by applying the adjustment rate derived from the internal wholesale price index published by INDEC. We do not report our results by accounting segments. 55
COMPARABILITY In December 2004, we acquired Nuevo Banco Suquía, which significantly enhanced the size and scope of our business. As a result of our acquisition of Nuevo Banco Suquía, our results of operations for the year ended December 31, 2005 differ significantly from our results of operations for the year ended December 31, 2004. In addition, we acquired Banco del Tucumán in May 2006 and Nuevo Banco Bisel in August 2006, which we call the “2006 acquisitions”, which enhanced the size and scope of our business. As a result of our acquisitions of Banco del Tucumán and Nuevo Banco Bisel, our results of operations for the year ended December 2005 differ from our results of operations for the year ended December 31, 2006. Additionally, our results of operations for the year ended December 31, 2006 are not entirely comparable to our results of operations for the year ended December 31, 2007; our results of operations for the year ended December 31, 2007 reflect the results of Banco del Tucumán and Nuevo Banco Bisel for the entire year. Given the instability, and regulatory and economic changes that Argentina has experienced since the beginning of the economic crisis in 2001 as well as our acquisitions, the financial information set forth in this annual report may not be fully indicative of our anticipated results of operations or business prospects after the dates indicated. OVERVIEW
We are one of the leading banks in Argentina. With the most extensive private-sector branch network in the country, we provide standard banking products and services to a nationwide customer base. We distinguish ourselves from our competitors by our strong financial position and by our focus on low- and middle-income individuals and small and medium-sized businesses, generally located outside of the City of Buenos Aires, which we believe offer significant opportunity for continued growth in our banking business. According to the Central Bank, as of December 31, 2007, we were ranked second in terms of assets and first in terms of equity among private-sector banks.
Our consolidated net income for the year ended December 31, 2007 was Ps.495.2 million (US$157.7 million), representing a return on average equity of 20.2% and a return on average assets of 2.8%.
In general, given the relatively low level of banking intermediation in Argentina currently, there are limited products and services being offered. We are focusing on the overall growth of our loan portfolio by expanding our customer base and encouraging them to make use of our lending products. We have a holistic approach to our banking business; we do not manage the bank by segments or divisions or by customer categories, by products and services, by regions, or by any other segmentation for the purpose of allocating resources and assessing profitability. We have savings and checking accounts, credit and debit cards, consumer finance loans and other credit-related products and transactional services available to our individual customers and small and medium-sized businesses through our branch network. We also offerPlan Sueldopayroll services, lending, corporate credit cards, mortgage finance, transaction processing, and foreign exchange. In addition, ourPlan Sueldopayroll processing services for private companies and four provincial governments give us a large and stable customer deposit base.
We emerged from the Argentine economic crisis of 2001 and 2002 as a stronger and larger bank. In January 2002, in the midst of the crisis, Banco Macro, our predecessor acquired a controlling interest in Banco Bansud. This acquisition tripled the size of our bank as measured by assets, and expanded our geographic presence from the northern provinces of Argentina to the southern provinces. In December 2004, during the recovery period of the Argentine economy, we completed the acquisition of Nuevo Banco Suquía, the leading private bank in the central provinces of Argentina, thereby becoming the private sector bank with the country’s most extensive branch network. The Nuevo Banco Suquía transaction increased our assets by 41% and our number of branches by 67%. Beginning at the end of 2002 and during the recovery years, we also experienced organic growth as our business in the provinces of Argentina suffered lower levels of volatility than our principal competitors in the City of Buenos Aires. In November 2005, a portion of the assets, including seven branches and the headquarters, and liabilities of Banco Empresario de Tucumán were transferred to us. In May 2006, we completed the acquisition of Banco del Tucumán. As a result of these transactions in Tucumán, we increased our branch network by 34 branches, or 14%. More recently, in August 2006, we completed the acquisition of Nuevo Banco Bisel, which added 158 branches, or 56%, to our branch network.
IMPACT OF THE 2001-2002 ECONOMIC CRISIS ON US
The economic crisis and the Argentine government’s response to the economic crisis, had dramatic effects on the business and financial results of Argentine banks, including us, as substantially all of our operations and customers are located in Argentina. As described below, the run on bank deposits, government measures to counteract the effects of the crisis (such as thecorralito, corralónand asymmetric pesification), the devaluation of the peso, the high inflation environment that accompanied the crisis, the virtual suspension of banking activity and government compensation measures to offset the effects of asymmetric pesification, all had significant negative effects on our business and results of operations. However, we believe we have managed to address these challenges successfully. Moreover, as the Argentine economy continues to recover and the business environment stabilizes, we have emerged from the crisis as a larger and we believe stronger bank.
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The run on bank deposits and restrictions on withdrawalsMACROECONOMIC CONTEXT
BeginningThe continuous growth of the Argentine economy remained constant in 2006 and 2007 with a GDP increase of 8.5% and 8.7% respectively. Thus, the five years period 2003-2007 was completed with an average annual growth of 8.8%. The GDP growth in these years was based on the improvement in tax solvency, the favorable exchange rate and the prudent monetary policy, all tied to a favorable worldwide economic context.
The Primary Taxable Income (before interest payment) of the Argentine Government was 3.5% of GDP in 2006. After interest payment, the Government ended up with a Financial Surplus of 1.8% of GDP, which transmitted certainty about the maturity dates for the payment of principal and interest of the public debt. Such perception made possible an improvement in the prices of the Argentine securities and a considerable fall of 273 base points in the country risk. This conduct has been partially and transiently weakened during 2007 as a consequence of a 43.0% rise in the primary expenditure. In the same period, resources of the National Government — both current and capital — increased 38% in the year. In this way, Argentina achieved an accounting primary surplus (before interest payments) of 3.2% of GDP. It should be highlighted that such measure included assets transferred from the Pension and Retirement Funds Administrators to the Public Pension System for $ 7.911 billion or 1.0% of GDP. The maintenance of a high exchange rate continued to be a major aspect of the economic policy. Throughout 2006, the policy on nominal exchange rate, along with the appreciation of the Euro and the “Real” (Brazil’s currency) boosted a 2.5% increase in the multilateral exchange rate. In 2007 there was a similar appreciation of the Real, the Chilean Peso, the Euro and China’s Yuan, which as a whole meant a 9.0% devaluation of the Argentine peso. Argentine exports to such destinations represented 65% of exports for the year 2007. The good performance of the external sector, benefited by the mentioned improvement in the exchange terms, acquires special significance because it took place along with an increase in domestic consumption. In 2007, Argentina was able to sustain a sound commercial surplus despite the increase in domestic demand, as reflected in a considerable increase in imports. The rise in imports reflected the expansion of domestic demand driven by the increasing public expenditure, the rise in salaries and in private financing. Thus, the commercial surplus reached US$ 11.2 billion, 9.2% lower than the US$ 12.3 billion of the year 2006. In 2007, the measurement of the domestic inflation rate was subject to statistical discrepancies due to methodological changes. Consumer inflation increased 8.5 % according to what the INDEC reported. Meanwhile, wholesale prices — also influenced by the rise in the price of raw materials - rose 14.6 %. The boost in activity and employment indicators brought consequently a drop in unemployment and poverty. During 2006, 350,000 new jobs were created, with a nominal increase in salaries of 18% for the public sector and of 14% for the private sector. The unemployment rate ended up in the year 2006 in 8.7%, and 7.5% in 2007 being the lowest rate recorded over the previous 14 years. Likewise, the poverty indicator fell around 6 percentage points. It was reduced from 26.9 % in 2006 to 20.6 % in 2007. Despite an unfavorable change in the external context that started in the last quarter of 2007, the perception of a consistent economic policy kept a constant pace of economy that resulted in a permanent improvement of the industrial activity, as well as a fall in unemployment and poverty. The changes in global financial and economic conditions continued to worsen in 2008. The developed world shifted from a dynamic context to an abrupt credit restriction in the US and European financial systems that led the way to an economic contraction. The economic activity in Argentina started to show permeability to these external changes. In addition, there was an internal confrontation of the National Government with the agriculture and livestock sector during the first half of the year, due to the introduction of escalating export duties on grain. The negative effects of this dispute were partially offset by the increase in the terms of trade during that period. The prices registered in the first quartersemester set a record in the last 25 years. As from the second half of 2001, in response to growing and widespread concern about2008 the solvencyfinancial markets of the Argentine banking system, private depositors began to withdraw funds. Asworld’s leading countries have been rocked by volatility, lack of liquidity and credit. Consequently, there was a result, we experiencedsignificant drop in stock indices on international markets and an economic deceleration on a decreaseworldwide scale. In spite of the actions taken by the developed countries, the future development of international markets remains uncertain. In Argentina, stock markets had marked decreases in the overall level of our deposits. In addition, depositors that kept their funds in the bank shifted their funds out of time deposits into demand deposit accounts in anticipation of a further deterioration in the Argentine banking system. The Argentine government’s initial response to the run on bank deposits, thecorralito,limited the amount of cash that could be withdrawn from banks within specified time periods. However, this measure amplified public concern about the solvency of the banking system and contributed to a further decrease in deposit levels, as many depositors withdrew funds up to the permitted limit.
Under thecorralón,another government measure to address the run on bank deposits, the maturity for time deposits denominated in pesos and substantially all deposits denominated in U.S. dollars was mandatorily extended. In connection with thecorralón,we were required to issueCEDROsto affected customers, representing the interest in the underlying, rescheduled deposits. Below is a table that shows the impact of the crisis and recovery on our and the financial system’s deposit base. For more information on our response, see “—Our Response to the Crisis—Loyal client base” and “—Acquisitions.” The information detailed below is based on unconsolidated information reported monthly to the Central Bank and has not been adjusted for intercompany eliminations or adjusted for inflation.
| | | Phase 1. Bank run: | | December 31, 2000 to November 30, 2001 | | | | Phase 2.Corralito:
| | November 30, 2001 to December 31, 2001 | | | | Phase 3.Corralón:
| | January 31, 2002 to April 30, 2002 | | | | Phase 4. Stabilization: | | April 30, 2002 to April 30, 2003 | | | | Phase 5. Recovery: | | April 30, 2003 to December 31, 2006 | | | | Phase 6. Growth: | | December 31, 2006 to December 31, 2007 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Phase 1: | | | | | | | | | | | | | | | | | | | Bank | | | Phase 2: | | | Phase 3: | | | Phase 4: | | | Phase 5: | | | Phase 6: | | | | Run(1) | | | Corralito | | | Corralón(2) | | | Stabilization | | | Recovery(3) | | | Growth(4) | | Banco Macro | | | (171 | ) | | | 8 | | | | (21 | ) | | | 295 | | | | | | | | | | Banco Bansud | | | (354 | ) | | | (29 | ) | | | (183 | ) | | | 337 | | | | | | | | | | Banco Macro and Banco Bansud | | | (525 | ) | | | (21 | ) | | | (204 | ) | | | 632 | | | | 7,898 | | | | 3,556 | | Financial system | | | (18,205 | ) | | | (1,918 | ) | | | (10,010 | ) | | | 7,646 | | | | 91,682 | | | | 34,653 | |
| | | Source: Central Bank | | (1) | | We excluded the month of January 2002 because of the impact on nominal changes caused by the pesification of U.S. dollar-denominated deposits. | | (2) | | Banco Macro acquired Banco Bansud in January 2002; however, the information in the table above has not been consolidated for the corralón phase as we were just beginning to manage Banco Bansud during that period. | | (3) | | Including acquisitions of Nuevo Banco Suquía, Banco del Tucumán and Nuevo Banco Bisel. | | (4) | | Including Banco del Tucumán and Nuevo Banco Bisel. |
Asymmetric pesification and the Argentine government’s compensation measures
The asymmetric conversion of loans and deposits into pesos, the increase in banks’ non-performing loans and the decline in value of bank holdingsprices of government debt left much ofand private securities, as well as increases in interest rates, the financial sector virtually insolvent. To help prevent widespread insolvencies, the Argentine government pledged to provide offsetting compensation to banks. The general principles of the compensation scheme were to: (1) maintain the peso value of each bank’s net worth,country risk and (2) leave the banks hedged in terms of currency. To that end, the Argentine government issued two types of bonds to banks:
| • | | a bond denominated in pesos (BODEN 2007) to compensate for losses linked to asymmetric pesification;foreign exchange rates, and | | | • | | a bond denominated in dollars (BODEN 2012) that the Central Bank offered to affected banks at a discounted price of Ps.1.40 plus CER indexation to US$1.00, to compensate for the consequences of creating a mismatch between a bank’s dollar and peso position as a result of pesification. Banks could purchase the BODEN 2012 with either BODEN 2007 or by borrowing the applicable amount from the Central Bank. |
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Our cumulative compensation received from the Argentine government was as follows:
| | | | | | | | | | | | | | | | | | | | | | | Total | | | | BODEN 2007 | | | BODEN 2012 | | | Compensation | | | | (in millions of pesos) | | Banco Macro | | | 49.7 | | | | — | | | | 49.7 | | Banco Bansud | | | — | | | | 392 | | | | 392 | | Nuevo Banco Suquía | | | 209.3 | | | | 142.6 | | | | 351.9 | | | | | | | | | | | | Total | | | 259.0 | | | | 534.6 | | | | 793.6 | | | | | | | | | | | |
Amparos
Thecorralón, corralitoand pesification led to numerousamparosby depositors seeking court orders to have their deposits returned (in U.S. dollars in the case of U.S. dollar-denominated deposits). Additionally, Central Bank Rules permit the losses related toamparosto be accounted for as an intangible asset and amortized over five years. We took affirmative steps to reduce our exposure toamparosby agreeing to exchange depositors’CEDROs with time deposits plus BODEN 2012 and our guarantee on the BODEN 2012 in the event of a sovereign default. On December 31, 2007, we had approximately Ps.101 million ofamparosrecorded as Intangible Assets. The table below demonstrates our success in negotiating with our depositors, which has allowed us to maintain a low ratio ofamparosas a percentage of equity, compared to the financial system as a whole:
| | | | | | | | | | | | | | | Amparos/Equity | | | | As of December 31, | | | | 2005 | | | 2006 | | | 2007 | | Banco Macro | | | 2.9 | % | | | 3.2 | % | | | 3.7 | % | Financial system | | | 19.0 | % | | | 9.6 | % | | | 4.7 | % |
Source: Central Bank
Disappearance of market for private loans and increase in non-performing loans
Amid the inflationary fears, peso devaluation, GDP contraction, consumption collapse and rising unemployment accompanying the economic crisis, the level of private loans in the financial system dropped dramatically, loan origination virtually ceased for most of 2002 and the incidence of non-performing loans increased. The following table shows the evolution of net loan origination of Banco Macro, Banco Bansud and, as of 2002, Banco Macro, defined as the year over year variation in the twelve-month average of private sector loans:
| | | | | | | | | | | | | | | | | | | | | | | | | | | 2002(1) | | | 2003(1) | | | 2004 | | | 2005 | | | 2006(2) | | | 2007(3) | | Net loan origination (in millions of pesos) | | | (867.9 | ) | | | (58.6 | ) | | | 584.0 | | | | 565.8 | | | | 1,352.8 | | | | 2,955 | |
| | | (1) | | In constant pesos as of February 28, 2003. | | (2) | | Without Nuevo Banco Bisel and Banco del Tucumán. | | (3) | | Including Nuevo Banco Bisel and Banco del Tucumán. |
In addition, holders ofCEDROs issued by us in connection with thecorralóncould return theCEDRO s to us to satisfy their loan payment obligations, which further contributed to lowering the level of private loans outstanding during the crisis. In our case, the impact was magnified by the write off of bad loans and by collections of outstanding loan amounts from borrowers.
The following table shows the improving quality of our loan and lending portfolio and the improving of the financial system lending portfolio. The definition of non-performing lending in the table comes from the Central Bank and is not comparable to the non-performing loans definition in “Selected Statistical Information.”
| | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2004 | | | 2005 | | | 2006 | | | 2007 | | Banco Macro | | | | | | | | | | | | | | | | | Allowances/total loans | | | 7.3 | % | | | 6.7 | % | | | 3.1 | % | | | 2.2 | % | Non-performing loans ratio | | | 6.5 | | | | 5.3 | | | | 2.0 | | | | 1.6 | | | | | | | | | | | | | | | | | | | Allowances/lending(1) | | | 8.8 | % | | | 6.5 | % | | | 3.1 | % | | | 2.2 | % | Non-performing lending ratio(2) | | | 8.0 | | | | 5.0 | (3) | | | 2.0 | | | | 1.5 | | | | | | | | | | | | | | | | | | | Financial System | | | | | | | | | | | | | | | | | Allowances/lending(1) | | | 9.8 | % | | | 5.7 | % | | | 3.5 | % | | | 3.0 | % | Non-performing lending ratio(2) | | | 10.3 | | | | 5.0 | | | | 3.3 | | | | 2.6 | |
| | | Source: Central Bank
| | (1) | | Includes loans, other receivables from financial transactions, financial leases, memorandum accounts—other guarantees provided and unused portion of loans granted (included in Debtors Rating Standards).
| | (2) | | Non-performing lending includes all lending to borrowers classified as “3—with problems/medium risk”, “4—with high risk of insolvency/high risk”, “5—irrecoverable” and “6—irrecoverable by technical decision” under the Central Bank loan classification system.
| | (3) | | This ratio calculated without the loan portfolio of Banco Empresario de Tucumán (64% of non-performing lending) is 3.2%.
|
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Devaluation and inflation
The economic crisis was accompanied by a sharp decrease in the value of the peso and severe inflation in 2002. The steep devaluation of the peso triggered private sector and government defaults on foreign currency-denominated indebtedness and also resulted in the pesification of foreign-currency denominated indebtedness governed by Argentine law at an exchange rate of one peso for each U.S. dollar. While the devaluation did not have a significant effect on our net income due to our low level of U.S. dollar-denominated liabilities, the introduction of asymmetric pesification as a measure to counter the effects of the devaluation did affect us. See “—Asymmetric pesification and the Argentine government’s compensation measures” above. Under Central Bank Rules, our results of operations for the two-month period ended February 28, 2003 were adjustedabovementioned economic deceleration began to account for the effects of inflation in Argentina during those periods. For the periods subsequent to February 28, 2003, the inflation adjustments were no longer applied to the financial statements under Central Bank Rules, as inflation returned to normalized levels since 2003, as illustrated in the table below.
| | | | | | | | | | | | | | | | | | | | | | | December 31, | | | | 2003 | | | 2004 | | | 2005 | | | 2006 | | | 2007 | | Wholesale price inflation | | | 1.95 | % | | | 7.87 | % | | | 10.67 | % | | | 7.14 | % | | | 14.56 | % | Inflation rate adjustment to our financial statements | | | 0.86 | | | | — | | | | — | | | | — | | | | — | | CER(1) | | | 3.65 | | | | 5.48 | | | | 11.75 | | | | 10.08 | | | | 8.49 | |
| | | Source: INDEC
| | (1) | | CER beginning on February 2, 2002.
|
As a result of pesification, certain of our assets and liabilities are adjusted primarily for CER. In particular,CEDROsand pesified government debt are adjusted for CER. In addition, a portion of our pesified private sector loan portfolio is adjusted for CER.show.
OUR RESPONSE TO THE CRISISCONTEXT The effect of the crisis on the Argentine banking system presented challenges that we promptly took measures to address and created attractive opportunities that we acted upon. Despite thetheir magnitude, of the economic crisis and its impact on the banking sector, we managed to deal successfully with the turmoil and remained profitable. At the beginning of the crisis, we had high liquidity, which we maintained throughout the crisis. That high liquidity, combined with our loyal base of retail deposits, as well as deposits from provincial governments for whom we serve as financial agent, all a result of our response to the crisis and strategic vision for our business, helped us restore our deposit base faster than the financial system as a whole. We also were able to resume lending to the private sector before the rest of the financial system.system and to continue gaining market share in loans and deposits after the market stabilization. 57
We believe that our strengths at the time that a crisis starts and our response measures described below wereare important elements of our ability to withstand the effects of thea crisis and helpedhelp to position us to benefit significantly from athe recovery of the banking system. Furthermore, our comparatively strong financial condition during the economic crisis made it possible for us to become a leading nationwide bank by acquiring Banco Bansud, Nuevo Banco Suquía, Banco Empresario de Tucumán, Banco del Tucumán and Nuevo Banco Bisel. Commercial and balance sheet strategies Throughout the economic crisis, we maintainedWe maintain a strong position with respect to excess capital, to the quality of our loan portfolio and the level of our provisions.provisions for loan losses. To counteract the effects of thethat a run on deposits may have, one of our main priorities wasis to give depositors confidence that we would be able to absorb losses and fulfilfulfill our obligations to them.
Our practice of maintaining high liquidity levels throughout the business cycles helpedhelps us to withstand the economic crisis by serving two key purposes. First, we hadhave funds available in the face of adverse systemic events. Second, we gavegive our depositors confidence that they would be able to have access to their deposits at any time, even during the depth of a crisis. Our emphasis on maintaining high liquidity helped us to emerge from the 2001 crisis without any assistance from the Central Bank. We also minimizedminimize excess cash deposited in the Central Bank, without harming our overall liquidity position. In this way, we maximizedmaximize the return on our liquidity stock by keeping funds in more profitable assets, such as Central Bank-issued LEBACs/NOBACs and overdrafts to highly rated large corporations. In light of the potential exposure toamparos,we proactively offered several alternatives to our depositors, exchangingCEDROsfor a combination of time deposits and government bonds. This response proved to be very successful; the stock ofCEDROson our balance sheet, which corresponded to approximately 55% of our total deposits in March 2002 (as compared to 24% for the financial system), fell to 8% just one year later, well below the 19% average for the financial system at that time.
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Loyal client base We also benefitedbenefice from a loyal client base, as evidenced in part by the quick recovery of our deposit base after the 2001 crisis, due to our long-standing relationships, primarily through ourPlan Sueldopayroll services. As a result, our source of funding regained volume faster as compared to the banking sector as a whole, as shown in “—Impact of the 2001-2002 economic crisis on us—The run on bank deposits and restrictions on withdrawals.”whole. Acquisitions The 2001 crisis had a severe adverse impact upon the market value of Argentine banks. Our high level of liquidity and solvency throughout the crisis provided us with the resources to capitalize upon attractive acquisition opportunities and to expand our reach within Argentina. See “Item 4. Information on the Company—Our history.” The following table sets forth our assets, private sector loans, private sector deposits and branches before and after the acquisitions of Banco Bansud, Nuevo Banco Suquía, Banco Empresario de Tucumán and Banco del Tucumán as well as Nuevo Banco Bisel on a stand-alone basis: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, | | December 31, | | December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | September 30, 2001 | | September 30, 2004 | | 2005 | | June 30, 2006 | | 2006 | | 2007 | | | December 31, | | December 31, | | December 31, | | | | | | | | | | | | | | | | Nuevo | | | | | | | September 30, 2001 | | September 30, 2004 | | 2005 | | June 30, 2006 | | 2006 | | 2007 | | | | | | | | | | | | | | | | Banco | | | | | | | Nuevo | | | | | | | | | | | | | | | | | | | | Bisel | | | | | | | Banco | | | | | | | | | | | | | | Nuevo | | Banco | | | | (stand- | | Banco | | | | | | | | | Nuevo | | | | Bisel | | | | | | | | Banco | | Banco | | Banco | | Banco | | Macro | | Banco | | alone) | | Macro | | | | | Banco | | Banco | | Banco | | Banco | | Banco | | Banco | | (stand- | | Banco | | Banco | | | | Macro(1)(2) | | Bansud(1)(2) | | Macro(2) | | Suquía(2) | | (3) | | Macro(4) | | (2) | | (5) | | Banco Macro | | | Macro (1) (2) | | Bansud (1) (2) | | Macro (2) | | Suquía (2) | | Macro (3) | | Macro (4) | | alone) (2) | | Macro (5) | | Macro | | | | (in million of Pesos) | | | (in million of Pesos) | | Assets | | 1,424.0 | | 3,357.1 | | 5,312.6 | | 2,162.8 | | 9,487.8 | | 11,496 | | 1,934 | | 14,505.0 | | 19,781.2 | | | 1,424.0 | | 3,357.1 | | 5,312.6 | | 2,162.8 | | 9,487.8 | | 11,496 | | 1,934 | | 14,505.0 | | 19,781.2 | | Private sector loans (Gross) | | 590.8 | | 899.8 | | 1,187.1 | | 711.0 | | 2,948.8 | | 4,141 | | 665 | | 5,524.5 | | 9,335.7 | | | 590.8 | | 899.8 | | 1,187.1 | | 711.0 | | 2,948.8 | | 4,141 | | 665 | | 5,524.5 | | 9,335.7 | | Private sector deposits | | 790.6 | | 2,301.5 | | 2,236.0 | | 1,443.5 | | 5,737.4 | | 6,421 | | 1,326 | | 8,770.3 | | 11,803.7 | | | 790.6 | | 2,301.5 | | 2,236.0 | | 1,443.5 | | 5,737.4 | | 6,421 | | 1,326 | | 8,770.3 | | 11,803.7 | | Branches | | 73 | | 72 | | 154 | | 102 | | 254 | | 279 | | 158 | | 433 | | 427 | | | 73 | | 72 | | 154 | | 102 | | 254 | | 279 | | 158 | | 433 | | 427 | |
Source: Central Bank | | | (1) | | In constant pesos as of February 28, 2003. | | (2) | | Last quarter prior to acquisition. | | (3) | | Including NuevoBanco Suquía and Banco Empresario de Tucumánn. | | (4) | | Including Banco Empresario de Tucumán and Banco del Tucumánn. | | (5) | | Including Banco Empresario de Tucumán, Banco del Tucumán S.A. and Nuevo Banco BiselBisel. |
Banco Bansud.In January 2002, we acquired a controlling interest in former Banco Bansud from Banco Nacional de Mexico S.A., or Banamex. As part of the transaction, Banamex made an irrevocable capital contribution to Banco Bansud of US$305 million (of which US$60 million was a cash capital contribution). In addition, before the sale, Banamex purchased for cash certain assets from Banco Bansud for US$151 million. We agreed to pay Banamex US$65 million, to be adjusted in accordance with the amount of collections on certain loans. In 2003, the total amount of the liability in respect of the purchase price was determined to be zero as a result of this adjustment mechanism and no cash payment was made to Banamex. In 2003, Banco Macro and Banco Bansud were merged. Financial statements prepared according to Central Bank Rules require the historical financial statements to be restated to treat the merger as being effective from the time that Banco Macro acquired a controlling interest in Banco Bansud.
Scotiabank Quilmes S.A.We also purchased the assets and liabilities, including 36 branches, of Scotiabank Quilmes S.A. in August 2002.
Nuevo Banco Suquía. Our strong liquidity and solvency also enabled us to acquire Nuevo Banco Suquía in a public auction in December 2004 at a fixed price of Ps.15 million plus a commitment to make a capital contribution of Ps.289 million. This acquisition further enhanced our financial intermediation volume, completed our geographic coverage and complemented our existing base of clients. Upon the acquisition of Nuevo Banco Suquía, we became Argentina’s fourth largest private bank in terms of net worth, the fourth in deposits, and the fifth in private sector loans. In addition, we now have the largest and most extensive private bank network in Argentina. As we acquired Nuevo Banco Suquía in December 2004, its results of operations are only reflected in our financial statements for ten days of 2004 and for all subsequent periods. On March 14, 2007, Banco Macro, as surviving company, and Nuevo Banco Suquía, as absorbed company, entered into a Preliminary Agreement of Merger (“Compromiso Previo de Fusión”), by virtue of which Banco Macro shall absorb Nuevo Banco Suquía retroactively from January 1, 2007, based on the balance sheets of each company prepared as of December 31, 2006 and the consolidated balance sheet of merger prepared as of the same date. The merging companies have agreed on an exchange relationship equal to 0.710726 shares of Banco Macro per share of Nuevo Banco Suquía. Therefore, the minority shareholders of Nuevo Banco Suquia received 0.710726 shares in Banco Macro for each share held thereby in the capital stock of Nuevo Banco Suquía. As a consequence, Banco Macro increased its capital stock to Ps. 683,978,973.
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Banco Empresario de Tucumán. In November 2005, the Central Bank, in the context of the restructuring of Banco Empresario de Tucumán, transferred to us a portion of its assets amounting to approximately Ps.102 million (including its seven branches and the headquarters) and liabilities of approximately Ps.158 million, which were offset by a capital contribution of Ps.56 million made by SEDESA.
Banco del Tucumán.In May 2006, we completed the acquisition of Banco del Tucumán. With this acquisition, we added 25 branches and the headquarters to our branch network in Tucumán and we are the financial agent for the provincial government of Tucumán. We now own 53.0% of the branches in the province. From September 2006 through December 2006, Banco Macro acquired Class “C” shares in Banco del Tucumán representing 4.84% of its capital stock. Banco Macro’s total equity interest in Banco del Tucumán as of December 31, 2006 amounted to 79.84%. On November 28, 2006, the general ordinary and extraordinary shareholders’ meeting of Banco del Tucumán approved a capital stock increase of Ps. 21,980,000 establishing an additional paid-in capital of 26,171,000. In January 2007, Banco Macro subscribed the total increase. As a result, Banco Macro’s total equity interest increased to 89.92%.
Nuevo Banco Bisel.In August 2006, we acquired 100% of the voting rights and 92.73% of the capital stock of Nuevo Banco Bisel for Ps.19.5 million pursuant to an auction conducted by Banco de la Nación Argentina. In addition, the Bank, as purchaser of Nuevo Banco Bisel, and SEDESA (“Seguro de Depósitos S.A.”) entered into a put and call options, agreement regarding the preferred shares of Nuevo Banco Bisel. According to the call option, for a fifteen-year term as from taking possession of the Bank (August 11, 2006), the buyer is entitled to acquire from SEDESA preferred shares in Nuevo Banco Bisel. The price of those shares is set at 66,240,000 plus interest at an annual 4% rate as from the takeover date. Such price is payable upon the expiration of the option term (August 11, 2021).
Through the put option, SEDESA will be entitled to sell to the buyer the preferred shares that it owns in Nuevo Banco Bisel. Such put option may only be exercised by SEDESA after the term of fifteen years as from the date of issuance of the preferred shares (August 26, 2005). The price of those shares is set at 66,240,000, plus interest at an annual 4% rate as from August 11, 2006.
According to the call option, on May 28, 2007, the Bank purchased the abovementioned preferred shares.
Nuevo Banco Bisel has a strong presence in the central region of Argentina, especially in the province of Santa Fe, and with the acquisition we have added 158 branches to our branch network.
Cost management SinceUpon the crisis,current international situation, we have focused on controlling our costs and improving our efficiency. In addition, we have focused on carefully integrating the operations of our acquisitions. To this end, we have centralized, among other things, the treasury operations of all our acquisitions. We have also had a period of organic growth with a small reduction in the number of our employees. See “Item 6. Directors, Senior Management and employees—Employees.” We also improved our ratio of service net income to administrative expenses from 53.0%41.2% in 2002 to 69.2%59.4% as of December 31, 2007.2008. Finally, we implemented centralized purchasing practices to take advantage of our economies of scale.
Credit quality The following table shows the quality of our loan and lending portfolio and of the financial system lending portfolio after the 2001 crisis. In 2008, this improvement was interrupted by new signals of volatility. Additionally, the systemic expansion in loans to the private sector between 20% and 45% of the last five years may start to show some deterioration, as commonly occurs with new portfolios after some years of maturity. The definition of non-performing lending in the table comes from the Central Bank and is not comparable to the non-performing loans definition in “Selected Statistical Information.” | | | | | | | | | | | | | | | Year Ended December 31, | | | | 2006 | | | 2007 | | | 2008 | | Banco Macro | | | | | | | | | | | | | Allowances/total loans | | | 3.1 | % | | | 2.2 | % | | | 3.7 | % | Non-performing loans ratio | | | 2.0 | | | | 1.6 | | | | 2.6 | | | | | | | | | | | | | | | Allowances/lending (1) | | | 3.1 | % | | | 2.2 | % | | | 3.6 | % | Non-performing lending ratio (2) | | | 2.0 | | | | 1.5 | | | | 2.6 | | | | | | | | | | | | | | | Financial System | | | | | | | | | | | | | Allowances/lending (1) | | | 3.5 | % | | | 3.0 | % | | | 3.0 | % | Non-performing lending ratio (2) | | | 3.3 | | | | 2.6 | | | | 2.6 | |
Source: Central Bank | | | (1) | | Includes loans, other receivables from financial transactions, financial leases, memorandum accounts—other guarantees provided and unused portion of loans granted (included in Debtors Rating Standards). | | (2) | | Non-performing lending includes all lending to borrowers classified as “3—with problems/medium risk”, “4—with high risk of insolvency/high risk”, “5—irrecoverable” and “6—irrecoverable by technical decision” under the Central Bank loan classification system. |
Implementation of improved credit policies After the 2001 crisis, when we resumed lending in 2002, we restricted our lending activities to only low risk credit products, such as loans to individuals withPlan Sueldoaccounts and overdrafts to highly rated companies. Prior to expanding the scope of our lending activities, we modified our credit policies to take into account the new economic reality. For example, we established new factors to determine whether a potential debtor wasis an acceptable credit risk because old policies, such as credit history, wereare no longer useful due to the high levels of default during the recurrent crisis. We began focusing more closely on potential lenders’ ability to pay based on the quality of their business, their willingness to meet their obligations, and their access to alternative sources of funding. In addition, we established a policy of seeking personal guarantees from owners for loans to most companies. Finally, we reduced the lending limit of our branches and established a senior committee to approve all loans in excess of Ps.1Ps.5 million. Restoring lending These policies are still active and have helped the Bank to respond to the private sectorlower global activity of 2008.
Implementation of shares repurchase program We believe thatIn January 2008, we were amongimplemented a Share Buy Back Program. This decision has been adopted due to the first banks to make new loansmaterial impact on the price of domestic shares (including the quotation of the shares of the Bank, the current international macroeconomic context and the fluctuations in the aftermathcapital market in general) following the reduction of prices in international markets triggered by the crisis facing the sub prime mortgage loans market in the United States of America.
Likewise, the Board of Directors of the economic crisis, beginningBank has considered the financial strength of the institution, and the price/income ratio resulting from the price of the shares of the Bank and the profits currently reported by it. Therefore, in line with the fourth quartercommitment of 2002. In 2003, we increased our private sector loans by Ps.209the Board of Directors to the Bank and its shareholders and to help reduce the fluctuations of quotations, minimizing any possible temporary imbalance between supply and demand within the market, and due to the excessive cost of capital resulting from the current quotation prices, it has decided to establish acquisition of its own shares. The Board of Directors authorized repurchases of up to Ps.210 million or 41%, as comparedup to 2002.30 million shares or their equivalent in ADSs (comprising up to 4.4% of the Bank’s equity) within a price range of Ps.6.50 and Ps.7.00 per Class B Share. The expansion of our private sector loans accelerated in 2004, increasing by 205%program, which originally was going to Ps.2,209 million when we added Ps.1,485.4 millionlast up to our loan portfolio, of which Ps.721.8 million120 calendar days, has been extended up to April 30, 2009 and changed according the current market context. It was organic growtha useful method to keep the share value, and the rest came through the acquisition of Nuevo Banco Suquía. The organic growth of our loan portfolio was the highest among the ten largest Argentine banks during 2004. During 2005, we continuedresults are visible when comparing Macro shares to exhibit high rates of organic growth as lending to the private sector (net of liquidity management and securitizations) which increased 68%its competitors’. During 2006, our private portfolio grew to Ps.5,525 million, increasing 87%, of which Ps.1,223 million were loans made by Banco de Tucumán and Nuevo Banco Bisel. During 2007, our private portfolio grew to Ps.9,336 million, increasing 69%, when we added Ps. 3,811 million. 6159
On November 21, 2008, the Buenos Aires Stock Exchange authorized the Bank to reduce its subscribed and paid-in capital stock by an amount of up to Ps. 60 million representing 60,000,000 Class B shares, which represents the amount of shares that was purchased by the Bank under the aforementioned Buy Back Program. For further information, please refer to item 5.B “Liquidity and Capital Resources”. As a result of this program, as of April 30, 2009 Banco Macro has repurchased 89,493,692 shares at an average price of Ps.4.799 per share, and for a total amount of Ps.429,468,398 million. In addition, the Bank has also bought back 114,800 ADSs at an average price of US$22 per ADS, and for a total amount of US$2.5 million. Repurchase of own Notes In January 2008, we also started to make some repurchases of our 8.50% Notes Due 2017 and 10.750% Argentine Peso-Linked Notes Due 2012. The following table shows all the repurchases that the bank has made as of May 31, 2009: | | | | | | | | | Date | | 8.50% Notes Due 2017 | | | 10.750% Argentine Peso-Linked Notes Due 2012 | | 1/23/2008 | | | 9,500,000 | | | | | | 9/17/2008 | | | 10,000,000 | | | | | | 9/26/2008 | | | 850,000 | | | | | | 10/6/2008 | | | | | | | 500,000 | | 10/9/2008 | | | | | | | 1,000,000 | | 10/10/2008 | | | 11,375,000 | | | | | | 10/15/2008 | | | 1,000,000 | | | | | | 11/21/2008 | | | 595,000 | | | | 1,520,000 | | 11/28/2008 | | | 705,000 | | | | 4,640,000 | | 12/19/2008 | | | 8,530,000 | | | | 800,000 | | 2/12/2009 | | | | | | | 200,000 | | 4/7/2009 | | | | | | | 4,500,000 | | 5/6/2009 | | | 1,050,000 | | | | 20,000,000 | | 5/12/2009 | | | | | | | 1,020,000 | | | | | | | | | Total repurchased | | | 43,605,000 | | | | 34,180,000 | | | | | | | | | Total cancelled | | | 42,555,000 | | | | 26,660,000 | | | | | | | | |
As of May 31, 2009, Banco Macro has repurchased US$ 43,605,000 of our 8.50% Notes Due 2017 and US$ 34,180,000 of our 10.750% Argentine Peso-Linked Notes Due 2012. In addition, the Bank has cancelled US$ 42,555,000 of our 8.50% Notes Due 2017 and US$ 26,660,000 of our 10.750% Argentine Peso-Linked Notes Due 2012. PRINCIPAL TRENDS AFFECTING OUR BUSINESS We believe that the following trends in the Argentine economy, the banking sector and our business have affected and will, for the foreseeable future, continue to affect our results of operations and profitability. Our continued success and ability to increase our value to our shareholders will depend, among other factors, upon the continued economic recovery in Argentina and the corresponding re-emergence of the market for long-term private sector lending. Argentine economic recovery and continued growthperformance Argentina’s overall economic performance will continue to havehad a substantial effect on our financial results. During 2005, 2006 and 2007, GDP growth was 9.2%, 8.5% and 8.7%, respectively. Although GDP growth in 2008 was 7.0%, the international markets volatility affected the private, domestic and foreign expectations. The Central Bank’s survey of independent forecasting firms indicates a consensus GDP growth estimate of 7.4%1.2% in 2008.2009. We expect demand for private sector loans to growreact in line with GDP, growth as it is closely related to investment and consumption behavior in the private sector increases.sector. Due to our focus on the low and middle-income individuals and small and medium-sized businesses, generally located outside of the City of Buenos Aires, of particular significance to us are: | • | | Export-led growth in the economy. The recovery of Argentina’s post-crisis economy has been led by export growth and import substitution. This economic model is likely to favor provinces outside of the City of Buenos Aires that are heavily focused on primary sectors of the economy, such as agriculture, cattle ranching, mining, basic industries and tourism. Our extensive branch network outside of the City of Buenos Aires (94 % of our, as compared to 80%Export-led growth in the economy. Argentina’s economy has been led by export growth and import substitution. This economic model is likely to favor provinces outside of the City of Buenos Aires that are heavily focused on primary sectors of the economy, such as agriculture, cattle ranching, mining, basic industries and tourism. Our extensive branch network outside of the City of Buenos Aires (94 % of our, as compared to 81% for Argentina’s financial system) provides us with an opportunity to take advantage of growth in these provinces to increase our credit portfolio faster than our competitors and to increase our market share. | | | • | | Gradual recovery of proportion of national income held by lower income segments. After decades of widening, the income distribution gap between rich and poor in Argentina began to narrow during 2003 and 2004, when the crisis resulted in a collapse of income of all population segments. The real income of the poorer half of Argentina’s population has fallen over the last decades, from 32% of the income of the richer half in the late 1970s to less than 20% of the income of the richer half in the aftermath of the crisis. Since that time, the gap has narrowed and now the real income of the poorer half is higher than 20% of the income of the richer half. We believe that the long-term trend of increasing income inequality has stopped and that the recent improvement in income distribution will continue. Given our focus on the low- to medium-income individuals, we believe that we are well positioned to benefit from an increase in credit demand by these population segments. | | | • | | Transitional inflation. The inflation rate for the twelve months ended December 31, 2007 was 8.5%. Inflation for 2007 was lower than the 9.8% registered in 2006 and is a result of the government’s policy of keeping the value of the peso to the dollar at the relatively low level of approximately Ps.3 to US$1. We believe that to the extent that the market views this exchange rate as being stable, they will be in a better position to forecast future inflation. |
Reduction in public sector exposure
Since the crisis of 2001 and 2002, Argentine government securities and other public sector obligations have represented a substantial portion of our balance sheet. We are managing our assets to gradually reduce the proportion of our balance sheet represented by such securities and other public sector obligations and to increase the proportion of our balance sheet represented by private sector lending. We expect our income from holding government obligations to continue to decline and to be offset by income resulting from the continued recovery of private sector lending in Argentina.
The increase in our position in government securities and other public sector obligations was mainly attributable to:
| • | | the forms of compensation received by the banking system in the context of asymmetric pesification, which, as described in greater detail in “The crisis and recovery in Argentina,” included BODEN 2007 and BODEN 2012; | | | • | | the stock of public securities and other public sector obligations that we inherited upon our acquisition of Banco Bansud in January 2002 and Banco Nuevo Suquía in December 2004; | | | • | | the purchases of treasury bills, principally in the form of LEBACs and NOBACs, made by our treasury desk as the preferred investment vehicle for our excess liquidity; and | | | • | | the slow recovery of private sector lending, which continues at low levels due to concerns about increased inflation, which has delayed the more rapid development of long-term lending. |
Although generally government debt would be expected to yield lower levels of returns, the appreciation of the market value of the securities acquired by us over this time frame and the high risk premiums offered on the securities made these holdings highly profitable for us over the 2002 to 2007 period. See “Selected statistical information—Average Balance Sheets, Interest Earned on Interest-Earning Assets and Interest-Bearing Liabilities.”share.
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RecoveryGradual recovery of privateproportion of national income held by lower income segments. After decades of widening, the income distribution gap between rich and poor in Argentina began to narrow during 2003 and 2004, when the crisis resulted in a collapse of income of all population segments. The real income of the poorer half of Argentina’s population has fallen over the last decades, from 32% of the income of the richer half in the late 1970s to less than 20% of the income of the richer half in the aftermath of the crisis. Since that time, the gap has narrowed and now the real income of the poorer half is higher than 20% of the income of the richer half. We believe that the long-term trend of increasing income inequality has stopped and that the recent improvement in income distribution will continue. Given our focus on the low- to medium-income individuals, we believe that we are well positioned to benefit from an increase in credit demand by these population segments. Moderate inflation levels. The inflation rate for the twelve months ended December 31, 2008 was 7.2%. Inflation for 2007 was 8.5%, lower than the 9.8% registered in 2006 and is a result of the government’s policy of keeping the value of the peso to the dollar at a level between Ps.3.5 and Ps.4 to US$1. We believe that to the extent that the market views the exchange rate variations as predictable, the market will be in a better position to forecast future inflation. Private sector lending Our private sector loans increased to Ps.2,209.0 million as of December 31, 2004 from Ps.723.6 million as of December 31, 2003 and Ps.514.6 million as of December 31, 2002, including the effect of the acquisition of Nuevo Banco Suquía in December 2004. As of December 31, 2005, our private sector loans increased to Ps. 2,949 million and as of December 31, 2006, our private sector loans increased to Ps. 5,525 million including the effect of the acquisitions of Banco de Tucumán and Nuevo Banco Bisel. During 2007, ourOur private sector lending portfolio increased to Ps. 9,336 million.million in 2007 and Ps. 10,893 million in 2008. This increased lending reflects both our higher market share resulting from our earlier return to the lending market than our competitors and the improvement of private sector lending after the crisis of 2001 and 2002, which had caused a collapse in both demand for and supply of new loans. We see the following trends in this important area of our business: | • | | Low cost of funds; high levels of liquidity. As a result of our low cost of funds and our high level of liquidity, a key driver of our results is our ability to increase our lending within the scope of our credit policy, as such lending is always at a positive margin. Therefore, we have seen increases in our gross intermediation margin as our private sector lending has increased. | | | • | | Demand from large corporations has preceded demand from small and medium-sized companies and consumers. New lending in Argentina has been primarily fueled by commercial lending, which for the Argentine banking system represented approximately two-thirds of new lending in 2004, which we believe to be generated by large corporations. Over the medium term we expect small and medium-sized companies, which lack access to the securities markets, to represent a larger component of new lending. Consumer lending has not yet fully recovered and remains at 5% of GDP as of December 31, 2007, despite having achieved levels higher than 10% before the crisis. | | | • | | Growth prospects subject to development of inflation and long-term fixed rate lending. We believe that the main obstacle preventing a faster recovery of Argentina’s private sector lending has been the uncertain outlook on long-term inflation, which has a significant impact on both the supply of and demand for long-term loans as borrowers try to hedge against inflation risk by borrowing at fixed rates while lenders hedge against inflation risk by offering loans at floating rates. As a result, most of the increase in the volume of private loans in the financial system until December 31, 2007 was concentrated in short-term products. For example, the ratio of personal loans, overdrafts and documents to GDP has increased from 3% in June 2003 to 6% as of December 31, 2007 while long-term loans represented by mortgages and secured loans have remained at 2% of GDP during the same period (despite substantial GDP growth during the period). | | | • | | Reduced spreads. We expect the high intermediation spreads that prevailed after the economic crisis to continue to decline due to increasing competition in the banking sector. The reduction of private sector credit volume has prompted Argentine banks to lend at lower interest rates in an effort to capture a larger portion of the contracted loan market, largely accounting for the current low spreads. Additionally, if the Central Bank increases interest rates to combat inflation, funding costs may increase. The expansionary monetary policy being undertaken by the Central Bank has resulted in unusually low funding costs. Interest rates on short-term time deposit accounts remain negative in real terms. Inflation pressures may push these rates upward in the medium term. If the spread reduction continues without a significant increase in volumes, profitability will be negatively affected. This trend will be partially offset for us by our stable depositor base, which provides a low cost source of funding. |
Low cost of funds; high levels of liquidity. As a result of our low cost of funds and our high level of liquidity, a key driver of our results is our ability to increase our lending within the scope of our credit policy, as such lending is always at a positive margin. Therefore, we have seen increases in our gross intermediation margin as our private sector lending has increased. Growth prospects subject to development of inflation and long-term fixed rate lending. We believe that the main obstacle preventing a faster recovery of Argentina’s private sector lending has been the uncertain outlook on long-term inflation, which has a significant impact on both the supply of and demand for long-term loans as borrowers try to hedge against inflation risk by borrowing at fixed rates while lenders hedge against inflation risk by offering loans at floating rates. As a result, most of the increase in the volume of private loans in the financial system until December 31, 2008 was concentrated in short-term products. For example, the ratio of personal loans, overdrafts and documents to GDP has increased from 3% in June 2003 to 6% as of December 31, 2008 while long-term loans represented by mortgages and secured loans have decreased from 3% to 2% of GDP during the same period (despite substantial GDP growth during the period). Reduced spreads. We expect the high intermediation spreads that prevailed after the 2001 economic crisis to continue to decline due to increasing competition in the banking sector. The reduction of private sector credit volume has prompted Argentine banks to lend at lower interest rates in an effort to capture a larger portion of the contracted loan market, largely accounting for the current low spreads. Additionally, the international context that is forcing the flight to quality, reduces the liquidity in countries such as Argentina. This may push deposit rates upward in the medium term. If the spread reduction continues without a significant increase in volumes, profitability will be negatively affected. This trend will be partially offset for us by our stable depositor base, which provides a low cost source of funding. Private sector loan portfolio credit quality Our private sector loan portfolio credit quality has improved from 2002 through December 31, 2007, in line with the Argentine economic recovery. The percentage of non-performing loans declined from 16.94% as of December 31, 2002 to 1.55% as of December 31, 2007. In 2008, we had a slight deterioration of our portfolio; our non-performing loans increased to 2.64%. Allowances as a percentage of non-performing loans went from 70.04% as of December 31, 2002 to 141.81% as of December 31, 2008. We created additional allowances reflecting our policy to have the adequate level of them. In 2009, this tendency may continue, both in the financial system as a whole and in our own portfolio. Organic growth complemented by strategic acquisitions We will continue to consider strategic acquisition opportunities that complement our branch network and are consistent with our strategy. As result of 2001 crisis, Argentine banks have responded to reduced lending volumes primarily by reducing their operating costs in real terms and sometimes by downsizing their operations. Due to the increase in loan volume, many Argentine banks are likely to need additional capital. In the same way, the current international situation affects the liquidity and capital situation in the local financial system. In this scenario, we have the opportunity, because of our significant excess of liquidity and capital, to continue to complement our organic growth with strategic acquisitions. We evaluate the effectiveness of our acquisition strategy by how it complements our organic growth strategy and whether we have succeeded in increasing our customer base, expanding our loan portfolio and generating more fee income from transactional services. Recovery of private sector loan portfolio credit quality
Our private sector loan portfolio credit quality has improved from 2002 through December 31, 2007, in line with the Argentine economic recovery. Our non-performing loans as a percentage of total loans declined from 16.94% as of December 31, 2002 to 1.55% as of December 31, 2007. During the same period, allowances as a percentage of non-performing loans went from 70.04% as of December 31, 2002 to 138.77% as of December 31, 2007, reflecting our policy to have adequate allowances.
Recent changes in export tax tariffs and agricultural
Argentina introduced a regime of sliding-scale export tariffs on soy products in March 2008, in addition to the foreign trade tax policies already in force. In reaction and to protest against these tariffs, farmers staged a strike. The strike caused some food shortages and, therefore, negatively impacted inflation. After a month-long pause, farmers revived the strike, including blocking roads throughout the country. The strike currently is in abeyance. However, if the farmers return to striking and roadblocks care put up again, the resulting lower economic activity, food shortages and higher inflation could affect Argentina’s political and economical environment. For the banking sector, this could lead to a decrease of deposits, an increase in interest rates, lower credit expansion and a deterioration in asset quality.
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RESULTS OF OPERATIONS The following discussion of our results of operations is for the bank as whole and without reference to any operating segments. We do not manage the bank by segments or divisions or by customer categories, by products and services, by regions, or by any other segmentation for the purpose of allocating resources or assessing profitability. We consider total loans to the private sector and the level of our average total deposits to be key measures of our core business. Total loans to the private sector grew by 87% from 2,948.8 million as of December 31, 2005 to Ps. 5,525 million as of December 31, 2006, of which Ps.1,223Ps. 1,223 million were loans from Banco del Tucumán and Nuevo Banco Bisel. Our private sector loans increased by 69% from Ps.5,525Ps. 5,525 million as of December 31, 2006 to Ps.Ps 9,336 million as of December 31, 2007. 2007 and 17% from 2007 to Ps. 10,893 million as of December 31, 2008. As of December 31, 2006, our private sector deposits grew 53% to Ps.8,770Ps. 8,770 million compared to Ps.5,737.4(of which Ps. 1,741 million as of December 31, 2005.were deposits from Banco del Tucumán and Nuevo Banco Bisel). The level of our private sector deposits grew by 35% from Ps.8,770 million as of December 31, 2006Ps. 8,770 to Ps. 11,804 million as of December 31, 2007. In addition,As of December 31, 2008, our private sector deposits totalized Ps. 11,868 million. Since 2006 we experienced a dramatic increase in our public sector deposits as a result of the substantial fiscal surpluses experienced by the four provincial governments for whom we act as financial agent. Additionally during 2008 the deposits from AFJP (Federal Public Revenue Agency) included as private sector deposits were transferred to public sector, as consequence deposits from public sector increased from December 2007 to December 2008 122%. Banco Macro also improved the quality of its credit portfolio. Banco Macro continued to improve its asset quality ratios and has among the highest quality assets of any Argentine bank.The Bank maintains a high liquidity ratio. The ratio of non-performing financing to total financing was 1.53%48.8% as of December 2007 including31, 2008, this was above the 2006 acquisitionsaverage of the financial system as compared to 5.1%a whole. During the last three years the Bank increased the level of liquid assets as of 2005cash and 1.98% as of 2006.
| | | | | | | | | | | | | | | Year ended December 31, | | | | | | | | 2006 (including | | | 2007 (including | | | | | | | | the 2006 | | | the 2006 | | | | 2005 | | | acquisitions) | | | acquisitions) | | | | (in thousands of pesos except for ratios) | | Commercial Portfolio | | | 2,503 | | | | 4,097 | | | | 5,291 | | Irregular Commercial Portfolio | | | 133 | | | | 65 | | | | 46 | | | | | | | | | | | | | | | Consumer Portfolio | | | 1,574 | | | | 3,351 | | | | 5,700 | | Irregular Consumer Portfolio | | | 75 | | | | 82 | | | | 122 | | | | | | | | | | | | Total Portfolio | | | 4,077 | | | | 7,448 | | | | 10,991 | | Total Irregular Portfolio | | | 208 | | | | 147 | | | | 168 | | Irregular/Total Portfolio Ratio | | | 5.10 | % | | | 1.98 | % | | | 1.53 | % | Total Provisions | | | 266 | | | | 230 | | | | 238 | | Coverage Ratio | | | 127.88 | % | | | 156.34 | % | | | 141.53 | % |
LEBACS/NOBACS portfolio.Banco Macro is using new sources of funding to prepare for potential changes in the Argentine loan market over the long-term. In December 2006, the Bank issued a series of subordinated notes for a nominal US$150 million due 2036 at a fixed rate of 9.75% for the first ten years and at LIBOR plus 7.11% for the following years. In addition, in January 2007, the Bank issued a US$150 million series of 10-year notes due 2017 at a fixed rate of 8.50% and, in June 2007, the Bank issued a US$100 million series of Argentine peso-linked notes due 2012 at a fixed rate of 10.750%. The Bank maintains a high liquidity ratio. The ratio was 53.2% as We have repurchased some of December 31, 2007. This was above the averagethese notes. For further information please refer to “Repurchase of the financial system as a whole.own notes”.
YEAR ENDED DECEMBER 31, 2008 COMPARED TO YEAR ENDED DECEMBER 31, 2007 AND YEAR ENDED DECEMBER 31, 2007 COMPARED TO YEAR ENDED DECEMBER 31, 2006 AND YEAR ENDED DECEMBER 31, 2006 COMPARED TO YEAR ENDED DECEMBER 31, 2005 The disclosure includes consolidated comparisons and, in some cases, also comparisons for 2006 against 2005 and comparisons for 2007 against 2006 of Banco Macro without the 2006 acquisitions of Nuevo Banco Bisel and Banco del Tucumán in order to permit period-to-period comparisons, considering that Banco del Tucumán was acquired in May 2006 and Nuevo Banco Bisel was acquired in August of 2006. 64
Net Income The following table sets forth certain components of our income statement for the years ended December 31, 2005, 2006, 2007 and 2007.2008. Our results of operations for 2006 include results for Banco del Tucumán from May 5, 2006 and Nuevo Banco Bisel from August 11, 2006 through year end. Our results of operations for 2007 and 2008 include results for Banco del Tucumán and Nuevo Banco Bisel for the entire year. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, | | | Year ended December 31, | | | | 2006 without | | 2007 without | | | 2006 without | | 2007 without | | | | | | 2006 | | 2006 | | | 2006 (1) | | 2006 acq. (2) | | 2007 | | 2006 acq. (2) | | 2008 | | | | 2005 | | 2006(1) | | acquisitions(2) | | 2007 | | acquisitions(2) | | | (in thousands of pesos) | | | | (in thousands of pesos) | | | Financial income | | 749,583 | | 1,155,207 | | 993,425 | | 1,890,422 | | 1,420,908 | | | 1,155,207 | | 993,425 | | 1,890,422 | | 1,420,908 | | 3,029,860 | | Financial expenses | | | (302,909 | ) | | | (394,897 | ) | | | (354,289 | ) | | | (805,265 | ) | | | (672,428 | ) | | | (394,897 | ) | | | (354,289 | ) | | | (805,265 | ) | | | (672,428 | ) | | | (1,342,062 | ) | | | | | | | | | | | | | | Gross intermediation margin | | 446,674 | | 760,310 | | 639,136 | | 1,085,157 | | 748,480 | | | 760,310 | | 639,136 | | 1,085,157 | | 748,480 | | 1,687,798 | | Provision for loan losses | | | (70,309 | ) | | | (59,773 | ) | | | (48,872 | ) | | | (94,717 | ) | | | (71,425 | ) | | | (59,773 | ) | | | (48,872 | ) | | | (94,717 | ) | | | (71,425 | ) | | | (297,606 | ) | Service charge income | | 302,758 | | 452,232 | | 388,724 | | 662,326 | | 497,312 | | | 452,232 | | 388,724 | | 662,326 | | 497,312 | | 891,700 | | Service charge expenses | | | (59,510 | ) | | | (93,323 | ) | | | (84,174 | ) | | | (150,282 | ) | | | (123,012 | ) | | | (93,323 | ) | | | (84,174 | ) | | | (150,282 | ) | | | (123,012 | ) | | | (172,401 | ) | Administrative expenses | | | (443,026 | ) | | | (652,457 | ) | | | (552,376 | ) | | | (957,043 | ) | | | (690,454 | ) | | | (651,000 | ) | | | (552,376 | ) | | | (953,897 | ) | | | (690,454 | ) | | | (1,211,399 | ) | Net other income | | 120,201 | | 97,490 | | 155,809 | | 44,187 | | 216,188 | | | 96,033 | | 155,809 | | 41,041 | | 216,188 | | 26,519 | | | | | | | | | | | | | | | Income before income tax | | 296,788 | | 504,479 | | 498,247 | | 589,628 | | 577,089 | | | 504,479 | | 498,247 | | 589,628 | | 577,089 | | 924,611 | | Income tax | | | (34,042 | ) | | | (76,961 | ) | | | (73,961 | ) | | | (92,345 | ) | | | (81,922 | ) | | | (76,961 | ) | | | (73,961 | ) | | | (92,345 | ) | | | (81,922 | ) | | | (261,207 | ) | Minority Interest | | — | | | (3,178 | ) | | 54 | | | (2,083 | ) | | 33 | | | | (3,178 | ) | | 54 | | | (2,083 | ) | | 33 | | | (3,354 | ) | | | | | | | | | | | | | | | | | | | | | | | | Net income | | 262,746 | | 424,340 | | 424,340 | | 495,200 | | 495,200 | | | 424,340 | | 424,340 | | 495,200 | | 495,200 | | 660,050 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | (1) | | Results for 2006 include the results of Banco del Tucumán from May 5, 2006 and Nuevo Banco Bisel from August 11, 2006. | | (2) | | The results of Banco del Tucumán and Nuevo Banco Bisel are included in “Net Other Income.” |
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Our consolidated net income for 2008 increased 33% to Ps. 660.0 million from Ps. 495.2 million for 2007. Our consolidated net income for 2007 was Ps. 495.2 million, which was a 17% increase over 2006. Our consolidated net income for 2006 increased 62 % to Ps.424.3 million from Ps. 262.7 million for 2005. Financial Income Our financial income increased 64% on a consolidated basis in 2007 as compared to 2006. Our financial income increased 54% on a consolidated basis in 2006 as compared to 2005. The components of our financial income for the years ended December 31, 2005, 2006, 2007 and 20072008 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, | | | Year ended December 31, | | | | 2006 without | | | | | 2006 without | | 2007 without | | | | | | 2006 | | 2007 without 2006 | | | 2006 (1) | | 2006 acq. | | 2007 (1) | | 2006 acq. | | 2008 | | | | 2005(1) | | 2006(1) | | acquisitions | | 2007 | | acquisitions | | | (in thousands of pesos) | | | | (in thousands of pesos) | | | Interest on cash and due from banks | | 4,080 | | 11,682 | | 11,408 | | 19,917 | | 18,351 | | | Interest on cash | | | 11,682 | | 11,408 | | 19,917 | | 18,351 | | 7,010 | | Interest on loans to the financial sector | | 5,320 | | 16,720 | | 13,786 | | 32,157 | | 30,229 | | | 16,720 | | 13,786 | | 32,157 | | 30,229 | | 15,584 | | Interest on overdrafts | | 53,953 | | 120,040 | | 96,186 | | 192,599 | | 146,661 | | | 110,721 | | 96,186 | | 177,490 | | 146,661 | | 357,215 | | Interest on documents(2)(3) | | 32,157 | | 56,988 | | 42,823 | | 139,102 | | 59,695 | | | 53,173 | | 42,823 | | 103,428 | | 59,695 | | 184,852 | | Interest on mortgage loans | | 29,655 | | 48,506 | | 44,733 | | 68,065 | | 55,380 | | | 48,506 | | 44,733 | | 68,065 | | 55,380 | | 97,057 | | Interest on pledge loans(3)(2) | | 26,160 | | 43,038 | | 39,427 | | 51,480 | | 38,213 | | | 43,038 | | 39,427 | | 51,480 | | 38,213 | | 64,499 | | Interest on credit card loans | | 18,233 | | 30,969 | | 27,992 | | 55,665 | | 44,371 | | | 30,969 | | 27,992 | | 55,665 | | 44,371 | | 117,952 | | Interest on other loans(4) | | 121,062 | | 259,801 | | 230,064 | | 527,954 | | 446,927 | | | Interest on other loans (4) | | | 272,935 | | 230,064 | | 578,737 | | 446,927 | | 1,032,837 | | Interest on other receivables from financial intermediation | | 19,901 | | 15,050 | | 13,876 | | 18,471 | | 15,176 | | | 15,050 | | 13,876 | | 18,471 | | 15,176 | | 14,416 | | Income from government and private securities, net | | 156,158 | | 324,178 | | 262,875 | | 488,757 | | 307,048 | | | 324,178 | | 262,875 | | 488,757 | | 307,048 | | 641,299 | | Income from guaranteed loans(5)(6) | | 28,625 | | 29,898 | | 26,656 | | 35,043 | | 25,965 | | | 29,898 | | 26,656 | | 35,043 | | 25,965 | | 37,043 | | Net income from options | | — | | — | | — | | 1,604 | | 1,604 | | | — | | — | | 1,604 | | 1,604 | | 261 | | CER (Benchmark Stabilization Coefficient) adjustment(6) | | 185,421 | | 84,951 | | 76,928 | | 78,065 | | 60,076 | | | CVS (Salary Variation Coefficient) adjustment | | 1,987 | | 1,947 | | 1,944 | | 1,605 | | 1,603 | | | CER (Indexation by benchmark stabilization coefficient) (5) | | | 84,951 | | 76,928 | | 78,065 | | 60,076 | | 70,477 | | CVS (Indexation by salary variation coefficient) | | | 1,947 | | 1,944 | | 1,605 | | 1,603 | | 818 | | Difference in quoted prices of gold and foreign currency | | 31,392 | | 40,007 | | 37,946 | | 48,823 | | 41,150 | | | 40,007 | | 37,946 | | 48,823 | | 41,150 | | 143,094 | | Other(7) | | 35,479 | | 71,432 | | 66,781 | | 131,115 | | 128,459 | | | Other (7) | | | 71,432 | | 66,781 | | 131,115 | | 128,459 | | 245,446 | | | | | | | | | | | | | | | | | | | | | | | | | Total financial income | | 749,583 | | 1,155,207 | | 993,425 | | 1,890,422 | | 1,420,908 | | | 1,155,207 | | 993,425 | | 1,890,422 | | 1,420,908 | | 3,029,860 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | (1) | | See note 4.2. to our audited consolidated financial statements for the year ended December 31, 2007.2008. | | (2) | | Includes primarily secured car loans. | | (3) | | Includes factoring, check cashing advances and loans with promissory notes. | | (3) | | Includes primarily secured car loans.
| | (4) | | Includes interest on loans not classified under prior headings. | | (5) | | Includes CER accrued for all the assets subject to adjustment by CER. | | (6) | | Includes loans to the Argentine government that were issued in exchange for federal and provincial government bonds. | | (6) | | Includes CER accrued for all the assets subject to adjustment by CER.
| | (7) | | Principally results from leasingforward foreign currency transactions and result from lending activity. |
2008 and 2007. Our financial income increased 60% as compared to 2007. Interest on loans increased 75% due to higher interest rates and a higher volume of loans to the private sector. Thus, the share of our total financial income from private sector loans increased from 55% in 2007 to 61% in 2008. The main drivers of this growth have been interest on credit card loans increased 112%, interest on overdrafts increased 101%, interest on documents increased 79% and interest on other loans increased 78% (including personnel loans) during 2008. The increase in interest on credit card loans and overdrafts was mainly due to an increase on the average rate: average credit card rate increased 56% and average overdraft rate increased 41%. The increase in interest on documents and personal loans was mainly due to an increase on the average balance, by 60% and 62%, respectively. Income from government and private securities climbed 31% mainly driven by LEBAC/NOBAC results, which increased 35% (the average rate of LEBACs/NOBACs increased from 10.05% during 2007 to 13.53% during 2008). Difference in quoted prices of gold and foreign currency increased 193% during 2008, the increase was explained by the impact of higher FX rate on the Bank’s net long FX position and FX trading results. Our other income increased 87% during 2008 as compared to the same period in 2007. This increase is principally due to higher forward FX gains (US Dollar — Argentine Peso) as result of a significant increase in volume and timely change to long position (trading activity increased 226% in 2008 compared to 2007). The following table sets forth the changes in financial income due to increases (decreases) in volume and increases (decreases) in nominal rates of average interest-earning assets. Such financial income excludes exchange differences and premiums on forward sales of foreign exchange: | | | | | | | | | | | December 31 2007 | | | December 31 2008 | | | | vs. | | | vs. | | | | December 31 2006 | | | December 31 2007 | | | | Increase (Decrease) | | | Increase (Decrease) | | | | | | | | | | | Financial Income due to changes in the volume of interest-earning assets | | | 622,135 | | | | 575,552 | | Financial Income due to changes in average nominal rates of interest-earning assets | | | 57,122 | | | | 373,687 | | | | | | | | | Net change | | | 679,257 | | | | 949,239 | | | | | | | | |
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2007 and 2006. Our financial income increased 64% on a consolidated basis and 43% without the 2006 acquisitions. Interest on loans increased 85% on a consolidated basis and 66% without the 2006 acquisitions due to a higher volume of loans to the private sector. We continue to exhibit high rates of growth as loans to the private sector increased 69% as of December 31, 2007 as compared to December 31, 2006. Thus, the share of our total financial income from private sector loans increased from 48% to 56% on a consolidated basis. The main drivers of this growth have been consumer loans, which grew 104%, and medium-term loans structured for our corporate customers recorded in “Other,” which grew 52% during 2007. Income from government and private securities climbed 51% on a consolidated basis and 17% without the 2006 acquisitions mainly driven by LEBAC/NOBAC results, which increased 57% (the average rate of NOBACs increased from 8.96% during 2006 to 10.05% during 2007). Indexation by CER decreased 8% on a consolidated basis due to the fact that the volume of loans and bonds adjusted by CER decreased for the year. Additionally, inflation for the twelve months ended December 31, 2007 was lower than the same period in 2006 (inflation of 8.47% during 2007 compared to 9.84% during 2006). Our other income increased 84% during 2007 as compared to the same period in 2006. This increase is principally due to higher income from leasing activity (Ps. 25.5 million of increase in income based on leasing portfolio increase of 73%) and higher interests from foreign trade activity (Ps. 27 million of increase in income). 2006 and 2005. Our financial income increased 54% on a consolidated basis and 32% without the 2006 acquisitions. Interest on loans increased 100% on a consolidated basis and 72% without the 2006 acquisitions due to a higher volume of loans to the private sector. We continue to exhibit high rates of growth as loans to the private sector increased 87% as of December 31, 2006 as compared to December 31, 2005. Thus, the share of our total financial income from private sector loans increased from 38% to 48% on both a consolidated basis and when measured without the 2006 acquisitions. The main drivers of this growth have been overdrafts, which grew 155%, consumer loans, which grew 200%, credit cards loans, which grew 107% and medium-term loans structured for our corporate customers recorded in “Other,” which grew 45% during 2006.
Income from government and private securities climbed 108% on a consolidated basis and 68% without the 2006 acquisitions mainly driven by LEBAC/NOBAC results, which increased 78% (the average rate of Lebacs increased from 7.5% to 10.7%). Also in this period we had a one-time gain of Ps.8 million, relating to our sale of an interest in the Puerto Madero Siete trust.
Indexation by CER decreased 54% on a consolidated basis and 58% without the 2006 acquisitions due to the fact that secured bonds have been marked to market since January 2006 (48% of the decrease was due to the marked to market of Secured Bonds) and the decreasing volume of loans and bonds adjusted by CER. Additionally, inflation for the twelve months ended December 31, 2006 was lower than the same period in 2005 (inflation of 9.84% during 2006 compared to 12.3% during 2005).
Without including the 2006 acquisitions, our other income increased 88%, or Ps.31 million, during 2006 as compared to the same period in 2005. On a consolidated basis, our other income increased 101%, or Ps.36 million, during 2006 as compared to 2005. This increase is principally due to higher income from leasing activity (Ps. 22 million of increase in income based on leasing portfolio increase of 92%) and higher interests from foreign trade activity (Ps. 14 million of increase in income).
Financial expenses Financial expenses increased 104% on a consolidated basis in 2007 as compared to 2006. Our financial expenses increased 30% on a consolidated basis in 2006 as compared to 2005. The components of our financial expenses for the years ended December 31, 2005, 2006, 2007 and 20072008 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, | | | Year ended December 31, | | | | 2006 without | | 2007 without | | | 2006 without | | 2007 without | | | | | | 2006 | | 2006 | | | 2006 (1) | | 2006 acq. | | 2007 (1) | | 2006 acq. | | 2008 | | | | 2005(1) | | 2006(1) | | acquisitions | | 2007 | | acquisitions | | | (in thousands of pesos) | | | | (in thousands of pesos) | | | Interest on checking accounts | | 2,647 | | 9,475 | | 8,665 | | 19,968 | | 18,251 | | | 9,475 | | 8,665 | | 19,968 | | 18,251 | | 17,708 | | Interest on savings accounts | | 4,302 | | 6,736 | | 5,976 | | 11,372 | | 8,985 | | | 6,736 | | 5,976 | | 11,372 | | 8,985 | | 14,534 | | Interest on time deposits | | 106,486 | | 233,697 | | 209,629 | | 457,395 | | 382,788 | | | 233,697 | | 209,629 | | 457,395 | | 382,788 | | 933,881 | | Interest on interfinancing received loans (received call) | | 980 | | 801 | | 794 | | 4,608 | | 4,572 | | | 801 | | 794 | | 4,608 | | 4,572 | | 3,909 | | Interest on other financing from the financial sector | | 43 | | 252 | | 210 | | 226 | | 130 | | | Interest on other liabilities from financial intermediation(2) | | 13,796 | | 14,421 | | 14,395 | | 70,706 | | 70,608 | | | Interest on subordinated bonds | | 1,806 | | 2,017 | | 2,017 | | 49,858 | | 49,858 | | | Interest on other financing from the financial institutions | | | 252 | | 210 | | 226 | | 130 | | 28 | | Interest on other liabilities from financial intermediation (2) | | | 14,421 | | 14,395 | | 70,706 | | 70,608 | | 91,083 | | Interest on subordinated corporate bonds | | | 2,017 | | 2,017 | | 49,858 | | 49,858 | | 47,523 | | Other interest | | 11,482 | | 12,410 | | 10,648 | | 9,768 | | 6,131 | | | 12,410 | | 10,648 | | 9,768 | | 6,131 | | 8,762 | | Net loss from options | | 1,017 | | 371 | | 371 | | — | | — | | | 371 | | 371 | | — | | — | | — | | CER adjustment(3) | | 117,048 | | 55,732 | | 46,633 | | 43,717 | | 24,953 | | | CER adjustment (3) | | | 55,732 | | 46,633 | | 43,717 | | 24,953 | | 32,946 | | Contribution to Deposit Guarantee Fund | | 9,701 | | 12,753 | | 10,968 | | 20,182 | | 15,939 | | | 12,753 | | 10,968 | | 20,182 | | 15,939 | | 25,945 | | Other(4) | | 33,601 | | 46,232 | | 43,983 | | 117,465 | | 90,213 | | | Other (4) | | | 46,232 | | 43,983 | | 117,465 | | 90,213 | | 165,743 | | | | | | | | | | | | | | | | | | | | | | | | | Total financial expenses | | 302,909 | | 394,897 | | 354,289 | | 805,265 | | 672,428 | | | 394,897 | | 354,289 | | 805,265 | | 672,428 | | 1,342,062 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | (1) | | See note 4.2. to our audited consolidated financial statements for the year ended December 31, 2007.2008. | | (2) | | Includes lines of credit from other banks, repurchase agreements, and liquidity assistance from the Central Bank.Bank . | | (3) | | Includes CER accrued for all the liabilities subject to adjustment by CER..CER.
| | (4) | | Includes interest on deposits in the form of government securities and CEDROs. |
2008 and 2007: Financial expenses increased 67% as compared to 2007. The increase of financial expenses is mainly explained by interest on deposits, which grew 98%, based on the growth of interest from time deposits (104%).This growth originated from two factors: the increasing volume of time deposits, which grew 37% in average during 2008 and the higher prevailing interest rates owing to with the increase in interest rates in the financial system as a whole (for time deposits in pesos, the average interest rate was 9.4% in 2007 and 13.2% in 2008). “Other expenses” showed a significant growth of 41% during 2008, mainly due an increase on turnover tax due to higher computable financial income. 6664
The following table sets forth the changes in financial expense due to increases (decreases) in volume and increases (decreases) in nominal rates of average interest-bearing liabilities. Such financial expense excludes exchange rate variations and premiums on forward purchases of foreign exchange, contributions to Bank Deposit Guarantee Insurance System, mandatory contributions and taxes on interest income: | | | | | | | | | | | December 31 2007 | | | December 31 2008 | | | | vs. | | | vs. | | | | December 31 2006 | | | December 31 2007 | | | | Increase (Decrease) | | | Increase (Decrease) | | | | | | | | | | | Financial Expense due to changes in the volume of interest-bearing liabilities | | | 291,394 | | | | 266,157 | | Financial Expense due to changes in average nominal rates of interest-bearing liabilities | | | 51,275 | | | | 218,692 | | | | | | | | | Net change | | | 342,669 | | | | 484,849 | | | | | | | | |
2007 and 2006: Financial expenses increased 104% on a consolidated basis and 90% without the 2006 acquisitions. The growth of financial expenses is mainly explained by interest on time deposits, which grew 96% on a consolidated basis and 83% without the 2006 acquisitions. This growth originated from two factors: the increasing volume of deposits, which grew 35% during 2007 and the higher prevailing interest rates owing to with the increase in interest rates in the financial system as a whole (for time deposits in pesos, the interest rate was 7% in December 2006 and more than 10% in December 2007). In addition, the increase in interest on other liabilities from financial intermediation and interest on subordinated notes was due to interest accrual from subordinated and non-subordinated notes. On December 18, 2006, the Bank issued US$150 million of Class 1 Subordinated Notes due 2036 at a fixed annual rate equal to 9.75% for the first 10 years and a variable one for the remaining years (six month LIBO rate + 7.11%). On January 29, 2007 the Bank issued US$150 million of Class 2 Notes due 2017 at a fixed annual rate equal to 8.50% and on June 7, 2007 issued U.S.$100 million of Argentine Peso-Linked Notes due 2012 at a fixed annual rate equal to 10.750%. Indexation by CER fell 22% on a consolidated basis, due to the CPI evolution and the reduction on the portfolio to be adjusted (inflation of 8.47% during 2007 compared to 9.84% during 2006). “Other expenses” showed a significant growth of 154% during 2007, mainly due to i) the decrease in value of the guaranteed loans portfolio as a consequence of a higher discount rate established by the Central bank and ii) turnover tax . 2006 and 2005. Financial expenses increased 30% on a consolidated basis and 16% without the 2006 acquisitions. The composition of financial expenses changed substantially, due to a sharp increase in interest rates and a decrease in indexation by CER.
The growth of financial expenses is mainly explained by interest on time deposits, which grew 120% and 97% on a consolidated basis and without the 2006 acquisitions, respectively. This growth originated in two factors: the higher prevailing interest rates in line with the increase in interest rates in the financial system as a whole (for time deposits in pesos, the interest rate was 6% in December 2005 and more than 8% in December 2006) and the increasing volume of deposits, which grew 53% during 2006.
Indexation by CER fell 52% on a consolidated basis, due to a decrease in CER-adjusted deposits (76% of decrease in CER-adjusted deposits portfolio), mostly owned by institutional investors and also due to lower inflation during 2006 (inflation of 9.84% during 2006 compared to 12.3% during 2005).tax.
Provision for loan losses 2008 and 2007: Provision for loan losses increased 214% compared to 2007. As we are all aware, the world’s economy is sustaining a highly virulent crisis that is affecting, to a lesser or larger extent, the levels of economic activity and employment and dragging down foreign trade. This scenario leads us to the assumption that some of the loans that currently make up our portfolio might sustain an impairment in value. Therefore, the Executive Committee has decided to increase provision for loan losses as of December 31, 2008 in PS.153.7 million to those presently required by regulators. 2007 and 2006: Provision for loan losses increased 58% on a consolidated basis for 2007 compared to 2006 and 46% without the 2006 acquisitions, in connection with the increasing loan portfolio. Private sector loans grew 69% compared to 2006 balances. 2006 and 2005. Provision for loan losses decreased 15% on a consolidated basis for 2006 compared to 2005 and 30% without the 2006 acquisitions, in connection with the asset quality improvement.
Service charge income The following table provides a breakdown of our service charge income by category for the years ended December 31, 2005, 2006, 2007 and 2007:2008: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, | | | Year ended December 31, | | | | 2006 without | | 2007 without | | | 2006 without | | 2007 without | | | | | | 2006 | | 2006 | | | 2006 (1) | | 2006 acq. | | 2007 (1) | | 2006 acq. | | 2008 | | | | 2005(1) | | 2006(1) | | acquisitions | | 2007 | | acquisitions | | | (in thousands of pesos) | | | | (in thousands of pesos) | | | Service charges on deposit accounts | | 181,961 | | 273,976 | | 224,911 | | 422,589 | | 297,457 | | | 258,855 | | 224,911 | | 398,569 | | 297,457 | | 587,426 | | Debit and credit card income | | 22,959 | | 65,410 | | 58,975 | | 92,519 | | 79,616 | | | 65,410 | | 58,975 | | 95,644 | | 79,616 | | 153,210 | | Other fees related to foreign trade | | 10,630 | | 11,607 | | 10,818 | | 15,947 | | 13,651 | | | 11,607 | | 10,818 | | 15,947 | | 13,651 | | 19,261 | | Credit-related fees | | 19,175 | | 35,964 | | 30,173 | | 53,995 | | 36,049 | | | 35,964 | | 30,173 | | 53,995 | | 36,049 | | 63,669 | | Capital markets and securities activities | | 1,666 | | 2,085 | | 2,041 | | 2,951 | | 2,672 | | | 2,085 | | 2,041 | | 2,951 | | 2,672 | | 2,517 | | Lease of safe-deposit boxes | | 5,712 | | 8,467 | | 7,420 | | 14,049 | | 9,434 | | | 8,467 | | 7,420 | | 12,904 | | 9,434 | | 16,282 | | Fees related to guarantees | | 570 | | 5,876 | | 5,837 | | 2,789 | | 2,718 | | | 5,876 | | 5,837 | | 2,789 | | 2,718 | | 1,750 | | Other(2) | | 60,085 | | 48,847 | | 48.549 | | 57,487 | | 55,715 | | | Other (2) | | | 63,968 | | 48.549 | | 79,527 | | 55,715 | | 47,585 | | | | | | | | | | | | | | | | | | | | | | | Total service charge income | | 302,758 | | 452,232 | | 388,724 | | 662,326 | | 497,312 | | | 452,232 | | 388,724 | | 662,326 | | 497,312 | | 891,700 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | (1) | | See note 4.2 to our audited financial statements for the year ended December 31, 2007.2008.
| | (2) | | Includes insurance income. |
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2008 and 2007: Service charge income increased 35% as compared to 2007 due to the increase in the volume of our operations. The main drivers were fees related to deposits, which grew 47% and represent 66% of total service charge income and fees related to debit and credit cards, which grew 60%. 2007 and 2006: Service charge income increased 46% on a consolidated basis primarily due to the increase in the volume of our operations. The main drivers were fees related to deposits, which grew 54% and represent 64% of total service charge income, fees related to debit and credit cards, which grew 41% and fees related to lending activities, which grew 50%. 2006 and 2005.Service charge income increased 49% on a consolidated basis primarily due to the increase in the volume of our operations and the acquisitions of 2006. The main drivers were fees related to deposits, which grew 51% and represent 61% of total service charge income, fees related to debit and credit cards, which grew 185% and fees related to lending activities, which grew 74%.
Service charge expenses Service charge expense in 2008 increased 15% compared to 2007 mainly due to higher credit card and debit card processing fees (35% increased) and taxes (26% increased). Service charge expense in 2007 increased 61% on a consolidated basis compared to 2006 mainly due to higher credit card and debit card processing fees, other service fees and taxes. Service charge expenses in 2006 increased 57% on a consolidated basis and 41% without the 2006 acquisitions, as compared to 2005, for the same reasons. Net service charge income grew 43% on a consolidated basis and 23% without the 2006 acquisitions as compared to 2006, and during 2006 grew 48% on a consolidated basis and 25% without the acquisitions as compared to 2005.
Administrative expenses The components of our administrative expenses for the years ended December 31, 2005, 2006, 2007 and 20072008 are reflected in the following table: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, | | | Year ended December 31, | | | | 2007 without | | | 2006 without | | 2007 without | | | | | | 2006 without 2006 | | 2006 | | | 2006 (1) | | 2006 acq. | | 2007 (1) | | 2006 acq. | | 2008 | | | | 2005 | | 2006 | | acquisitions | | 2007 | | acquisitions | | | (in thousands of pesos) | | | | (in thousands of pesos) | | | Personnel expenses | | 254,821 | | 396,338 | | 327,729 | | 589,021 | | 401,756 | | | 396,338 | | 327,729 | | 589,021 | | 401,756 | | 798,236 | | Directors and statutory auditors fees | | 14,142 | | 14,362 | | 13,167 | | 37,695 | | 33,909 | | | 14,362 | | 13,167 | | 37,695 | | 33,909 | | 26,941 | | Other professional fees | | 26,104 | | 39,670 | | 37,215 | | 42,428 | | 36,331 | | | 39,670 | | 37,215 | | 42,428 | | 36,331 | | 55,012 | | Advertising and publicity | | 22,668 | | 31,866 | | 29,719 | | 50,343 | | 45,634 | | | 31,866 | | 29,719 | | 50,343 | | 45,634 | | 53,178 | | Taxes | | 5,808 | | 9,008 | | 6,802 | | 13,491 | | 7,156 | | | 7,551 | | 6,802 | | 10,345 | | 7,156 | | 12,391 | | Depreciation of equipment | | 19,218 | | 29,231 | | 23,735 | | 42,723 | | 32,074 | | | 29,231 | | 23,735 | | 42,723 | | 32,074 | | 50,543 | | Amortization of organization costs | | 12,588 | | 13,263 | | 12,290 | | 17,923 | | 15,553 | | | 13,263 | | 12,290 | | 17,923 | | 15,553 | | 25,557 | | Maintenance, conservation and repair expenses | | 17,649 | | 25,209 | | 21,881 | | 36,930 | | 26,801 | | | 25,209 | | 21,881 | | 36,930 | | 26,801 | | 48,251 | | Security services | | 16,366 | | 25,003 | | 20,855 | | 35,487 | | 24,748 | | | 25,003 | | 20,855 | | 35,487 | | 24,748 | | 42,241 | | Electric power and communications | | 17,164 | | 22,912 | | 18,091 | | 32,206 | | 19,317 | | | 22,912 | | 18,091 | | 32,206 | | 19,317 | | 37,240 | | Lease payments | | 9,889 | | 14,123 | | 12,127 | | 18,686 | | 14,391 | | | 14,123 | | 12,127 | | 18,686 | | 14,391 | | 21,769 | | Insurance | | 3,973 | | 5,253 | | 4,663 | | 6,110 | | 4,857 | | | 5,253 | | 4,663 | | 6,110 | | 4,857 | | 6,090 | | Stationery and office supplies | | 7,979 | | 9,046 | | 7,900 | | 14,739 | | 10,477 | | | 9,046 | | 7,900 | | 14,739 | | 10,477 | | 15,335 | | Other | | 14,657 | | 17,173 | | 16,202 | | 19,261 | | 17,450 | | | 17,173 | | 16,202 | | 19,261 | | 17,450 | | 18,615 | | | | | | | | | | | | | | | | | | | | | | | | | Total administrative expenses | | 443,026 | | 652,457 | | 552,376 | | 957,043 | | 690,454 | | | 651,000 | | 552,376 | | 953,897 | | 690,454 | | 1,211,399 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | (1) | | See note 4.2 to our audited consolidated financial statements for the year ended December 31, 2008. |
2008 and 2007: Administrative expenses increased 27% as compared to 2007, mainly due to personnel expenses which grew 36%. This increase in personnel expenses is attributed to salary adjustments and to the increase in the number of employees. 2007 and 2006: Administrative expenses increased 47% on a consolidated basis and 25% without the 2006 acquisitions, mainly due to personnel expenses which grew 49% on a consolidated basis. This increase in personnel expenses is attributed to salary adjustments and to the increase in the number of employees as a result of the 2006 acquisitions. 2006 and 2005.Administrative expenses increased 47% on a consolidated basis and 25% without the 2006 acquisitions, mainly due to personnel expenses which grew 55% on a consolidated basis and 29% without the 2006 acquisitions. This increase in personnel expenses is attributed to salary adjustments and to the increase in the number of employees as a result of the 2006 acquisitions.
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Net other income Net other income decreased 35% (or Ps. 14.5 million) in 2008 in comparison to 2007 due to lower level of recovered loans and allowances reverse and higher uncollected charges for other loans and other provisions. Net other income decreased 55% (or Ps. 53 million) on a consolidated basis in 2007 in comparison to 2006 due to lower level of recovered loans and allowances reverse. 66
Net other income decreased 19% or Ps.23 million in 2006 in comparison with 2005 as a result of two main factors: (1) a Ps.16 million increase due to credit recoveries and (2) an increase in other losses of Ps.39 million, due to non-recurring expenses related to ADS offering and Notes issuance.
Income tax During 2008, we had income tax expenses of Ps.261.2 million, compared to Ps.92 million recorded in 2007 (increasing 182.9%), this can be traced to the complete use of the tax-loss carry forwards which belonged to Nuevo Banco Bisel and the estimated accrued income tax. During 2007, we had income tax expenses of Ps.92 million, compared to Ps.77 million recorded in 2006 (increasing 19.5%), on greater income before income tax (income before income tax increased 17% compared to 2006). Income tax expenses increased 126% on a consolidated basis from Ps.34 million in 2005 to Ps.77 million in 2006 mainly due to the fact that, since the fiscal year ended December 31, 2006, the Bank accrues in income tax the effects of pesification and the CER adjustments of guaranteed loans based on Decree 1035/06 dated on August 14, 2006. Also, the Bank and its subsidiaries included a higher income tax provision in 2006 because the computable net operating loss was used in 2005.
B. Liquidity and Capital Resources Our main source of liquidity consists of deposits, which totaled Ps.15,828 million as of December 31, 2008, Ps.13,591 million as of December 31, 2007 and Ps.10,071 million as of December 31, 2006 and Ps. 6,565 million as of December 31, 2005.2006. These deposits include deposits generated by our branch network, from institutional, and very large corporate clients and from provincial governments for whom we act as financial agent. We consider the deposits generated by our branch network and the provincial deposits to be stable. Funding continued increasing at a fast pace during 20072008 driven mainly by the increase in total deposits, which grew 35%16% during the year. These deposits were used primarily for financing the growth in credit for the private sector with the remainder being invested in profitable liquid assets, such as LEBACs and NOBACs, short-term loans to highly rated companies, Central Bank repurchase obligations and cash. This approach has enabled us to maintain a high liquidity to deposits ratio of 62%48.8% as of December 31, 20072008 while awaiting a return to stronger demand for private sector loans. In December 2006, we issued a series of subordinated notes for a nominal US$150 million due 2036 at a fixed rate of 9.75% for the first ten years and at LIBOR plus 7.11% for the following years. The notes are treated as capital for regulatory purposes. In addition, in January 2007 we issued a US$150 million series of 10-year notes due 2017 at a fixed rate of 8.50% and in June 2007 we issued a US$100 million series of Argentine peso-linked notes due 2012 at a fixed rate of 10.750%. The proceeds from the placement of the notes will be used to make medium-term loans. In June 2007, the General Ordinary and Extraordinary Shareholders’ Meeting approved the increase of the USDUS$ 400,000,000 (US dollars four hundred million) of the Global Program for the issuance of Negotiable Obligations to USDUS$ 700,000,000 (US dollars seven hundred million), or an equal amount in other currencies, as set forth in the original program. In January 2008, we signed a 24-month extension to the US$ 50 million loan from Credit Suisse First Boston International, at 8.55% rate and maturing in January 2010. Additionally, the bank currently has access to uncommitted lines of credit with foreign banks and to letters of credit. During the quarter ended March 31, 2008, the Bank repurchased and settled non-subordinated 8.50% Notes Due 2017 negotiable obligations for a face value amount of USD 9,500,000.US$ 42,555,000 and Argentine Peso-linked 10.75% Notes Due 2012 negotiable obligations for a face value amount of US$ 8,460,000. As of December 31, 2008 the Bank cancelled a face value amount of US$ 32,725,000 Notes Due 2017 and a face value amount of US$ 1,500,000 Notes Due 2012. Consequently, the remaining principal of 8.50% Notes Due 2017 totaled US$ 117,275,000 and of 10.75% Notes Due 2012 totaled US$ 98,500,000. During 2009, the Bank repurchased non-subordinated 8.50% Notes Due 2017 for a face value amount of US$1,050,000 and Argentine Peso-linked 10.75% Notes Due 2012 for a face value amount of US$ 25,720,000. As of May 31, 2009 the Bank cancelled a face value amount of US$ 9,830,000 Notes Due 2017 and a face value amount of US$ 25,160,000 Notes Due 2012. Consequently, as of May 31, 2009 the remaining principal of 8.50% Notes Due 2017 totals USD 140,500,000.US$ 107,445,000 and of 10.75% Notes Due 2012 totals US$ 73,340,000. On January 8, 2008, the Board of Directors decided to establish the terms and conditions for the acquisition of its own shares issued by the Bank. See Item 16E Purchases of Equity Securities by the Issuer and Affiliated Purchasers for more details. On October 1, 2008, the Bank’s Board of Directors requested the Buenos Aires Stock Exchange’s prior authorization to reduce its subscribed and paid-in capital stock by an amount of up to Ps. 60 million, representing 60,000,000 Class B shares (with a face value of Ps. 1 each and entitled to 1 vote per share), which is treasury stock and which was purchased under section 68, Law No. 17,811. On November 21, 2008, the Buenos Aires Stock Exchange authorized the capital stock reduction for the abovementioned amount. On April 21, 2009 the Regular and Special General Shareholders’ Meeting of Banco Macro S.A. approved, among other issues, such capital stock reduction. On May 8, 2009, the Bank’s Board of Directors requested the Buenos Aires Stock Exchange’s prior authorization to reduce its subscribed and paid-in capital stock by an amount of up to Ps. 30,641,692, representing 30,641,692 Class B shares (with a face value of Ps. 1 each and entitled to 1 vote per share), which is treasury stock and which was purchased under section 68, Law No. 17,811. This authorization is still pending. The CFO manages the excess liquidity by analyzing interest rates from a limited number of liquid and short-term assets including Central Bank Bills, deposits with the Central Bank and overnight loans to highly rated companies. The amount allocated to overnight loans is determined by the amount of deposits received from institutional investors, and as such, there is a high degree of volatility in our overnight allocations. We believe that we have adequate working capital to meet our current and reasonably foreseeable needs. As of December 31, 2007,2008, we had excess capital of Ps. 1,8191,772 million (158%(132% of minimum capital requirement). On January 8, 2008, the Board of Directors decided to establish the terms and conditions for the acquisition of its own shares issued by the Bank. See Item 16.
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Minimum capital requirements Our excess capital (representing the amount in excess of minimum reserve requirements of the Central Bank) is as set forth in the table: | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | | As of December 31, | | | | 2005 | | 2006 | | 2007 | | | 2006 | | 2007 | | 2008 | | | | (in thousands of pesos, except | | | (in thousands of pesos, except | | | | ratios and percentages) | | | ratios and percentages) | | Calculation of excess capital: | | | Allocated to assets at risk | | 251,394 | | 549,882 | | 749,855 | | | 549,882 | | 749,855 | | 939,296 | | Allocated to Bank premises and equipment, intangible assets and equity investment assets | | 64,247 | | 81,647 | | 95,729 | | | 81,647 | | 95,729 | | 87,114 | | Market risk(1) | | 21,011 | | 60,547 | | 127,445 | | | 60,547 | | 127,445 | | 49,899 | | Interest rate risk | | 15,136 | | 16,371 | | 102,343 | | | 16,371 | | 102,343 | | 204,510 | | Government sector and securities in investment account | | 14,296 | | 19,746 | | 38,609 | | | 19,746 | | 38,609 | | 60,780 | | Incremental requirement | | — | | 13,328 | | 36.202 | | | 13,328 | | 36,202 | | — | | | | | | | | | | | | | | | | | Required minimum capital under Central Bank Rules | | 366,084 | | 741,521 | | 1,150,183 | | | 741,521 | | 1,150,183 | | 1,341,598 | | | | | | | | | | | | | | | | | Basic net worth | | 1,226,908 | | 2,426,351 | | 2,697,416 | | | 2,426,351 | | 2,697,416 | | 2,688,679 | | Complementary net worth | | 243,124 | | 383,040 | | 461,405 | | | 383,040 | | 461,405 | | 625,756 | | Deductions | | 21,638 | | | (153,115 | ) | | | (189,145 | ) | | | (153,115 | ) | | | (189,145 | ) | | | (200,610 | ) | | | | | | | | | | | | | | | | Total capital under Central Bank Rules | | 1,491,670 | | 2,656,276 | | 2,969,676 | | | 2,656,276 | | 2,969,676 | | 3,113,825 | | | | | | | | | | | | | | | | | Excess capital | | 1,125,586 | | 1,914,755 | | 1,819,493 | | | 1,914,755 | | 1,819,493 | | 1,772,227 | | | | | | | | | | | | | | | | | | | | Selected capital and liquidity ratios: | | | Regulatory capital/risk weighted assets | | | 31.03 | % | | | 31.31 | % | | | 26.81 | % | | | 31.31 | % | | | 26.81 | % | | | 22.95 | % | Average shareholders’ equity as a percentage of average total assets | | | 14.25 | % | | | 16.24 | % | | | 13.87 | % | | | 16.24 | % | | | 13.87 | % | | | 12.69 | % | Total liabilities as a multiple of total stockholders’ equity | | 5.37 | x | | 5.27 | x | | 6.31 | x | | 5.27 | x | | 6.31 | x | | 6.96 | x | Cash as a percentage of total deposits | | | 18.11 | % | | | 26.08 | % | | | 22.94 | % | | | 26.08 | % | | | 22.94 | % | | | 22.26 | % | Liquid assets as a percentage of total deposits(2) | | | 58.65 | % | | | 61.92 | % | | | 52.01 | % | | Liquid assets as a percentage of total deposits (2) | | | | 61.92 | % | | | 52.01 | % | | | 48.80 | % | Loans as a percentage of total assets | | | 36.12 | % | | | 45.00 | % | | | 50.60 | % | | | 45.00 | % | | | 50.60 | % | | | 50.30 | % |
| | | (1) | | Average variance for December. | | (2) | | Liquid assets include cash, cash collateral, LEBACs, NOBACs, and interbanking loans. Since 2004, we includeloans and overnight loans to highly rated companies. |
We believe that our capital resources are sufficient for our present requirements on an individual and a consolidated basis. Funding Our principal source of funding is deposits from individuals and businesses located in Argentina. Deposits include checking accounts, savings accounts and time deposits. The following table sets forth our sources of funding as of December 31, 2005, 2006, 2007, and 2007.2008. | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31 | | | As of December 31, | | | | 2005(1) | | 2006(1) | | 2007 | | | 2006 (1) | | 2007 (1) | | 2008 | | | | (in thousands of pesos) | | | (in thousands of pesos) | | Deposits | | | From the non-financial government sector | | 822,687 | | 1,295,630 | | 1,774,121 | | | 1,295,630 | | 1,774,121 | | 3,937,961 | | From the financial sector | | 5,208 | | 5,078 | | 13,310 | | | 5,078 | | 13,310 | | 22,438 | | From the non-financial private sector and foreign residents | | | | | | | | | Checking accounts | | 1,036,175 | | 1,876,232 | | 2,599,682 | | | 1,876,232 | | 2,599,682 | | 2,581,060 | | Savings accounts | | 1,100,633 | | 2,097,362 | | 2,780,350 | | | 2,097,362 | | 2,780,350 | | 2,716,913 | | Time deposits | | 3,222,011 | | 4,380,981 | | 5,907,005 | | | 4,380,981 | | 5,907,005 | | 6,031,882 | | Investment accounts(2) | | 29,826 | | 18,836 | | 63,063 | | | Investment accounts (2) | | | 18,836 | | 63,063 | | 155,936 | | Other(4)(3) | | 292,767 | | 360,195 | | 391,176 | | | 360,195 | | 391,176 | | 321,020 | | Accrued interest, adjustments and foreign exchange differences payable | | 56,019 | | 36,703 | | 62,442 | | | 36,703 | | 62,442 | | 61,147 | | Borrowing from Central Bank and financial institutions | | | Central Bank (5) | | 217,511 | | 386,089 | | 347,896 | | | 386,089 | | 347,896 | | 302,760 | | Banks and international institutions | | 158,544 | | 182,405 | | 164,829 | | | 182,405 | | 164,829 | | 232,422 | | Financing received from Argentine financial institutions | | 42,259 | | 68,158 | | 160,296 | | | 68,158 | | 160,296 | | 73,806 | | Other | | 186,371 | | 250,096 | | 493,912 | | | 250,096 | | 493,912 | | 627,140 | | Minority interest in subsidiaries | | — | | 78,045 | | 12,640 | | | 78,045 | | 12,640 | | 15,607 | | Corporate Bonds | | — | | — | | 799,537 | | | — | | 799,537 | | 724,873 | | Subordinated Corporate Bonds | | 12,047 | | 507,844 | | 490,695 | | | 507,844 | | 490,695 | | 521,681 | | Shareholders’ equity | | 1,489,652 | | 2,315,097 | | 2,707,706 | | | 2,315,097 | | 2,707,706 | | 2,816,597 | | | | | | | | | | | | | | | | | Total funding | | 8,671,710 | | 13,858,751 | | 18,768,660 | | | 13,858,751 | | 18,768,660 | | 21,143,243 | | | | | | | | | | | | | | | | |
| | | (1) | | See note 4.2. to our audited consolidated financial statements for the year ended December 31, 2007.2008. | | (2) | | Time deposit payable at the option of the depositor. | | (3) | | As of December 31, 2005, deposits include Ps.88.1 million, for CEDROs.
| | (4) | | Primarily includes CEDROs, expired time deposits, and judicial deposits. | | (5) | | For 2005 represents amounts borrowed by Nuevo Banco Suquía from the Central Bank to purchase bonds to deliver to depositors in exchange for their CEDROs. For 2006 also includes amounts attributable to Nuevo Banco Bisel.
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Critical accounting policies Our accounting and reporting policies comply with Central Bank Rules, which differ in certain significant respects from U.S. GAAP. See note 35 to the financial statements for the three years ended December 31, 20072008 included in this annual report for a reconciliation of our audited financial statements to U.S. GAAP. The preparation of our financial statements requires management to make estimates and assumptions. Our financial position and results of operations can be affected by these estimates and assumptions, which are integral to understanding our financial position. Critical accounting policies are those policies that management believes are the most important to the portrayal of our financial condition and results of operations, and require management to make estimates that are subjective or complex. Most accounting policies are not considered by management to be critical accounting. Several factors are considered in determining whether or not a policy is critical in the preparation of our financial statements. These factors include, among others, whether the estimates are material to our financial statements, the nature of the estimates, the ability to readily validate the estimates with other information including information from third parties or available prices, and sensitivity of the estimates to changes in economic conditions and whether alternative accounting methods may be utilized under Central Bank Rules. Significant accounting policies are discussed in note 4 to our audited consolidated financial statements for the three years ended December 31, 2007. Loan loss reserve
The loan loss reserve represents the estimate of probable losses in the loan portfolio. Determining the loan loss reserve requires significant management judgments and estimates including, among others, identifying impaired loans, determining customers’ ability to pay and estimating the fair value of underlying collateral or the expected future cash flows to be received. Actual events will likely differ from the estimates and assumptions used in determining the loan loss reserve. Additional loan loss reserves could be required in the future.
The loan loss reserve is maintained in accordance with the Central Bank’s applicable regulatory requirements. This results from evaluating the degree of debtors’ compliance and the guarantees and collateral supporting the respective transactions.
Increases in the reserve are based on the deterioration of the quality of existing loans, while decreases in the reserve are based on regulations requiring the write-off of non-performing loans classified as irrecoverable after a certain period of time and on management’s decisions to write off non-performing loans evidencing a very low probability of recovery.
Under the Central Bank Rules, a minimum loan loss reserve is calculated primarily based upon the classification of commercial loan borrowers and upon delinquency aging (or the number of days the loan is past due) for consumer and housing loan borrowers. Although we are required to follow the methodology and guidelines for determining the minimum loan loss reserve, as set forth by the Central Bank, we are allowed to establish additional loan loss reserves.
For commercial loans, we are required to classify all commercial loan borrowers. In order to classify them, we must consider different parameters related to each of those customers. In addition, based on the overall risk of the portfolio, we consider whether or not additional loan loss reserves in excess of the minimum required are warranted.
For the consumer loan portfolio, we classify loans based upon delinquency aging, consistent with the requirements of the Central Bank. Minimum loss percentages required by the Central Bank are also applied to the totals in each loan classification.
We record provisions after evaluating the loan portfolio in terms of delay (for consumer loans) or constant monitoring (for commercial loans). This process determines whether an increase or decrease in charges for non-performing loans is required based on our estimate of whether the credit is worsening or improving, or whether the loan is repaid. Our loan loss charges have been historically stable (absent the impact of the Argentine crisis), accommodating qualitative and quantitative changes in the composition of our loan portfolio. We believe that, as a result of the stabilization of the macroeconomic environment, there should not be substantial changes in the assumptions we will make to determine the allowances for loan losses. As a result, we do not believe that more current information will result in our actual results being materially different from our estimates, and therefore, we do not expect the provisions for loan losses to have a significant impact on our net income.
In addition, we have applied the following methods below to reconcile Central Bank Rules to U.S. GAAP.
Credit card loans
We establish a reserve for credit card loans based on the past due status of the loan. All loans without preferred guarantees past due over 180 days have been reserved at 50%, in accordance with Central Bank Rules. Under U.S. GAAP, the Bank adopted a policy to charge off loans which are 180 days past due.
Impaired loans—non-financial private sector and foreign residents
The Bank applies SFAS No. 114, “Accounting by Creditors for Impairment of a Loan” and SFAS No. 118, “Accounting by Creditors for Impairment of a Loan—Income Recognition and Disclosures” for computing U.S. GAAP adjustments. SFAS No. 114, as amended by SFAS No. 118, requires a creditor to measure impairment of a loan based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. SFAS No. 114 is applicable to all loans (including those restructured in a troubled debt restructuring involving amendment of terms), except large groups of smaller-balance homogenous loans that are collectively evaluated for impairment. Loans are considered impaired when, based on management’s evaluation, a borrower will not be able to fulfill its obligation under the original loan terms.
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Interest recognition—non-accrual loans
The method applied to recognize income on loans is described in note 4.4.d of our audited consolidated financial statements for the years ended December 31, 2007. Additionally, the accrual of interest is discontinued generally when the related loan is non-performing and the collection of interest and principal is in doubt, generally after 90 days of being past due. Accrued interest remains on our books and is considered a part of the loan balance when determining the loan loss reserve.
Under U.S. GAAP, the accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectibility of principal or interest, even though the loan is currently performing. When a loan is placed on non-accrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the provision for loan losses.
Certain assets receivable from the government sector
In accordance with Central Bank Rules, we classify our portfolio of government securities into trading and investment securities, unlisted government securities and securities issued by the Central Bank.
Realized and unrealized gains and losses and interest income on government securities are included as “Net Income/(Loss) from Government and Private Securities” in our financial statements.
Guaranteed loans
We have additional guaranteed loans acquired in the market and also through the business combinations that took place during the previous year. The difference between the cost of each acquired loan and its expected future cash flows is accounted for in accordance with PB 6—Amortization of Discounts on Acquired Loans. From 2005, the Bank apply SOP03-3 — “Accounting for certain Loans and Debt Securities Acquired in a transfer” for loans acquired.
Secured bonds
We have outstanding secured bonds to the Argentine government. Pursuant to Central Bank Rules, these loans do not require a loan loss reserve. However, beginning March 2003, Communiqué “A” 3,911 required these bonds to be valued at the lower of their book value or their net present value calculated using an increasing discount rate specified by such Communiqué and supplementary rules. For more information, see note 4 to our audited consolidated financial statements, for the years ended December 31, 2007.
Under U.S. GAAP, as mentioned above, and in light of the characteristics of the transaction, we considered this transaction to be in line with SFAS No. 15 “Accounting by Debtors and Creditors for Troubled Debt Restructurings.”
According to SFAS No. 15, a creditor in a troubled debt restructuring involving only a modification of terms of a receivable-that is, not involving receipt of assets (including an equity interest in the debtor)-shall account for the troubled debt restructuring in accordance with the provisions of Statement No. 114.
As of December 31, 2002, considering that such assets were presented but not documented or finally accepted, as established by such exchange regulations, they were not considered as government securities.
In accordance with SFAS No. 114 “Accounting by Creditors for Impairment of a Loan”, as of December 31, 2001, and 2002, we measured impairment based on the present value of expected future cash flows discounted at the asset’s effective interest rate, with a corresponding charge to bad-debt expense or by adjusting an existing valuation allowance for the impaired assets with a corresponding charge or credit to bad-debt expense.
During 2003, we received government securities known as Secured Bonds (BOGAR), which are securities available for sale and accounted for in accordance with SFAS No. 115.
These BOGAR are classified by us for U.S. GAAP purposes as available-for-sale securities and carried at fair value with the unrealized gain or loss, net of income tax, recognized as a charge or credit to equity through other comprehensive income. We used quoted market values to estimate the fair value of the BOGAR.2008.
Income tax In estimating accrued taxes, we assess the relative merits and risks of the appropriate tax treatment considering statutory, judicial and regulatory guidance in the context of the tax position. Because of the complexity of tax laws and regulations, interpretation can be difficult and subject to legal judgment and given specific facts and circumstances. It is possible that others, given the same information, may at any point reach different reasonable conclusions regarding the estimated amounts of accrued taxes.
Changes in the estimate of accrued taxes occur periodically due to changes in tax rates, interpretations of the status of examinations being conducted by various taxing authorities, and newly-enacted statutory and regulatory guidance that impact the relative merits and risks of tax positions. These changes, when they affect accrued taxes, can be material to our operating results. As explained in note 6 to our audited consolidated financial statements, Central Bank Rules do not require the recognition of deferred tax assets and liabilities and, therefore, income tax is recognized on the basis of amounts due in accordance with Argentine tax regulations and no deferred tax and liabilities are recognized. For purposes of U.S. GAAP reporting, the Bank applies SFAS No. 109 “Accounting for U.S. Income Taxes.” Under this method, income tax is recognized based on the liability method whereby deferred tax assets and liabilities are recorded for temporary differences between the financial reporting and tax basis of assets and liabilities at each reporting date. A valuation allowance is provided for the deferred tax assets to the extent that it is more likely than not that they will not be realized.realized, based on the weight of available evidence. The carrying amounts of those deferred tax assets are subject to management’s judgment based on available evidence that realization is more likely than not and they are reduced, if necessary, by a valuation reserve. In the event that all or part of our net deferred tax assets in the future become realizable under U.S. GAAP, an adjustment to our deferred tax assets would be credited to income tax expense in the period when the determination was made. Effective January 1, 2007, the company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The adoption of FIN 48 did not have an impact on Banco Macro’s financial position. There were no unrecognized tax benefits as of the date of adoption and as of December 31, 2007.2008. 69
Exposure to the Argentine Public Sector and Private Securities Guaranteed Loans During the fiscal year ended December 31, 2001, and as a consequence of Presidential Decree No. 1,387/01, the Bank exchanged a portion of federal government securities effective as of November 6, 2001, and received so-called guaranteed loans in consideration thereof. The loans received in this exchange were not significant. Guaranteed loans were valued according to Central Bank Communiqué “A” 3,911, as supplemented. We have additional guaranteed loans acquired in the market and also through business combinations. Under USGAAP, since 2005, the difference between the cost of each acquired loan and its expected future cash flows is accounted for in accordance with SOP 03-3 — “Accounting for Certain Loans and Debt Securities Acquired in a Transfer”. In accordance with paragraph 8 of SOP 03-3, the Bank should continue to estimate cash flows expected to be collected over the life of the loan. As of December 31, 2008, based on current information and events, the Bank estimated that the guaranteed loans were impaired, applying SFAS 114 “Accounting by Creditors for Impairment of a Loan” and SFAS No. 118, “Accounting by Creditors for Impairment of a Loan — Income Recognition and Disclosures” for computing U.S. GAAP adjustments. SFAS No. 114, as amended by SFAS No. 118, requires a creditor to measure impairment of a loan based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. Government and private securities Secured bonds We have Secured Bonds (BOGARs). Since March 2003, Central Bank Communiqué “A” 3,911 required these bonds to be valued at the lower of their book value or their net present value calculated using an increasing discount rate specified by such Communiqué and supplementary rules. As of December 31, 2007 and 2006, they were classified as holding for trading or intermediation. As of December 31, 2008, a significant portion of them is classified as holding in special investment accounts in accordance with Central Bank rules. For more information, see note 4.4.b.1) and b.2) to our audited consolidated financial statement, for the year ended December 31, 2008. These BOGARs are classified for US GAAP purposes as available for sale securities and carried at fair value with the unrealized gain or loss, net of income taxes, recognized as a charge or credit to equity through other comprehensive income in accordance with SFAS No. 115 “Accounting for certain investment in debt or equity securities”. In connection with estimating the fair value of the BOGARs, the Bank used quoted market values. Instruments issued by Central Bank of Argentina and other securities In accordance with Central Bank Rules, we classify our portfolio of government securities into trading holding in investment accounts, unlisted securities (mainly government securities and Corporate Bonds) and securities issued by the Central Bank. For more information, see note 4.4.b.2) to our audited consolidated financial statements, for the year ended December 31, 2008. According to US GAAP, these securities should be considered as “available for sale” and carried at fair value, with unrealized gains and losses reported as net of income tax within the shareholders’ equity accounts. However, SFAS No.115 requires that if the decline in fair value is judged to be other than temporary, the cost of the security shall be written down to fair value, and the write down amount shall be included in earnings. The Bank has evaluated the changes in the argentine macroeconomic environment and this decline in fair value to determine whether it is other than temporary and has not recognized any other than temporary impairment for these securities for the fiscal year ended December 31, 2008 related to the following reasons: a) | | The decline is attributable solely to adverse interest rate movements, and has not connection with a credit event; | | b) | | The principal and interest payments have been made as scheduled, and there is not evidence that the debtor will not continue to do so; | | c) | | The Bank has the intention and the ability to hold the security at least until the fair value of the security recovers to a level that exceeds the security’s amortized costs. |
Allowance for loan losses The loan loss reserve represents the estimate of probable losses in the loan portfolio. Determining the loan loss reserve requires significant management judgments and estimates including, among others, identifying impaired loans, determining customers’ ability to pay and estimating the fair value of underlying collateral or the expected future cash flows to be received. Actual events will likely differ from the estimates and assumptions used in determining the loan loss reserve. Additional loan loss reserves could be required in the future. 70
The loan loss reserve is maintained in accordance with the Central Bank rules. This results from evaluating the degree of debtors’ compliance and the guarantees and collateral supporting the respective transactions. Increases in the reserve are based on the deterioration of the quality of existing loans, while decreases in the reserve are based on regulations requiring the write-off of nonperforming loans classified as “non-recoverable” after a certain period of time and on management’s decisions to write off non-performing loans evidencing a very low probability of recovery. Under the Central Bank rules, a minimum loan loss reserve is calculated primarily based upon the classification of commercial loan borrowers and upon delinquency aging (or the number of days the loan is past due) for consumer and housing loan borrowers. Although, we are required to follow the methodology and guidelines for determining the minimum loan loss reserve, as set forth by the Central Bank, we are allowed to establish additional loan loss reserve. For commercial loans, we are required to classify all commercial loan borrowers. In order to classify them, we must consider different parameters related to each of those customers. In addition, based on the overall risk of the portfolio, we consider whether or not additional loan loss reserves in excess of the minimum required are warranted. For the consumer loan portfolio, we classify loans based upon delinquency aging, consistent with the requirements of the Central Bank. Minimum loss percentages required by the Central Bank are also applied to the totals in each loan classification. We record provisions after evaluating the loan portfolio in terms of delay (for consumer loans) or constant monitoring (for commercial loans). This process determines whether an increase or decrease in charges for non-performing loans is required based on our estimate of whether the credit is worsening or improving, or whether the loan is repaid. Our loan loss charges have been historically stable (absent the impact of the Argentine crisis), accommodating qualitative and quantitative changes in the composition of our loan portfolio. As we are all aware, the world’s economy is sustaining a highly virulent crisis that is affecting, to a lesser or larger extent, the levels of economic activity and employment and dragging down foreign trade. This scenario leads us to the assumption that some of the loans that currently make up our portfolio might sustain an impairment in value. Therefore, the Executive Committee has decided to increase the allowance for loan losses related to the loan portfolio as of December 31, 2008 to such amounts presently required by regulators. In addition, we have applied the following methods below to reconcile Central Bank Rules to U.S. GAAP. Credit card loans We establish a reserve for credit card loans based on the past due status of the loan. All loans without preferred guarantees past due over 180 days have been reserved at 50%, in accordance with Central Bank Rules. Under U.S. GAAP, the Bank adopted a policy to charge off loans which are 180 days past due. Impaired loans — Non Financial Private Sector and residents abroad The Bank applies SFAS No. 114, “Accounting by Creditors for Impairment of a Loan” and SFAS No. 118, “Accounting by Creditors for Impairment of a Loan — Income Recognition and Disclosures” for computing U.S. GAAP adjustments. SFAS No. 114, as amended by SFAS No. 118, requires a creditor to measure impairment of a loan based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. SFAS No. 114 is applicable to all loans (including those restructured in a troubled debt restructuring involving amendment of terms), except large groups of smaller-balance homogenous loans that are collectively evaluated for impairment. Loans are considered impaired when, based on management’s evaluation, a borrower will not be able to fulfill its obligation under the original loan terms. Interest recognition — non-accrual loans The method applied to recognize income on loans is described in note 4.4.d of our audited consolidated financial statements for the year ended December 31, 2008. Additionally, the accrual of interest is discontinued generally when the related loan is non-performing and the collection of interest and principal is in doubt, generally after 90 days of being past due. Accrued interest remains on our books and is considered a part of the loan balance when determining the loan loss reserve. Under U.S. GAAP, the accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectibility of principal or interest, even though the loan is currently performing. When a loan is placed on non-accrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the provision for loan losses. Business combination We acquire financial institutions and, in some circumstances, acquire the assets and liabilities or branches of other financial institutions. According to Central Bank Rules, such transactions are recorded considering the values of the assets acquired, which are valued according to such rules and the price paid. In the process of these acquisitions, the Bank may record intangibles. Negative goodwill, if any, is amortized under the straight-line method over 5 years or charged to income depending on the reasons therefor.therefore. 71
The Central Bank established the methods for disclosure and amortization of negative goodwill, as well as the treatment thereof in the merger process. Such amortization methods depend on the reasons that originated such negative goodwill and are summarized: (a) for differences between book and fair values of government securities and guaranteed loans over the period of convergence of these values; (b) for differences between book and current values of the loan portfolio during the effective period thereof; (c) for expected future losses, upon occurrence thereof; or (d) for differences between book and current values of non-monetary assets, during the amortization period of these assets. Positive goodwill, if any, is amortized based on estimated useful life. Under U.S. GAAP, a business combination occurs when an entity acquires net assets that constitute a business or acquires equity interests of one or more entities and obtains control over that entity or entities. The acquisition of all or part of a financial institution that meets the definition of a business combination is accounted for by the purchase method. The cost of an acquired entity shall be allocated to the assets acquired including intangible assets and liabilities based on their estimated fair values at the date of acquisition. The difference between the purchase price and the fair value of the net assets acquired results in a negative goodwill or positive goodwill. The negative goodwill can be applied to reduce, on a pro rata basis, the amounts assigned to the non-current assets acquired and the surplus, if any, is charged to income for the year. Positive goodwill, if any, should be analyzed to determine whether it is amortizable and in which periods it is amortized, or if it continues not amortized but it is tested for impairment annually. Fair value of financial instruments SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, SFAS 157 has established a hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows: Level 1: Unadjusted quoted prices for identical assets or liabilities in an active market that Banco Macro has the ability to access. Level 2: Other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include the following: | a) | | Quoted prices for similar assets or liabilities in active markets; | | | b) | | Quoted prices for identical or similar assets or liabilities in less-active markets; | | | c) | | Pricing models whose inputs are observable for substantially the full term of the asset or liability; and |
| d) | | Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability. |
Level 3: Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability. We use fair value to measure certain assets and liabilities on a recurring basis when fair value is the primary measure for accounting. This is done primarily for government and private securities (debt instruments issued by National Government and B.C.R.A., shares, mutual funds and corporate bonds) classified as available for sale or trading account, forward transactions pending settlement and derivatives (forward transactions without delivery of underlying assets and interest rate swaps). Fair value is also used when evaluating impairment on certain assets including available for sale securities, intangibles, long-lived assets, and for annual disclosures required by SFAS No. 107, Disclosures about Fair Value of Financial Instruments. C. Research and Development, Patents and Licenses, Etc. Not applicable. D. Trend Information At the end of fiscal 2007,2008, we becamewere the first private bank in shareholders’ equity terms, the second bank as to loans to the private sector and the third bank as to deposits, thus becoming the private network with the most branches in the interior of Argentina. This great spreading over Argentine regional economies and the sectors that are availing themselves of the economic recovery imply a key advantage with respect to other banks upon competing in the credit expansion service in Argentina. In addition, this strong network of branches and the functions of financial agents from different provinces provide us with a source of growth and low costs in its deposit base. 7372
We have experience in generating and marketing bank products aimed at a broad population segment that was not supplied by the traditional bank system: | • | | The use of bank services by state and private employees and retirees through the opening of savings accounts. | | | • | | Granting of personal loans to state and private employees and retirees. | | | • | | The delivery of limited-risk credit cards as a result of diversification and the automatic debit of the minimum account payment. | | | • | | Marketing of other types of services, such as insurance, interbank transfers, service payments, etc. |
The use of bank services by state and private employees and retirees through the opening of savings accounts. Granting of personal loans to state and private employees and retirees. The delivery of limited-risk credit cards as a result of diversification and the automatic debit of the minimum account payment. Marketing of other types of services, such as insurance, interbank transfers, service payments, etc. This penetration strategy permitted the bank to generate a significant commercial portfolio, based on the experience of small- and medium-sized enterprises engaged in regional activities, thus consolidating this portfolio with another one aimed at large local and international companies traditionally operating with the financial system. The combination of these factors permitted to create a funding/use matrix in two types of markets, natural persons deriving from segments with medium or low bank services use and companies, which form the pillar of the bank’s strategy: | • | | Creating an excellent source of resources with very low volatility and costs. | | | • | | Expanding the portfolio related to loans distributed among a significant number of people, the risk in this type of financing being relatively low. | | | • | | Applying the market’s lowest rates in personal loans and credit cards, thus enabling the systematic growth of loan stock. | | | • | | Fixing strategic agreements with companies to allow the bank to place commercial loans in companies with profitable projects and growth prospects, and providing new individuals’ accounts simultaneously to allow them to receive their salaries. |
Creating an excellent source of resources with very low volatility and costs. Expanding the portfolio related to loans distributed among a significant number of people, the risk in this type of financing being relatively low. Applying the market’s lowest rates in personal loans and credit cards, thus enabling the systematic growth of loan stock. Fixing strategic agreements with companies to allow the bank to place commercial loans in companies with profitable projects and growth prospects, and providing new individuals’ accounts simultaneously to allow them to receive their salaries. Experience provides us with the excellent opportunity to repeat such experience in all Argentine regions, even in the urban centers in which the financial market has not had an active presence permanently. However, there are segments related to population or small- and medium-sized enterprises that are hardly supplied with bank products. We will continue with its diversification and atomization strategy regarding the credit portfolio, thus enabling to obtain satisfactory efficiency, growth, security and profitability in commercial management. It also intends to stress its presence in the assistance to small- and medium-sized enterprises, emphasizing the election of dynamic economic sectors and growth potential in industrial, commercial and service areas for the purpose of contributing to companies’ expansion and ensuring an acceptable return of the funds assigned. At the same time, a complete range of corporate financial services will be offered, including exports and imports financing, letters of credit confirmation and opening, and granting guarantees to third parties on behalf of its customers. Please see “Item 5 — Operating and financial review and prospects — Principal trends affecting our business”. E. Off-Balance Sheet Arrangements We enter into various transactions involving off-balance sheet financial instruments (see Note 33 to the Consolidated Financial Statements). We use these instruments to meet the risk management, trading and financing needs of clients or for our proprietary trading and asset and liability management purposes. These instruments are subject to varying degrees of credit and market risk. We monitor credit risk and market risk associated with on- and off-balance sheet financial instruments on an aggregate basis. We use the same credit policies in determining whether to enter or extend option contracts, commitments, conditional obligations and guarantees as we do for granting loans. Our management believes that the outstanding off-balance sheet items do not represent an unusual credit risk. F. Contractual Obligations The following table represents our contractual obligations and commercial commitments as of December 31, 2007:2008: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Payments due by period | | | Payments due by period | | | | Less than | | After | | | Less than | | After | | | | Total | | 1 year | | 1–3 years | | 3–5 years | | 5 years | | | Total | | 1 year | | 1-3 years | | 3-5 years | | 5 years | | | | (in thousands of pesos) | | | (in thousands of pesos) | | Contractual obligations | | | Central Bank(1) | | 347,896 | | 72,526 | | 137,417 | | 137,419 | | 534 | | | 302,760 | | 78,939 | | 148,857 | | 74,539 | | 425 | | Banks and international institutions | | 164,829 | | 7,279 | | 157,550 | | — | | — | | | 232,422 | | 59,737 | | 172,685 | | — | | — | | Corporate Bonds | | 799,537 | | 18,947 | | — | | 307,940 | | 472,650 | | | 724,873 | | 16,518 | | — | | 303,321 | | 405,034 | | Financing received from Argentine financial institutions | | 160,296 | | 119,038 | | 5,865 | | 7,280 | | 28,113 | | | 73,806 | | 31,846 | | 7,649 | | 7,867 | | 26,444 | | Operating leases | | | 49,199 | | 17,516 | | 25,388 | | 2,097 | | 4,198 | | Other | | 493,912 | | 412,161 | | 7,280 | | 3,104 | | 71,367 | | | 627,140 | | 545,183 | | 6,193 | | 2,751 | | 73,013 | | Subordinated corporate bonds | | 490,695 | | 16,404 | | 1,641 | | — | | 472,650 | | | 521,681 | | 2,740 | | 886 | | — | | 518,055 | | | | | | | | | | | | | | | | | | | | | | | | | Total contractual obligations | | 2,457,165 | | 646,355 | | 309,753 | | 455,743 | | 1,045,314 | | | 2,531,881 | | 752,479 | | 361,658 | | 390,575 | | 1,027,169 | | | | | | | | | | | | | | | | | | | | | | | | | Commercial commitments | | | Lines of credit | | 35,842 | | 35,842 | | — | | — | | — | | | 13,502 | | 13,502 | | — | | — | | — | | Guarantees | | 337,825 | | 125,117 | | 101,528 | | 90,172 | | 21,008 | | | 283,246 | | 118,529 | | 89,232 | | 48,184 | | 27,301 | | Standby letters of credit | | 95,565 | | 94,537 | | 247 | | 781 | | — | | | 76,583 | | 51,551 | | 25,032 | | — | | — | | | | | | | | | | | | | | | | | | | | | | | | | Total commercial commitments | | 469,232 | | 255,496 | | 101,775 | | 90,953 | | 21,008 | | | 373,331 | | 183,582 | | 114,264 | | 48,184 | | 27,301 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | (1) | | As mentioned in note 2, to our audited consolidated financial statements for the year ended December 31, 2008., during January and February 2009, as set forth by Central Bank resolution No. 06/2009 the Bank and its subsidiary Nuevo Banco Bisel S.A. have decided to prepay to payable amounts resulting from loans received to acquire Argentine government bonds intended for the depositors of former Nuevo Banco Suquia S.A and Nuevo Banco Bisel S.A in the amount of 291,609 (see note 7.2.b to our audited consolidated financial statements for the year ended December 31, 2008). |
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Item 6. Directors, Senior Management and Employees A. Directors and Senior Management We are managed by our board of directors, which is currently comprised of tentwelve members and four alternate members. Currently, the shareholders present at any annual ordinary meeting may determine the size of the board of directors, provided that there shall be no less than three and no more than twelve directors. Any director so appointed will serve for one fiscal year. At the shareholders’ meeting on September 26, 2005, our shareholders adopted an amendment to our bylaws that modifies the term for service and the process of election of directors. According to the amendment, each director’s term will be three fiscal years. If the shareholders elect more than eight board members, each director will be re-elected as a staggered board. The shareholders will designate approximately one-third of the directorsboard, to be re-elected one year later, one-third to be re-elected two years later, and one-third to be re-electedrenewed by thirds, provided that in all cases no less than three years later. Each group must contain at least three directors. After the first term, directors shall be electedrenewed each time. The annual ordinary shareholders’ meeting may also appoint an equal or lesser number of alternate directors, to hold office for three-year terms.the same term than regular directors, to fill any vacancy in the board occurring for any reason whatsoever, and shall further determine the order of substitution. Alternate directors shall hold office until the regular directors in whose place they have acted as substitutes shall resume office, and in case any such absence is permanent, until the next ordinary meeting of shareholders where at directors shall be appointed. Both regular and alternate directors may be re-elected indefinitely. DUTIES AND LIABILITIES OF DIRECTORS Under Argentine corporate law, directors have the obligation to perform their duties with the loyalty and the diligence of a prudent business person. Directors are jointly and severally liable to a corporation, the shareholders and third parties for the improper performance of their duties, for violating the law, the corporation’s bylaws or regulations, if any, and for any damage caused by fraud, abuse of authority or gross negligence. The following are considered integral to a director’s duty of loyalty: (i) the prohibition on using corporate assets and confidential information for private purposes; (ii) the prohibition on taking advantage, or to allow another to take advantage, by action or omission, of the business opportunities of the company; (iii) the obligation to exercise board powers only for the purposes for which the law, the corporation’s bylaws or the shareholders’ or the board of directors’ resolutions have intended; and (iv) the obligation to take strict care so that acts of the board do not go, directly or indirectly, against the company’s interests. A director must inform the board of directors and the supervisory committee of any conflicting interest he may have in a proposed transaction and must abstain from voting thereon. Under Argentine law, the board of directors is in charge of the management and administration of the Bank and, therefore, makes any and all decisions in connection therewith, as well as those decisions expressly provided for in the Argentine corporate law, the Bank’s bylaws and other applicable regulations. Furthermore, the board is generally responsible for the execution of the resolutions passed by shareholders meetings and for the performance of any particular task expressly delegated by the shareholders. In general, our board of directors is more involved in operating decision-making than might be customary in other jurisdictions. BOARD OF DIRECTORS The following table sets forth information about the members and alternate members of our board of directors as of December 31, 2007:2008: | | | | | | | | | | | | | | | | | | | | | Year of | | | Year of | | | Year First | | Expiration of | | | Year First | | Expiration of | Name | | Position | | Age | | Appointed | | Term | | | Position | | Age | | Appointed | | Term | Jorge Horacio Brito | | Chairman | | 55 | | 2002 | | 2008 | | | Chairman | | 56 | | 2002 | | 2008 | Delfín Jorge Ezequiel Carballo | | Vice Chairman | | 55 | | 2002 | | 2008 | | | Vice Chairman | | 56 | | 2002 | | 2008 | Jorge Pablo Brito | | Director | | 28 | | 2002 | | 2008 | | | Director | | 29 | | 2002 | | 2008 | Juan Pablo Brito Devoto | | Director | | 47 | | 2002 | | | 2007 | (1) | | Director | | 48 | | 2002 | | 2010 | Roberto Julio Eilbaum | | Director | | 63 | | 2002 | | | 2007 | (1) | | Director | | 64 | | 2002 | | 2010 | Luis Carlos Cerolini | | Director | | 53 | | 2002 | | | 2007 | (1) | | Director | | 54 | | 2002 | | 2010 | Carlos Enrique Videla | | Director | | 62 | | 2002 | | 2009 | | | Director | | 63 | | 2002 | | 2009 | Alejandro Macfarlane | | Director | | 42 | | 2005 | | 2009 | | | Director | | 43 | | 2005 | | 2009 | Guillermo Eduardo Stanley | | Director | | 59 | | 2006 | | 2009 | | | Director | | 60 | | 2006 | | 2009 | Constanza Brito | | Director | | 26 | | 2007 | | 2009 | | | Director | | 27 | | 2007 | | 2009 | Mario Eduardo Bartolomé | | Alternate director | | 62 | | 2004 | | 2008 | | | Alternate director | | 63 | | 2004 | | 2008 | Ernesto Eduardo Medina | | Alternate director | | 40 | | 2002 | | 2008 | | | Alternate director | | 41 | | 2002 | | 2008 | Marcos Brito | | Alternate director | | 25 | | 2007 | | 2008 | | | Alternate director | | 26 | | 2007 | | 2008 | Fernando Raúl García Pulles | | Alternate director | | 52 | | 2007 | | 2008 | | | Alternate director | | 53 | | 2007 | | 2008 |
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The following table sets forth information about the members and alternate members of our board of directors elected by the Ordinary and Extraordinary Shareholders’ Meeting held on April 21, 2009. | | | | | | | | | | | | | | | | | Year of | | | | | | | Year First | | Expiration of | Name | | Position | | Age | | Appointed | | Term | Jorge Horacio Brito | | Chairman | | 56 | | 2002 | | 2011 | Delfín Jorge Ezequiel Carballo | | Vice Chairman | | 56 | | 2002 | | 2011 | Jorge Pablo Brito | | Director | | 29 | | 2002 | | 2011 | Marcos Brito | | Director | | 26 | | 2007 | | 2011 | Hugo Alvarez (1) | | Director | | 59 | | 2009 | | 2011 | Juan Pablo Brito Devoto | | Director | | 49 | | 2002 | | 2010 | Roberto Julio Eilbaum | | Director | | 64 | | 2002 | | 2010 | Luis Carlos Cerolini | | Director | | 55 | | 2002 | | 2010 | Carlos Enrique Videla | | Director | | 64 | | 2002 | | 2009 | Alejandro Macfarlane | | Director | | 43 | | 2005 | | 2009 | Guillermo Eduardo Stanley | | Director | | 61 | | 2006 | | 2009 | Constanza Brito | | Director | | 27 | | 2007 | | 2009 | Mario Eduardo Bartolomé | | Alternate director | | 63 | | 2004 | | 2011 | Ernesto Eduardo Medina | | Alternate director | | 42 | | 2002 | | 2011 | Delfin Federico Ezequiel Carballo (1) | | Alternate director | | 24 | | 2009 | | 2011 | Fernando Raúl García Pulles | | Alternate director | | 54 | | 2007 | | 2011 |
| | | (1) | | Re-elected by the Ordinary and Extraordinary Shareholders’ Meeting held on April 29, 2008.Central Bank authorization is still pending.
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The following family relationships exist within the board of directors: (i) Chairman Jorge Horacio Brito and Vice Chairman Delfín Jorge Ezequiel Carballo are brothers-in-law; (ii) Directors Jorge Pablo Brito and Marcos Brito are the sons of Chairman Jorge Horacio Brito and the nephews of vice chairman Delfín Jorge Ezequiel Carballo; (iii) Director Constanza Brito is the daughter of Chairman Jorge Horacio Brito and the niece of vice chairman Delfín Jorge Ezequiel Carballo; (iv) Chairman Jorge Horacio Brito and Director Juan Pablo Brito Devoto are cousins andcousins; (v) Directors Jorge Pablo Brito, Marcos Brito and Constanza Brito are siblings.siblings; and (vi) Delfín Federico Ezequiel Carballo is the son of Vice Chairman Delfín Jorge Ezequiel Carballo and the nephew of Chairman Jorge Horacio Brito. SENIOR MANAGEMENT Our senior management oversees our day-to-day operations to ensure that our overall strategic objectives are being implemented and reports to our chief executive officer and our chief financial officer. In addition, we have the following committees comprised of different directors and senior management: internal audit committee, senior credit committee, executive committee and operations and systems committee. The following table sets forth certain relevant information of our executive officers and our senior management as of December 31, 2007:2008: | | | | | | | | | | | | | | | Year First | | | Year First | Names | | Position | | Age | | Appointed | | | Position | | Age | | Appointed | Jorge Horacio Brito | | Chief Executive Officer | | 55 | | 2002 | | | Chief Executive Officer | | 56 | | 2002 | Delfín Jorge Ezequiel Carballo | | Chief Financial Officer | | 55 | | 2002 | | | Chief Financial Officer | | 56 | | 2002 | Juan Pablo Brito Devoto | | Chief Accounting Officer | | 48 | | 2002 | | | Chief Accounting Officer | | 49 | | 2002 | Jorge Pablo Brito | | Coordinator of the Executive Committee | | 28 | | 2006 | | | Coordinator of the Executive Committee | | 29 | | 2006 | Guillermo Goldberg | | Deputy general manager | | 50 | | 2005 | | | Deputy general manager | | 51 | | 2005 | Ernesto Eduardo Medina | | | Systems and Technology manager | | 42 | | 2007 | Jorge Francisco Scarinci | | Financial and Investor relations manager | | 37 | | 2006 | | | Financial and Investor relations manager | | 38 | | 2006 | Ana María Magdalena Marcet | | Credit risk manager | | 46 | | 2002 | | | Credit risk manager | | 47 | | 2002 | Miguel Gurfinkiel | | Government portfolio manager | | 57 | | 2006 | | | Government portfolio manager | | 58 | | 2006 | Horacio Sistac | | Corporate banking manager | | 51 | | 2005 | | | Corporate banking manager | | 52 | | 2005 | María Begoña Pérez de Solay | | Retail banking manager | | 36 | | 2002 | | | Francisco Muro | | | Retail banking manager | | 35 | | 2008 | Brian Anthony | | Branch network manager | | 34 | | 2005 | | | Branch network manager | | 35 | | 2005 | Eduardo Roque Covello | | Operations manager | | 50 | | 2006 | | | Operations manager | | 51 | | 2006 | Máximo Eduardo Lanusse | | Administration manager | | 34 | | 2007 | | | Administration manager | | 35 | | 2007 | Daniel Hugo Violatti | | Accountancy and Tax manager | | 44 | | 2003 | | | Accountancy and Tax manager | | 46 | | 2003 | Constanza Brito | | Human Resources manager | | 26 | | 2005 | | | Human Resources manager | | 27 | | 2005 | Carmen Esther Estévez | | Internal audit manager | | 50 | | 2002 | | | Internal audit manager | | 51 | | 2002 | Francisco Martín Sguera | | Legal manager | | 35 | | 2005 | | | Ernesto López | | | Legal manager | | 36 | | 2008 | Milagro Medrano | | Institutional relations manager | | 31 | | 2002 | | | Institutional relations manager | | 32 | | 2002 | Gerardo Alvarez | | | Security and Fraud control manager | | 39 | | 2008 |
Set forth below are brief biographical descriptions of the members of our board of directors and our senior management.management as of December 31, 2008. The business address of each of our current directors and management is Sarmiento 447, Buenos Aires, Republic of Argentina. 75
Jorge Horacio Brito was born on July 23, 1952. He is the chairman of our board of directors and member of our executive committee and senior credit committee. He has been with our bank since June 1988. Mr. Brito is the chairman ofAsociación de Bancos Argentinos(Argentine Bank Association orADEBA). He also serves as chairman of the board of directors ofNuevo Banco Bisel S.A., Banco del Tucumán S.A., Sud Inversiones y Análisis S.A.,Macro Securities S.A. Sociedad de BolsaandInversora Juramento S.A. Delfín Jorge Ezequiel Carballo was born on November 21, 1952. He is the vice-chairman of our board of directors and a member of our executive committee and our senior credit committee. Mr. Carballo holds a law degree from the Law School of the Catholic University in Argentina. He has been with our bank since June 1988. Mr. Carballo also serves as vice-chairman of the board of directors ofNuevoBancoNuevo Banco Bisel S.A., Banco del Tucumán S.A., Sud Inversiones y Análisis S.A.,andMacro Securities S.A. Sociedad de BolsaandInversora Juramento S.A.Bolsa. Jorge Pablo Brito was born on June 29, 1979. He is a member of our board of directors, the coordinator of our executive committee and a member of our senior credit committee, our technology and systems committee and our internal audit committee. He has been a member of the board since June 2002. Mr. Brito also serves as chairman of the board of directors ofMacro Warrants S.A.S.A,, Macro Valoresas vice-chairman of the board of directors ofInversora Juramento S.A and Red Innova Administradora de Fondos S.A.. and as director ofNuevo Banco Bisel S.A., Banco del Tucumán S.A.,Sud Inversions y Análisis S.A.,andMacro Securities S.A. Sociedad de BolsaBolsa. andInversora Juramento S.A.. Juan Pablo Brito Devoto was born on March 25, 1960. He is a member of our board of directors, our internal audit committee and our technology and systems committee. He has been with our bank since December 1992. Mr. Brito Devoto holds an accounting degree from the School of Economics of the University of Buenos Aires in Argentina. Mr. Brito Devoto serves as a chairman of the board of directors ofMacro Bank, LTD.and as vice-chairman of the board of directorsMacro Valores S.A..Mr. Brito Devoto also serves as director ofNuevo Banco Bisel Banco del Tucumán,S.A., and Sud Inversiones y Análisis S.AS.A. and Red Innova Administradoraas alternate director ofBanco del Tucumán S.A.andMacro Securities S.A. Sociedad de Fondos S.A.Bolsa. Roberto Julio Eilbaum was born on December 23, 1944. He is a member of our board of directors, and has been a member of the board since June 2002. Mr. Eilbaum holds a law degree from the Law School of the University of Buenos Aires in Argentina. Mr. Eilbaum also serves as alternate director ofNuevo Banco BiselBiselS.A.andBanco del Tucumán.n S.A. 76
Luis Carlos Cerolini was born on January 27, 1954. He is a member of our board of directors and has been a member of the board since April 2000. Mr. Cerolini holds a law degree and a masters in legal foreign affairs from the Law School ofgranted by the National University of Córdoba in Argentina. Mr. Cerolini also serves as vice-chairman ofProvincanje S.A.and director ofNuevo Banco Bisel S.A.,Banco del Tucumán S.A., Sud Inversiones y Análisis S.A.,Macro Securities S.A. Sociedad de Bolsa, Macro Warrants S.A., Macro Valores S.A.andACH S.A. Cámara Compensadora Electrónica. Carlos Enrique Videla was born on March 21, 1945. He is a member of our board of directors and an independent member of our audit committee and our internal audit committee. He has been a member of the board since December 1999. Mr. Videla holds a law degree from the Law School of the Catholic University of Argentina. Mr. Videla also serves as alternate director ofNuevo Banco Bisel.Bisel S.A. Alejandro Macfarlane was born on August 16, 1965. He is a member of our board of directors, and has been a member since April 2005, and is an independent member of our audit committee. He also serves as chairman of the board of directors ofEmpresa Distribuidora y Comercializadora Norte or Edenor S.A.S.A. Guillermo Eduardo Stanley was born on April 27, 1948. He has worked for the Company since May 2005 and he has been a member of our board of directors since May 2006. He is an independent member of our audit committee. He also serves as chairmandirector of theHavanna S.A. Hugo Alvarez was born on August 21, 1949. He is a member of our board of directors,Havanna S.A. and has been a member since April 2009, Mr. Alvarez holds an accountant degree from the La Plata National University. He also serves as chairman of M.A.P Consultant. Constanza Brito was born on October 2, 1981. She is the Human Resources manager for the Bank. Ms. Brito has a degree in Human resources from the University of Salvador. She has been a member of our staff since May 2005. Ms. Brito also serves as alternate director ofBanco del Tucumán.n S.A. Mario Eduardo Bartolomé was born on August 12, 1945. He is an alternate member of our board of director and has served on the board since July 2004. Delfín Federico Ezequiel Carballo was born on July 4, 1984. He holds an economics degree from the Universidad Torcuato Di Tella. He is an alternate member of our board of directors. Ernesto Eduardo Medina was born on January 9, 1967. He is an alternate member of our board of directors, and a member of our technology and systems committee. He has been a member of our staff since February 1989. Mr. Medina holds a public accountant and business administration degree from the School of Economics of the University of Buenos Aires in Argentina. In addition, Mr. Medina holds a degree in systems analysis from the University of Buenos Aires in Argentina. Mr. Medina also serves as director ofNuevo Banco BiselandMercado Abierto Electrónico S.A. or MAEand as alternate director of Banco del Tucumán. Marcos Brito was born on October 5, 1982. He holds an economics degree from the Universidad Torcuato Di Tella. He is a member of a board of directors ofNuevo Banco BiselS.A. and an alternate member of our board of directors. Fernando Raúl García Pulles was born on April 15, 1955. He has two legal titles, that of lawyer, and Doctor of Juridical Sciences, both granted by the Catholic University of Argentina. Mr. García Pulles served as Subprocurer for the nation’s treasury from 1991 to 1995. He is a partner ofEstudio García Pulles-Calatrava & Asociadosand off-counsel lawerlawyer inEstudio O’Farrell. 76
Guillermo Goldberg was born on January 30, 1957. He is our AssistantDeputy general manager. Mr. Goldberg holds an economics degree from the School of Economics of the University of Buenos Aires in Argentina. Mr. Goldberg has been with us since July 2005. Jorge Francisco Scarinci was born on May 19, 1970. He is the head of investor relations and our finance manager. Mr. Scarinci holds a degree from the School of Economics of the University of Belgrano in Argentina, a mastersmaster in finance from the University of CEMA and became CFA in 2001. Ana María Magdalena Marcet was born on February 24, 1961. She is our credit portfolio manager, as well as the relations manager with the Central Bank. She has been a member of our staff since December 1996. Ms. Marcet holds a public accountant, economics and business administration degree from the School of Economics of the University of Buenos Aires and a mastersmaster in banking management from the University of CEMA, both located in Argentina. Miguel Leon Gurfinkiel was born on December 13, 1950. He is the Government portfolio manager. He has been a member of our staff since April 2006. Horacio Sistac was born on March 7, 1956. He is our Corporate Banking manager. Mr. Sistac holds a public accounting degree from the Catholic University of Buenos Aires in Argentina. Mr. Sistac has been with us since September 2005. María Begoña Pérez de SolayFrancisco Muro was born on March 28, 1971. She2, 1973. He is a member of our operations and systems committee and our retailRetail banking manager. Ms. Pérez de SolayMr. Muro holds an architectureaccounting degree from the UniversitySchool of Belgrano in Argentina and a masters in business administration fromEconomics of the University of CEMABuenos Aires in Argentina. Mr. Muro has been with us since August 2004.
Brian Anthony was born on April 17, 1973. He is our branch network manager. Mr. Anthony holds an engineering degree from the Catholic University of Buenos Aires in Argentina. Mr. Anthony has been with us since September 2005. Eduardo Roque Covello was born on February 20, 1957. He is the Operations manager and a member of the Bank’s Operations and Systems Committee. He has been a member of our staff since January 1996. 77
Máximo Eduardo Lanusse was born on October 11, 1973. Mr. Lanusse holds a law degree from the University of Buenos Aires. He has been the Administration manager since February 2007. Daniel Hugo Violatti was born on May 27, 1962. He is our accounting manager. He has been a member of our staff since December 1997. Mr. Violatti holds an accounting degree from the School of Economics of the University of Buenos Aires in Argentina. Cármen Esther Estévez was born on April 28, 1957. She is our internal audit manager and a member of our internal audit committee. Ms. Estévez holds an accounting degree and a masters degree in system audits from the School of Economics of the University of Buenos Aires in Argentina. She has been a member of our staff since October 1997. Francisco Martín SgueraErnesto López was born on July 14,October 5, 1972. He is our legal manager. Mr. SgueraLópez holds a law degree from the Law School of Law of the University of Buenos Aires as well as a masters in trusts and a masters in banking law from Austral University in Argentina. Mr. SgueraHe is our legal manager. He has been with usa member of our staff since December 1996.October 1999.
Milagro Medrano was born on October 27, 1976. She is our planning and management control manager, our institutional relations manager and a member of our operations and systems committee. She is an alternate director ofBanco del Tucumán.n S.A.. Ms. Medrano holds a business management degree from the Catholic University of Salta in Argentina. She has been a member of our staff since April 1997. Gerardo Alvarez was born on December 13, 1969. He is our security and fraud control manager. Mr. Alvarez holds a law degree from the University of Argentine Federal Police. He has been with us since January 2006. B. Compensation Argentine law provides that the compensation paid to all directors and syndics (including those directors who are also members of senior management) in a fiscal year may not exceed 5.0% of net income for such year, if the company is not paying dividends in respect of such net income. Argentine law increases the annual limitation on director compensation to up to 25.0% of net income based on the amount of such dividends, if any are paid. In the case of directors that perform duties at special commissions or perform administrative or technical tasks, the aforesaid limits may be exceeded if a shareholders’ meeting so approves and such issue is included in the agenda and is in accordance with the regulations of the CNV. In any case, the compensation of all directors and members of the supervisory committee requires shareholders’ approval at an ordinary meeting. The aggregate amount of compensation paid by us to all of our directors, alternate directors and senior management for the fiscal year 20072008 was Ps.36.4Ps. 43.5 million. Neither we nor any of our subsidiaries have entered into any agreement that provides for any benefit or compensation to any director after the expiration of his term or upon his retirement. 77
C. Board Practices Corporate Governance As a listed company on the New York Stock Exchange (“NYSE”), we are required under the rules governing listed companies to (i) comply with SEC’s requirements concerning audit committee, (ii) submit annual written affirmation to the NYSE and an Interim Written Annual Affirmation each time a change occurs in the Board of Directors or the Audit Committee, and (iii) disclose any significant ways in which our corporate governance practices differ from those followed by domestic companies under the NYSE listing standards. Finally, and, (iv) our CEO must promptly notify the NYSE in writing after any executive officer becomes aware of any material non-compliance with any of the applicable NYSE corporate governance rules. We incorporate the information regarding the significant ways in which our corporate governance practices differ from those followed by domestic companies under the NYSE listing standards by reference to our website www.macro.com.ar.www.macro.com.ar. For further information see item 16.G. Independence of the Members of the Board of Directors and the Supervisory Committee The members of the board of directors and the supervisory committee of a public company such as us must inform the CNV within ten days from the date of their appointment whether such members of the board of directors or the supervisory committee are “independent.” A director shall not be considered independent in certain situations, including where a director (i) owns a 35% equity interest in a company, or a lesser interest if such director has the right to appoint one or more directors of a company (hereinafter “significant participation”) or has a significant participation in a corporation having a significant participation in the company or a significant influence in the company; (ii) depends on shareholders, or is otherwise related to shareholders, having a significant participation in the company or of other corporations in which these shareholders have directly or indirectly a significant participation or significant influence; (iii) is or has been in the previous three years an employee of the company; (iv) has a professional relationship or is a member of a corporation that maintains professional relationships with, or receives remuneration (other than the one received in consideration of his performance as a director) from, a company or its shareholders having a direct or indirect significant participation or significant influence on the same, or with corporations in which the shareholders also have a direct or indirect significant participation or a significance influence; (v) directly or indirectly sells or provides goods or services to the company or to the shareholders of the same who have a direct or indirect significant participation or significant influence, for higher amounts than his remuneration as a member of the administrative body; or (vi) is the spouse or parent (up to second grade of affinity or up to fourth grade of consanguinity) of persons who, if they were members of the administrative body, would not be independent, according to the above listed rules. 78
Carlos Enrique Videla, Alejandro Macfarlane, Guillermo Eduardo Stanley and Fernando Raúl García Pulles qualify as independent members of the board of directors under these criteria. Ladislao Szekely, Santiago Marcelo Maidana, Herman Fernando Aner, Alejandro Almarza, Horacio Della Rocca and Alejandro Carlos Piazza qualify as independent members of our supervisory committee. On April 21, 2009 Alejandro Almarza, Santiago Marcelo Maidana, Leonardo Pablo Cortigiani, Carlos Javier Piazza, Horacio Della Rocca and Alejandro Carlos Piazza were appointed as members of our supervisory committee, under these criteria.whoever qualify as independent members. For information on the expiration of current terms of directors see “Item 6.A.” For information on service contracts with directors providing benefits upon termination of employment see Item “6.B Compensation.” Supervisory Committee Our bylaws provide for a supervisory committee, which consists of three syndics and three alternate syndics that serve for a term of one fiscal year. Pursuant to the Argentine corporate law, only lawyers and accountants admitted to practice in Argentina or civil partnerships composed of such persons may serve as syndics of an Argentinesociedad anónima, or limited liability corporation. The primary responsibilities of the supervisory committee are to monitor the management’s compliance with Argentine corporate law, the bylaws, its regulations, if any, and the shareholders’ resolutions, and to perform other functions, including, but not limited to: (i) attending meetings of the board of directors, management committee and shareholders, (ii) calling extraordinary shareholders’ meetings when deemed necessary and ordinary and special shareholders’ meetings when not called by the board of directors and (iii) investigating written complaints of shareholders. In performing these functions, the supervisory committee does not control our operations or assess the merits of the decisions made by the directors. The following table sets forth certain relevant information of the members of our supervisory committee as of December 31, 2007:2008: | | | | | | | | | | | | | | | | | | | Year of | | Current | | Year of | | Current | Name | | Position | | Age | | Appointment | | Term Ends | | Position | | Age | | Appointment | | Term Ends | Ladislao Szekely | | Syndic | | 54 | | 2007 | | April 2008 | | Syndic | | 55 | | 2008 | | April 2009 | Santiago Marcelo Maidana | | Syndic | | 77 | | 2007 | | April 2008 | | Syndic | | 78 | | 2008 | | April 2009 | Herman Fernando Aner | | Syndic | | 53 | | 2007 | | April 2008 | | Syndic | | 54 | | 2008 | | April 2009 | Alejandro Almarza | | Alternate syndic | | 49 | | 2007 | | April 2008 | | Alternate syndic | | 50 | | 2008 | | April 2009 | Horacio Della Rocca | | Alternate syndic | | 54 | | 2007 | | April 2008 | | Alternate syndic | | 54 | | 2008 | | April 2009 | Alejandro Carlos Piazza | | Alternate syndic | | 53 | | 2007 | | April 2008 | | Alternate syndic | | 53 | | 2008 | | April 2009 |
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AllThe following table sets forth certain relevant information of the members were re-electedof our supervisory committee elected by the Ordinary and Extraordinary Shareholder’sShareholders’ Meeting held on April 29, 2008.21, 2009: | | | | | | | | | | | | | | | Year of | | Current | Name | | Position | | Age | | Appointment | | Term Ends | Alejandro Almarza | | Syndic | | 51 | | 2009 | | April 2010 | Santiago Marcelo Maidana | | Syndic | | 79 | | 2009 | | April 2010 | Leonardo Pablo Cortigiani | | Syndic | | 41 | | 2009 | | April 2010 | Carlos Javier Piazza | | Alternate syndic | | 51 | | 2009 | | April 2010 | Horacio Della Rocca | | Alternate syndic | | 55 | | 2009 | | April 2010 | Alejandro Carlos Piazza | | Alternate syndic | | 54 | | 2009 | | April 2010 |
Set forth below are brief biographical descriptions of the members of our supervisory committee.committee: Herman Fernando AnerAlejandro Almarza is a syndic on our supervisory committee. Mr. AnerAlmarza holds an accounting degree from the School of Economics ofform the University of Buenos Aires in Argentina. Mr. AnerAlmarza also servesserved as syndic ofMacro Fondos S.A. Sociedad Gerente de Fondos Comunes de Inversión S.A.andMacro Warrants S.A., and as an alternate syndic ofNuevo Banco Bisel S.A,Macro ValoresBanco del Tucumán S.A.,Macro Securities S.A. Sociedad de BolsaandSud Inversiones y Análisis S.A.S.A. Mr. AnerAlmarza was admitted to the Accountants Professional Association of the City of Buenos Aires in 1981.1983.
Santiago Marcelo Maidana is a syndic on our supervisory committee. Mr. Maidana holds a law degree from the University of Buenos Aires in Argentina. Mr. Maidana also servesserved as syndic ofNuevo Banco Bisel,Macro Valores S.A.,Macro Securities S.A. Sociedad de BolsaandSud Inversiones y Análisis S.A.Mr. Maidana was admitted to the Bar of the City of Buenos Aires in 1957. Ladislao SzekelyLeonardo Pablo Cortigiani is a syndic on our supervisory committee. Mr. SzekelyCortigiani holds an accounting degree from the School of Economics ofform the University of Buenos Aires in Argentina. Mr. Szekely also serves as syndic ofNuevo Banco Bisel,Macro Valores S.A., Banco del Tucumán,Macro Securities S.A. Sociedad de BolsaandSud Inversiones y Análisis S.A.Mr. SzekelyCortigiani was admitted to the Accountants Professional Association of the City of Buenos Aires in 1979.1995.
Alejandro AlmarzaCarlos Javier Piazza is an alternate syndic on our supervisory committee. Mr. AlmarzaPiazza holds an accounting degree fromform the University of Buenos Aires in Argentina. . Mr. Almarza also serves as syndicof Macro Fondos S.A. Sociedad Gerente de Fondos Comunes de Inversión S.A.andMacro Warrants S.A.and as alternate syndic ofNuevo Banco Bisel,Macro Valores S.A., Banco del Tucumán,Macro Securities S.A. Sociedad de BolsaandSud Inversiones y Análisis S.A.Mr. AlmarzaPiazza was admitted to the Accountants Professional Association of the City of Buenos Aires in 1983.
Horacio Della Rocca is an alternate syndic on our supervisory committee. Mr. Della Rocca holds an accounting degree from the School of Economics of the University of Buenos Aires in Argentina. Mr. Della Rocca also servesserved as syndicof Macro Fondos S.A. Sociedad Gerente de Fondos Comunes de Inversión S.A.and as alternate syndic ofNuevo Banco Bisel S.A.,Macro Valores S.A., Macro Warrants S.A., Banco del Tucumán S.A.,Macro Securities S.A. Sociedad de BolsaandSud Inversiones y Análisis S.A..S.A.Mr. Della Rocca was admitted to the Accountants Professional Association of the City of Buenos Aires in 1977. Alejandro Carlos Piazza is an alternate syndic on our supervisory committee. Mr. Piazza holds accounting and business administration degree from the School of Economics of the University of Buenos Aires in Argentina. Mr. Piazza also servesserved as syndicof Macro Fondos S.A. Sociedad Gerente de Fondos Comunes de Inversión S.A.and as an alternate syndic ofNuevo Banco Bisel S.A., Macro Securities S.A. Sociedad de Bolsa,Macro Valores S.A.andSud Inversiones y Análisis S.A.Mr. Piazza was admitted to the Accountants Professional Association of the City of Buenos Aires in 1978. 79
Audit Committee Our audit committee is comprised of three directors, all of them have independent status according to CNV Rules, and one alternate director, who is independent. The Argentine independence standards under CNV Rules differ in many ways from the NYSE, NASDAQ or the U.S. federal securities law standards. All of the members of our audit committee who were appointed through a resolution of the board of directors dated May 2, 2007 were elected for one-fiscal year renewable terms. They were renewrenewed by the board of directors in June 6, 2008 and in April 24, 2009. The audit committee is responsible for the fulfillment of the duties within its powers, as set forth under the Argentine Decree No. 677/2001, including, among others, the following: (i) delivering an opinion regarding the board of director’s proposal of appointment of our external auditors and controlling their independent status, (ii)��supervising the correct performance of our internal control and accounting systems, (iii) supervising the observance of the policies regarding information about our risk management, and (iv) delivering an opinion regarding transactions with related parties or transactions that may threaten any conflicts of interest. Furthermore, the audit committee has unlimited access to our books and registers and a right to request as much information as necessary for the performance of its duties. The following table sets forth certain relevant information of the members of the audit committee as of December 31, 2007:2008: | | | | | | | | | | | | | | | | | | | Year of | | | | Year of | | | Name | | Position | | Age | | Appointment | | Status | | Position | | Age | | Appointment | | Status | Guillermo Eduardo Stanley | | | Chairman | | 60 | | 2007 | | Independent | Carlos Enrique Videla | | Chairman | | 62 | | 2007 | | Independent | | Vice Chairman | | 63 | | 2007 | | Independent | Alejandro Macfarlane | | Vice Chairman | | 42 | | 2007 | | Independent | | Member | | 43 | | 2007 | | Independent | Guillermo Eduardo Stanley | | Member | | 59 | | 2007 | | Independent | | Fernando Raúl García Pulles | | Alternate Member | | 52 | | 2007 | | Independent | | Alternate Member | | 53 | | 2007 | | Independent |
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Committees Reporting to the Board of Directors and to the CEO and the CFO The following committees are under the supervision of our board of directors: the internal audit committee, the systems and technology committee, the senior credit committee and the executive committee. Internal audit committee.The internal audit committee is responsible for supervising the correct functioning of our internal control systems and procedures. Furthermore, this committee reviews our annual and quarterly financial statements, the external auditor’s reports, the relevant financial information and the audit committee’s reports. The following table sets forth certain relevant information of the members of the internal audit committee as of December 31, 2007:2008: | | | Name | | Position | Juan Pablo Brito Devoto | | Director | Jorge Pablo Brito | | Director | Carlos Enrique Videla | | Director (Independent) | Carmen Estévez | | Internal audit manager — coordinator |
Systems and technology.The systems and technology committee is responsible for the issuance of the systems and operations management policies. Furthermore, this committee verifies that the several management plans are in accordance with our business strategy and oversees the implementation of our strategic projects. The following table sets forth certain relevant information of senior members of the systems and operationstechnology committee as of December 31, 2007:2008: | | | Name | | Position | Jorge Pablo Brito | | Director | Juan Pablo Brito Devoto | | Chief Accounting OfficerDirector | Guillermo Goldberg | | Deputy general manager | Ernesto Eduardo Medina | | Deputy generalSystems and technology manager — coordinator | Eduardo Roque Covello | | Operations manager | Brian Anthony | | Branch network manager | Constanza Brito | | Human Resources manager | Milagro Medrano | | Institutional relations manager | Daniel Hugo Violatti | | Accountancy and Tax manager | Claudia Cueto | | System Development manager | Miguel Ángel Fernández | | Technology and Support manager | Ricardo Ojeda | | Production manager | Guillermo Powell | | IT Security manager | Lídia Levato | | Plan and Control manager |
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Senior credit committee.The senior credit committee is responsible for the issuance of our credit policy and credit analysis guidelines. Furthermore, this committee reviews and approves credit transactions in excess of Ps.5,000,000Ps. 5,000,000 and examines periodic reports related to our loan portfolio. The following table sets forth certain relevant information of the members of the senior credit committee, as of December 31, 2007:2008: | | | Name | | Position | Jorge Horacio Brito | | Chairman | Delfín Jorge Ezequiel Carballo | | Vice Chairman | Jorge Pablo Brito | | Director | Ana M. Marcet | | Coordinator of the Senior Credit CommitteeRisk manager — coordinator |
Executive committee. The executive committee is responsible for the management of the business and affairs of the bank and its powers include to: (i) manage the business and affairs of the bank and all other matters delegated by the board of directors; (ii) develop the commercial, credit and financial policy of the bank subject to the goals approved by the board of directors; (iii) establish, maintain, eliminate, restructure or move the offices and areas of the administrative and operating organization of the bank; (iv) establish special committees and approve various operating structures and determine the scope of their functions and duties; (v) approve personnel, including to appoint the General Manager, Assistant Managers, Executive Vice Presidents and other Department Heads and Managers, and to set the amount of their remunerations, working terms and conditions and any other personnel policy measure, including promotions; (vi) propose the establishment, opening, moving or closing of branches, agencies or representatives in the country or abroad; and (vii) supervise the management of subsidiary companies and of the other companies in which the bank holds a participating interest and to propose to the board of directors the incorporation, acquisition or total or partial sale of participating interests in companies in financial services. The following table sets forth certain relevant information of the members of our executive committee as of December 31, 2007:2008: | | | Name | | Position | Jorge Horacio Brito | | Chairman | Delfín Jorge Ezequiel Carballo | | Vice Chairman | Jorge Pablo Brito | | Director — coordinator |
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Committee on assets and liabilities.The committee on assets and liabilities is responsible for the financial strategy of the Bank. In addition, it carries on deep market analysis and establishes strategic policies related to Banco Macro’s liquidity, market, interest rate and currency risks. The following table sets forth certain relevant information of the members of our committee on assets and liabilities as of December 31, 2008: | | | Name | | Position | Delfin Jorge Ezequiel Carballo | | Vice Chairman | Jorge Pablo Brito | | Director | Roberto Eilbaum | | Director | Guillermo Goldberg | | Deputy general manager | Jorge Scarinci | | Financial and Investor relations manager | Brian Anthony | | Branch network manager | Horacio Sistac | | Corporate banking manager | Francisco Muro | | Retail banking manager |
Committee on operational risk. The committee on operational risk is responsible for the evaluation of the risk operations administration model. It has the authority to investigate any topic that may need the intervention of the committee and its functions include: (i) appraising changes in policies, procedures and structures and submitting them to the consideration of the Board of Directors; (ii) evaluating periodic reports from the Operational Risk Area and informing the Executive Board of any relevant details; (iii) reviewing, at least annually, the Bank’s firm-wide framework regarding management of operational risk; (iv) promoting the creation of an organizational culture that prioritizes the administration of Operational Risk, including standards of conduct, integrity and behavior ethics for personnel; and (v) providing an executive-level forum for discussion and decision-making on all aspects of Operational Risk and its management, compliant with all the obligations imposed by applicable laws and decrees. The following table sets forth certain relevant information of the members of our committee on operational risk as of December 31, 2008: | | | Name | | Position | Jorge Pablo Brito | | Director | Guillermo Goldberg | | Deputy general manager | Ernesto Medina | | Systems and technology manager | Alberto Figueroa | | Supervisory entities relation manager | Pablo Siwacki | | Responsible for operational risk sector — coordinator |
Anti-money laundering committee. The anti-money laundering committee is responsible for Planning, coordinating and monitoring compliance with anti-money laundering policies approved by the Board of Directors and its powers include to: (i) define policies for compliance with anti-money laundering corporate guidelines, (ii) be a permanent forum for the discussion of money laundering and terrorist financing risks that affect the Entity in its entirety, (iii) promote the definition of strategies so that the Entity will establish more effective controls to prevent money laundering and terrorist financing and implement such controls, (iv) take care of the continued updating of the Manual of Procedures for the prevention of money laundering and terrorist financing, in accordance with regulatory changes and new Entity needs, (v) monitor the implementation of a program designed to provide training and raise awareness regarding the prevention and control of asset laundering and terrorist financing, (vi) establish appropriate mechanisms for the internal reporting of unusual / suspicious activities, (vii) report any unusual or suspicious transactions to the relevant Agencies in compliance with applicable regulations, and subsequently inform the Board of Directors, (viii) provide support to the head of the anti-money laundering committee in the examination of unusual or suspicious transactions, (ix) approve and follow-up the work program submitted by the anti-money laundering committee for the relevant fiscal year, for which it will report to the Board of Directors and (x) perform any other duties that may be imposed under applicable laws and regulations. The following table sets forth certain relevant information of the members of our anti-money laundering committee as of December 31, 2008: | | | Name | | Position | Jorge Pablo Brito | | Director | Juan Pablo Brito Devoto | | Director | Luis Cerolini | | Director | Guillermo Goldberg | | Deputy general manager | Jorge Scarinci | | Financial and Investor relations manager | Alfredo Cobos | | Responsible for Anti-money laundering sector — coordinator |
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D. Employees As of December 31, 2007,2008, we had 7,8687,973 employees, 34%35% of whom worked at our headquarters and the remaining 66%65% at our branches. At December 31, 2007,2008, more than 90% of our employees were represented by a national bank union, which negotiates a collective bargaining agreement setting minimum wages for all of its members. We maintain good relations with our union and non-union employees and have never experienced a work stoppage. In connection with our acquisitions of Nuevo Banco Suquía and Nuevo Banco Bisel we agreed not to lay off Nuevo Banco Suquía and Nuevo Banco Bisel employees; however, unplanned layoffs occurred, not related to severance plans but to the normal course of business and the bank’s personnel policies. The payments related to the layoffs were immaterial. | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | | As of December 31, | | Employees | | 2005 | | 2006 | | 2007 | | | 2006 | | 2007 | | 2008 | | Headquarters | | 1,782 | | 2,553 | | 2,713 | | | 2,553 | | 2,713 | | 2,805 | | Branches | | 3,272 | | 5,032 | | 5,155 | | | 5,032 | | 5,155 | | 5,168 | | | | | | | | | | | | | | | | | Total | | 5,054 | | | 7,585 | (1) | | 7,868 | | | 7,585 | | 7,868 | | 7,973 | | | | | | | | | | | | | | | | |
| | | (1) | | Includes 2,474 from Banco del Tucumán and Nuevo Banco Bisel
|
E. Share Ownership The persons who are currently members of our board of directors, our supervisory committee or are our senior management held as a group 243,344,274246,275,705 shares of our capital stock as of December 31, 2007.2008. This represented approximately 35.57%36.01% of our outstanding capital stock as of such date. Other than Jorge Horacio Brito, Delfín Jorge Ezequiel Carballo, Juan Pablo Brito Devoto, Jorge Pablo Brito, Luis Carlos Cerolini, Alejandro Macfarlane, Carlos Enrique Videla, Alejandro Macfarlane, and Marcos Brito, no member of our board of directors, the supervisory committee or senior management beneficially owned shares as of December 31, 2007.2008. The following table sets forth the beneficial ownership of our shares by the members of our board of directors, our supervisory committee and members of senior management: | | | | | | | | | | | | | | | | | | | | | | | | | | | Percentage of | | | Percentage of | | | | Number of | | Percentage of | | Voting | | | Number of | | Percentage of | | Voting | | Shareholder Name | | shares owned | | capital stock (%) | | rights (%) | | | shares owned | | capital stock(%) | | rights(%) | | Jorge Horacio Brito | | 124,250,014 | | | 18.17 | % | | | 19.95 | % | | 125,507,961 | | | 18.35 | % | | | 20.12 | % | Delfín Jorge Ezequiel Carballo | | 111,910,112 | | | 16.36 | % | | | 18.04 | % | | 113,258,507 | | | 16.56 | % | | | 18.22 | % | Juan Pablo Brito Devoto | | 6,691,999 | | | 0.98 | % | | | 1.07 | % | | 6,691,999 | | | 0.98 | % | | | 1.07 | % | Jorge Pablo Brito | | | 244,168 | | | 0.04 | % | | | 0.03 | % | Luis Carlos Cerolini | | 179,900 | | | 0.03 | % | | | 0.02 | % | | 185,400 | | | 0.03 | % | | | 0.03 | % | Carlos Enrique Videla | | | 172,838 | | | 0.03 | % | | | 0.03 | % | Alejandro Macfarlane | | 170,000 | | | 0.02 | % | | | 0.02 | % | | 154,832 | | | 0.02 | % | | | 0.02 | % | Carlos Enrique Videla | | 92,249 | | | 0.01 | % | | | 0.01 | % | | Marcos Brito | | 50,000 | | | 0.00 | % | | | 0.00 | % | | 60,000 | | | 0.01 | % | | | 0.01 | % | | | | | | | | | | | | | | | | Total | | 243,344,274 | | | 35.57 | % | | | 39.11 | % | | 246,275,705 | | | 36.01 | % | | | 39.53 | % | | | | | | | | | | | | | | | |
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Additionally, the persons who are currently members of our board of directors, our supervisory committee or are our senior management held as a group a total of 244,030,005246,398,233 shares of our capital stock as of May 30, 2008.31, 2009. This represented approximately 35.69%35.82% of our outstanding capital stock as of such date. Other than Jorge Horacio Brito, Delfín Jorge Ezequiel Carballo, Juan Pablo Brito Devoto, Luis Cerolini, Alejandro Macfarlane, Carlos Enrique Videla and Jorge Pablo Brito and Marcos Brito no member of our board of directors, the supervisory committee or senior management beneficially owned shares as of May 30, 2008.31, 2009. The following table sets forth the beneficial ownership of our shares by the members of our board of directors, our supervisory committee and members of senior management, as of May 30, 2008:31, 2009: | | | | | | | | | | | | | | | | | | | | | | | | | | | Number of | | Percentage of | | Percentage of | | | Number of | | Percentage of | | Percentage of | | Shareholder Name | | shares owned | | capital stock (%) | | Voting rights (%) | | | shares owned | | capital stock(%) | | Voting rights(%) | | Jorge Horacio Brito | | 124,520,643 | | | 18.21 | % | | | 19.99 | % | | 124,257,417 | | | 18.17 | % | | | 19.95 | % | Delfín Jorge Ezequiel Carballo | | 112,178,725 | | | 16.40 | % | | | 18.08 | % | | 113,258,507 | | | 16.56 | % | | | 18.23 | % | Juan Pablo Brito Devoto | | 6,691,999 | | | 0.98 | % | | | 1.07 | % | | 6,691,999 | | | 0.98 | % | | | 1.07 | % | Jorge Pablo Brito | | | 327,909 | | | 0.05 | % | | | 0.04 | % | Carlos Enrique Videla | | | 199,921 | | | 0.03 | % | | | 0.03 | % | Luis Carlos Cerolini | | 179,900 | | | 0.03 | % | | | 0.02 | % | | 193,400 | | | 0.03 | % | | | 0.03 | % | Alejandro Macfarlane | | 255,000 | | | 0.04 | % | | | 0.03 | % | | Carlos Enrique Videla | | 105,249 | | | 0.02 | % | | | 0.02 | % | | Jorge Pablo Brito | | 83,256 | | | 0.01 | % | | | 0.01 | % | | Marcos Brito | | 15,233 | | | 0.00 | % | | | 0.00 | % | | | | | | | | | | | | | | | | | Total | | 244,030,005 | | | 35.69 | % | | | 39.22 | % | | 244,929,153 | | | 35.82 | % | | | 39.35 | % | | | | | | | | | | | | | | | |
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Item 7. Major Shareholders and Related Party Transactions A. Major Shareholders As of December 31, 2007,2008, we had 683,943,437608,437,455 outstanding shares of common stock, consisting of 11,235,670 Class A shares and 672,707,767597,201,785 Class B shares. Additionally, during 2008 the Bank repurchased 75,541,518 Class B shares, resulting in a total of 683,978,973 shares, all of them with a par value of Ps.1.00 per share. Each share of our common stock represents the same economic interests, except that holders of our Class A shares are entitled to five votes per share and holders of our Class B shares are entitled to one vote per share. Other than aforementioned differences among holders of Class A shares and holders of Class B shares, the holders of these shares listed in the table below do not have different voting rights. As of December 31, 2007,2008, we had 6,4567,097 holders of record of our shares. The following table sets forth information regarding the ownership of our Class A and Class B shares as of December 31, 2007:2008: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Number of | | Number of | | | | | | | Number of | | Number of | | Percentage of | | Percentage of | | | | Class A | | Class B shares | | Percentage of | | Percentage of | | | Class A | | Class B shares | | capital stock | | Voting rights | | Shareholder Name | | shares owned | | owned | | Total | | capital stock (%) | | Voting rights (%) | | | shares owned | | owned | | Total | | (%) | | (%) | | ANSES | | | — | | 182,053,609 | | 182,053,609 | | | 26.62 | %(1) | | | 24.98 | % | Jorge Horacio Brito | | 5,292,143 | | 118,957,871 | | 124,250,014 | | | 18.17 | % | | | 19.95 | % | | 5,292,143 | | 120,215,818 | | 125,507,961 | | | 18.35 | % | | | 20.12 | % | Delfín Jorge Ezequiel Carballo | | 4,895,416 | | 107,014,696 | | 111,910,112 | | | 16.36 | % | | | 18.04 | % | | 4,895,416 | | 108,363,091 | | 113,258,507 | | | 16.56 | % | | | 18.22 | % | Other Shareholders | | 1,048,111 | | 446,735,200 | | 447,783,311 | | | 65.47 | % | | | 62.01 | % | | Other Shareholders (3) | | | 1,048,111 | | 262,110,785 | | 263,158,896 | | | 38.47 | %(2) | | | 36.68 | % | | | | | | | | | | | | | | | | | | | | | | | | Total | | 11,235,670 | | 672,707,767 | | 683,943,437 | | | 100.00 | % | | | 100.00 | % | | 11,235,670 | | 672,743,303 | | 683,978,973 | | | 100.00 | % | | | 100.00 | % | | | | | | | | | | | | | | | | | | | | | | | |
| | | (1) | | Although ANSES holds capital stock for up to 26.62%, pursuant to section 8 of Law No. 26,425 and its cross-reference to section 76 of Law No. 24,241, such shareholder’s voting rights are limited to 5%. In the shareholders meetings held on April 21, May 12 and 27, 2009, ANSES made reserve of the right to vote without such limit. | | (2) | | The 15.69% of capital stock is held in the form of ADSs issued by The Bank of New York. | | (3) | | Includes 75,541,518 repurchased shares. |
Additionally, asAs of May 30, 2008,31, 2009, we had 683,978,973593,337,281 outstanding shares of common stock, consisting of 11,235,670 Class A shares and 672,743,303582,101,611 Class B shares. Additionally, as of April 29, 2009, the Bank repurchased 90,641,692 Class B shares, resulting in a total of 683,978,973 shares, all of them with a par value of Ps.1.00 per share. Each share of our common stock represents the same economic interests, except that holders of our Class A shares are entitled to five votes per share and holders of our Class B shares are entitled to one vote per share. Other than aforementioned differences among holders of Class A shares and holders of Class B shares, the holders of these shares listed in the table below do not have different voting rights. As of May 30, 2008,31, 2009, we had 7,2776,183 holders of record of our shares.
The following table sets forth information regarding the ownership of our Class A and Class B shares as of May 30, 2008:31, 2009: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Number of | | Number of | | | | | | | Number of | | Number of | | Percentage of | | Percentage of | | | | Class A | | Class B shares | | Percentage of | | Percentage of | | | Class A | | Class B shares | | capital stock | | Voting rights | | Shareholder Name | | shares owned | | owned | | Total | | capital stock (%) | | Voting rights (%) | | | shares owned | | owned | | Total | | (%) | | (%) | | ANSES | | | — | | 182,053,609 | | 182,053,609 | | | 26.62 | %(1) | | | 24.98 | % | Jorge Horacio Brito | | 5,292,143 | | 119,228,500 | | 124,520,643 | | | 18.21 | % | | | 19.99 | % | | 5,292,143 | | 118,965,274 | | 124,257,417 | | | 18.17 | % | | | 19.95 | % | Delfín Jorge Ezequiel Carballo | | 4,895,416 | | 107,283,309 | | 112,178,725 | | | 16.40 | % | | | 18.08 | % | | 4,895,416 | | 108,363,091 | | 113,258,507 | | | 16.56 | % | | | 18.23 | % | Other Shareholders | | 1,048,111 | | 446,231,494 | | 447,279,605 | | | 65.39 | % | | | 61.93 | % | | Other Shareholders (3) | | | 1,048,111 | | 263,361,329 | | 264,409,440 | | | 38.65 | %(2) | | | 36.84 | % | | | | | | | | | | | | | | | | | | | | | | | | Total | | 11,235,670 | | 672,743,303 | | 683,978,973 | | | 100.00 | % | | | 100.00 | % | | 11,235,670 | | 672,743,303 | | 683,978,973 | | | 100.00 | % | | | 100.00 | % | | | | | | | | | | | | | | | | | | | | | | | |
| | | (1) | | Although ANSES holds capital stock for up to 26.62%, pursuant to section 8 of Law No. 26,425 and its cross-reference to section 76 of Law No. 24,241, such shareholder’s voting rights are limited to 5%. In the shareholders meetings held on April 21, May 12 and 27, 2009, ANSES made reserve of the right to vote without such limit. | | (2) | | The 13.97% of capital stock is held in the form of ADSs issued by The Bank of New York. | | (3) | | Includes 90,641,692 repurchased shares. |
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The table below represents the evolution of our capital stock and the material changes in equity participation of the controlling shareholders, in both cases, since June 30, 2002.2002: | | | | | | | | | | | Outstanding Capital | | | | | | Date | | Capital Stock (Ps.) | | | Event | | Controlling Shareholders | June 30, 2002 | | | 64,410,357 | | | Capital increase | | Banco Macro S.A. 59.58% | | | | | | | | | | January 31, 2003 | | | 455,242,646 | | | Capitalization of irrevocable capital contributions | | Banco Macro S.A. 81.23% | | | | | | | irrevocable capital | | | | | | | | | contributions | | | | | | | | | | | | December 31, 2003 | | | 608,943,437 | | | Merger with Banco Macro S.A. | | Jorge H. Brito 30.93%
| | | | | | | | | Delfín Jorge Ezequiel Carballo 25.73%
| | | | | | | | | Fernando Andrés Sansuste 11.75%
| | | | | | | | | Juan Pablo Brito Devoto 2.12% | | | | | | | | | | March 23, 2006 | | | 683,943,437 | | | Capital Increase | | Jorge H. Brito 18.9%
| | | | | | | | | Delfín Jorge Ezequiel Carballo 16.7%
| | | | | | | | | Fernando Andrés Sansuste 7.6%
| | | | | | | | | Juan Pablo Brito Devoto 1.3% | | | | | | | | | | May 12, 2006 | | | 683,943,437 | | | Transference of shares | | Jorge H. Brito 21.64 %
| | | | | | | | | Delfín Jorge Ezequiel Carballo 19.56%
| | | | | | | | | Juan Pablo Brito Devoto 1.27% | | | | | | | | | | May 31, 2007 | | | 683,943,437 | | | Transference of shares | | Jorge H. Brito 18.87% (1)
| | | | | | | | | Delfín Jorge Ezequiel Carballo 16.80% (1)
| | | | | | | | | Juan Pablo Brito Devoto 0.10% (1) | | | | | | | | | | February 29, 2008 | | | 683,978,973 | | | Capital Increase (2) | | Jorge H. Brito 18.17%
| | | | | | | | | Delfín Jorge Ezequiel Carballo 16.37%
| | | | | | | | | Juan Pablo Brito Devoto 0.98% | | | | | | | | | | December 31, 2008 | | 608,437,455 | | | Share repurchases (3) | | Jorge H. Brito 18.35%
| | | | | | | | | Delfín Jorge Ezequiel Carballo 16.56%
| | | | | | | | | Juan Pablo Brito Devoto 0.98% |
| | | (1) | | Monthly movements mainly from November 2006. | | (2) | | On June 4 and June 5, 2007, Shareholders’ Meetings for Banco Macro S.A. and Nuevo Banco Suquía S.A., respectively, resolved to authorize the merger of the two entities and increase the capital stock of Banco Macro S.A. from Ps.683,943,437 to Ps.683,978,973, issuing 35,536 Class B ordinary shares with a Ps. 1.00 par value each and the right to one vote per share, to be granted to the minority shareholders of Nuevo Banco Suquía S.A. as a result of the merger. Although this capital increase was authorized in 2007, the new shares were issued on February 12, 2008. | | (3) | | As of December 31, 2008, we had 608,437,455 outstanding shares of common stock, consisting of 11,235,670 Class A shares and 597,201,785 Class B shares. Additionally, during 2008 the Bank repurchased 75,541,518 Class B shares, resulting in a total of 683,978,973 shares, all of them with a par value of Ps.1.00 per share. For more detailed information regarding the Bank’s share repurchases, please refer to Item 16E. |
B. Related Party Transactions We are not party to any transactions with, and have not made any loans to, any of our directors, key management personnel or other related persons, nor are there any proposed transactions with such persons, except for those permitted by applicable law. Some of our directors have been involved in certain credit transactions with us. The Argentine Corporate law and Central Bank regulations allow directors of a corporation to enter into a transaction with such corporation if the transaction is in line with prevailing market practice. Additionally, lending to persons or entities affiliated with us is subject to the regulations of the Central Bank. These regulations set limits on the amount of credit that can be extended to affiliates based on, among other things, a percentage of our adjusted shareholders’ equity. We are required by the Central Bank to present, on a monthly basis, a list of the outstanding amount of credit advanced to directors, controlling shareholders, officers and other related entities that is recorded in the minute book of the Board of Directors. Central Bank Rules establish that loans to directors, controlling shareholders, officers and other related entities must be granted on an equal basis with respect to rates, tenor and guarantees as loans granted to the general public. Additionally, the Central Bank establishes limits for the transactions with related parties. For the yearsyear ended December 31, 2008, 2007 2006 and 2005,2006 an aggregate of Ps. 17.8 million, Ps. 15.8 million and Ps. 36.8 million and Ps.92.6 million, respectively, in financial assistance granted by us (credit, including guarantees granted) was outstanding to related parties. “Related parties” is defined as our directors, our senior officers, our syndics, our controlling shareholders as well as individuals related to them and any entities directly or indirectly affiliated with any of these parties that are not required to be consolidated. The single largest amount of financial assistance outstanding as of December 31, 20072008 was Ps. 57.8 million to Havanna S.A.Inversora Juramento S.A with an average interest rate of 25.6% Likewise, as of December 31, 2008, 2007 2006 and 2005,2006, the deposits made by individuals related parties to the Bankbank amounted to Ps. 141.767.1 million, Ps. 271.3141.7 million and Ps. 219.2 million respectively. During the fiscal year ended December 31, 2007, the Bank sold miscellaneous assets to a related company, which generated income amounting to Ps. 3 million.
Additionally, during the year ended December 31, 2006, the Bank sold (i) certificates of participation to a director from Banco Macro S.A., which generated income for an amount equal to Ps. 8.5 million and (ii) its equity interest in Inversora Juramento S.A. to a shareholder of Banco Macro S.A., which generated income amounting to Ps. 0.4271.3 million.
C. Interest of experts and counsel Not applicable. 8384
Item 8. Financial Information A. Consolidated Statements and Other Financial Information See Item 18 and our audited consolidated financial statements included in this annual report. Legal Proceedings We are involved in normal collection proceedings and other legal proceedings in the ordinary course of business. We are not involved in any litigation or other legal proceedings that, if adversely determined, would individually or in the aggregate have a material adverse effect on our operations. Dividend Policy Although we do not have, and have no current plans to adopt, a formal dividend policy governing the amount and payment of dividends, we currently intend to pay dividends subject to approval by a majority vote of our shareholders. All shares of our capital stock arepari passuwith respect to the payment of dividends. The following table sets forth the cash dividends paid to our shareholders in 2004, 2005, 2006 and 2007.2003 through 2008. All banks were prohibited by the Central Bank from paying dividends in respect of the results of 2001 and 2002. | | | | | | | | | | | | | | | | | | | | | | | | | Aggregate | | | Aggregate | | | | Dividend | | | Dividend | | | | Payment | | | Payment | | Based on financial statements for year ended | | Dividends per Share | | (in millions of | | | Dividends per Share | | (in millions of | | December 31, | | Payment Dates | | (in pesos) | | pesos) | | | Payment Dates | | (in pesos) | | pesos) | | 2003 | | July 2004 | | 0.10 | | 60.9 | | | July 2004 | | | 0.10 | | | | 60.9 | | 2004 | | April 2005 | | 0.05 | | 30.4 | | | April 2005 | | | 0.05 | | | | 30.4 | | 2005 | | May 2006 | | 0.10 | | 68.4 | | | May 2006 | | | 0.10 | | | | 68.4 | | 2006 | | May 2007 | | 0.15 | | 102.6 | | | May 2007 | | | 0.15 | | | | 102.6 | | 2007 | | May 2008 | | 0.25 | | 171.0 | | | May 2008 | | | 0.25 | | | | 171.0 | | 2008 (1) | | | May 2009 | | | 0.25 | | | | 149.9 | |
| | | (1) | | Central Bank authorization is still pending. Dividends may be paid for an amount up to Ps.149.9 million. |
Central Bank and contractual limitations on distribution of dividends The Central Bank has imposed restrictions on the payment of dividends, substantially limiting the ability of financial institutions to distribute such dividends without its prior consent, which were analyzed on case-by-case basis until November of 2006.basis. The Central Bank has eased these restrictions through Communication “A” 4589, as amended by Communication “A” 4591 and others, by providing for a mechanism for the calculation of distributable profits of the financial institutions.institutions: The Superintendency of Financial Institutions will review the ability of the bank to distribute dividends upon the bank’s requests for its approval. Such request has to be filed within 30 business days prior to the shareholders meeting that will resolve the approval of the annual financial statements. The Superintendency of Financial Institutions will authorize the distribution of dividends when none of the following circumstances are verified during the month preceding the request for the payment of dividendsdividends: (i) | | we are subject to a liquidation procedure or the mandatory transfer of assets by the Central Bank in accordance with section 34 or 35 bis of the Financial Institutions Law; | | (ii) | | we are receiving financial assistance from the Central Bank (except liquidity assistance under the pesification rules pursuant to Decree No. 739/2003); | | (iii) | | we are not in compliance with or have failed to comply on a timely basis with our reporting obligations to the Central Bank; or | | (iv) | | we are not in compliance with minimum capital requirements (both on an individual and consolidated basis) or with minimum cash reserves (on average). |
By means of an authorization dated April 21, 2006, the Central Bank approvedauthorization for the distribution of dividends corresponding to our fiscal year ended December 31, 2005. The Central Bank, through an authorization dated April 16, 2007, authorized the Bank to distribute dividends corresponding to the fiscal year ended December 31, 2006 and by means of an authorization dated April 11, 2008 authorized the Bank to distribute dividends corresponding to the fiscal year ended December 31, 2007.is still pending.
Additional regulatory and contractual restrictions exist which effectaffect the distribution of earnings and are included in Note 15 of our consolidated Financial Statements as of December 31, 2007.2008. 84
Amounts available for distribution and distribution approval process Under Argentine corporate law, declaration and payment of annual dividends, to the extent funds are legally available, is determined by our shareholders at the annual ordinary shareholders’ meeting. Generally, but not necessarily, the board of directors makes a recommendation with respect to the payment of dividends. 85
Dividends may be lawfully declared and paid only out of our retained earnings stated in our yearly financial statements according to Central Bank Rules and approved by a shareholders’ meeting as described below. The board of directors submits our financial statements for the preceding fiscal year, together with reports thereon by the supervisory committee, at the annual ordinary shareholders’ meeting for approval. Within four months of the end of each fiscal year, an ordinary shareholders’ meeting must be held to approve the financial statements and determine the allocation of our net income for such year. Under applicable CNV regulations, cash dividends must be paid to shareholders within 30 days of the shareholders’ meeting approving such dividends. In the case of stock dividends, shares are required to be delivered within three months of our receipt of notice of the authorization of the CNV for the public offering of the shares arising from such dividends. Legal reserve requirement According to the Argentine financial institutions law, or the FIL, and Central Bank regulations, we are required to maintain a legal reserve of 20% of our yearly income plus or minus prior-year adjustments and minus the accumulated loss at the prior year closing period. The legal reserve is not available for distribution to shareholders. Under Argentine corporate law and our bylaws, our yearly net income (as adjusted to reflect changes in prior results) is allocated in the following order: (i) to comply with the legal reserve requirement, (ii) to pay the accrued fees of the members of the board of directors and statutory supervisory committee; (iii) to pay fixed dividends, which are applied first to pending and unpaid dividends and holders of preferred stock (if applicable); (iv) for voluntary or contingent reserves, as may be resolved from time to time by our shareholders at the annual ordinary shareholders’ meeting; and (v) the remainder of the net income for the year may be distributed as dividends on common stock or as otherwise decided by our shareholders at the annual ordinary shareholders’ meeting. B. Significant Changes Except as otherwise disclosed in this annual report, there has been no undisclosed significant change since the date of the most recent annual financial statements included herein. Item 9. The Offer and Listing A. Offer and listing details The table below shows the high and low market prices in pesos for our Class B shares on the Buenos Aires Stock Exchange for the periods indicated: | | | | | | | | | | | | | | | | | | | Ps. per Class B Share | | | Ps. per Class B Share | | Banco Macro | | High | | Low | | | High | | Low | | 2008: | | | | | | 2009: | | | May | | | 6.55 | | 4.20 | | April | | | 4.20 | | 3.74 | | March | | | 4.00 | | 3.36 | | February | | | 3.85 | | 3.56 | | January | | 7.75 | | 6.70 | | | 4.19 | | 3.70 | | February | | 7.85 | | 7.10 | | | March | | 8.16 | | 7.20 | | | April | | 8.46 | | 7.26 | | | May | | 7.40 | | 6.15 | | | | | | December 2008 | | | 4.05 | | 3.35 | | | | | 2008 | | | 8.46 | | 2.12 | | 2007 | | | 12.30 | | 7.20 | | 2006 | | | 9.51 | | 5.32 | | 2005 | | | 5.45 | | 3.47 | | 2004 | | | 3.76 | | 2.19 | | | | | 2008 | | | 4th quarter | | | 6.15 | | 2.12 | | 3rd quarter | | | 6.60 | | 5.00 | | 2nd quarter | | | 8.46 | | 5.37 | | 1st quarter | | | 8.16 | | 6.70 | | | | | 2007: | | | 4th quarter | | | 10.15 | | 7.20 | | 3rd quarter | | | 10.70 | | 7.29 | | 2nd quarter | | | 11.75 | | 9.80 | | 1st quarter | | 12.30 | | 8.95 | | | 12.30 | | 8.95 | | 2nd quarter | | 11.75 | | 9.80 | | | 3rd quarter | | 10.70 | | 7.29 | | | 4th quarter | | 10.15 | | 7.20 | | | December | | 8.20 | | 7.20 | | | | | | 2006: | | | 1st quarter | | 7.00 | | 5.32 | | | 2nd quarter | | 7.37 | | 5.75 | | | 3rd quarter | | 6.65 | | 5.72 | | | 4th quarter | | 9.51 | | 6.60 | | | | | | 2005: | | | 1st quarter | | 4.35 | | 3.47 | | | 2nd quarter | | 4.28 | | 3.58 | | | 3rd quarter | | 5.31 | | 3.60 | | | 4th quarter | | 5.45 | | 4.65 | | |
| | | Source: Buenos Aires Stock Exchange Bulletin. |
85
Banco Macro and Banco Bansud merged in December 2003 and began trading on December 24, 2003 under the symbol “BSUD.” In January 2002, we acquired a controlling interest in the former Banco Bansud, but the shares of the two banks traded separately until their merger.
The table below sets forth the high and low market prices in pesos for the common shares of Banco Macro on the Buenos Aires Stock Exchange for the periods indicated:
| | | | | | | | | | | Ps. per Share | | Banco Macro | | High | | | Low | | 2003: | | | | | | | | | 1st quarter | | | 17.20 | | | | 16.00 | | 2nd quarter | | | 28.70 | | | | 20.00 | | 3rd quarter | | | 30.50 | | | | 26.00 | | 4th quarter | | | 41.30 | | | | 30.00 | | | | | | | | | | | 2002: | | | | | | | | | 1st quarter | | | — | | | | — | | 2nd quarter | | | 4.10 | | | | 3.40 | | 3rd quarter | | | — | | | | — | | 4th quarter | | | 17.60 | | | | 10.00 | | | | | | | | | | | 2001: | | | | | | | | | 1st quarter | | | 4.25 | | | | 4.50 | | 2nd quarter | | | 4.00 | | | | 4.00 | | 3rd quarter | | | 4.00 | | | | 3.40 | | 4th quarter | | | 3.40 | | | | 3.40 | |
| | | Source: Buenos Aires Stock Exchange Bulletin.
|
The table below sets forth the high and low market prices in pesos for the Class B shares of Banco Bansud on the Buenos Aires Stock Exchange for the periods indicated:
Banco Bansud
| | | | | | | | | | | Ps. per Class B Share | | Banco Bansud | | High | | | Low | | 2003: | | | | | | | | | 1st quarter | | | 1.65 | | | | 1.04 | | 2nd quarter | | | 2.20 | | | | 1.45 | | 3rd quarter | | | 2.16 | | | | 1.80 | | 4th quarter | | | 2.99 | | | | 2.05 | | | | | | | | | | | 2002: | | | | | | | | | 1st quarter | | | 0.70 | | | | 0.33 | | 2nd quarter | | | 0.55 | | | | 0.30 | | 3rd quarter | | | 1.06 | | | | 0.46 | | 4th quarter | | | 1.74 | | | | 0.90 | | | | | | | | | | | 2001: | | | | | | | | | 1st quarter | | | 1.74 | | | | 0.90 | | 2nd quarter | | | 1.31 | | | | 0.80 | | 3rd quarter | | | 1.07 | | | | 0.30 | | 4th quarter | | | 0.54 | | | | 0.30 | |
| | | Source: Buenos Aires Stock Exchange Bulletin.
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The ordinary shares trade on the New York Stock Exchange in the form of ADSs issued by The Bank of New York, as depositary. Each ADS represents ten ordinary shares. The table below shows the quarterly high and low market prices of the ADSs in dollars on the New York Stock Exchange for the periods indicated. | | | | | | | | | | | | | | | | | | | US$. per ADS | | | US$ per ADS | | Banco Macro(1) | | High | | Low | | | High | | Low | | | | | 2009: | | | May | | | 17.27 | | 10.43 | | April | | | 12.00 | | 9.63 | | March | | | 10.45 | | 8.72 | | February | | | 10.88 | | 9.24 | | January | | | 12.83 | | 9.75 | | | | | December 2008 | | | 11.95 | | 9.19 | | | | | 2008 | | | 26.67 | | 4.92 | | 2007 | | | 39.11 | | 22.40 | | 2006 | | | 31.96 | | 18.35 | | | | | 2008: | | | January | | 24.77 | | 20.86 | | | February | | 24.95 | | 21.82 | | | March | | 25.99 | | 22.10 | | | April | | 26.67 | | 22.40 | | | May | | 23.20 | | 18.40 | | | 4th quarter | | | 19.11 | | 4.92 | | 3rd quarter | | | 21.62 | | 15.44 | | 2nd quarter | | | 26.67 | | 16.61 | | 1st quarter | | | 25.99 | | 20.86 | | | | | 2007: | | | 4th quarter | | | 31.92 | | 22.75 | | 3rd quarter | | | 34.82 | | 22.40 | | 2nd quarter | | | 39.00 | | 31.98 | | 1st quarter | | 39.11 | | 29.30 | | | 39.11 | | 29.30 | | 2nd quarter | | 39.00 | | 31.98 | | | 3rd quarter | | 34.82 | | 22.40 | | | 4th quarter | | 31.92 | | 22.75 | | | December | | 26.20 | | 22.75 | | | | | | 2006: | | | 1st quarter | | 23.35 | | 21.60 | | | 2nd quarter | | 24.69 | | 18.70 | | | 3rd quarter | | 21.50 | | 18.35 | | | 4th quarter | | 31.96 | | 21.35 | | |
Source: Reuters | | | (1) | | Source: ReutersBanco Macro was first listed on NYSE in March 2006.
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B. Plan of Distribution Not applicable. C. Markets Our Class B shares are currently traded on the Buenos Aires Stock Exchange under the symbol ‘BMA’. Additionally, our ADSs have been trading on the NYSE since March 24, 2006 under the symbol ‘BMA’. Our (i) 9.75% Fixed/Floating Rate Non-Cumulative Junior Subordinated Notes Due 2036, (ii) 8.50% Notes Due 2017 and (iii) 10.750% Argentine Peso-Linked Notes Due 2012 are all currently listed on both the Buenos Aires Stock Exchange and the Luxembourg Stock Exchange. D. Selling Shareholders Not applicable. E. Dilution Not applicable. F. Expenses of the issue Not applicable. 87
Item 10. Additional Information A. Share Capital Not applicableapplicable. B. Memorandum and Articles of Association General We are a financial institution incorporated on November 21, 1966 as asociedad anónima,or a stock corporation, duly incorporated under the laws of Argentina for a 99-year period and registered on March 8, 1967 with the Public Registry of Commerce of the City of Buenos Aires, Argentina, under Nr. 1154 of Book 2, Volume 75 ofSociedades Anónimas.A translation of our by-Lawsbylaws has been filed as an exhibit to our 2006 annual report on form 20-F filed on July 13, 2007. As of December 31, 2007,2008, our capital stock consists of Ps.683,943,437,Ps. 683,978,973, represented by 11,235,670 common, book-entry Class A shares, with a par value of one peso each and the right to five votes per share, and 672,707,767672,743,303 common, book-entry Class B shares, with a par value of one peso each and the right to one vote per share. Under our bylaws, we may issue different classes of shares of common stock entitled with one to five votes per share. However, as long as we remain public we cannot issue additional shares of any class of capital stock that could entitle the holder thereof to more than one vote per share. All outstanding shares are fully paid. Our Class B shares have been listed on the Buenos Aires Stock Exchange since 1993. Our ADSs have been listed in the New York Stock Exchange since March 24, 2006. Holders of Class A shares are permitted to convert their shares into Class B shares on a one-for-one basis. Corporate Purpose Our bylaws sets forth that our corporate purpose is to engage within or outside of Argentina in any banking transaction contemplated and authorized under the FIL and other laws, rules and regulations governing banking activities in the place of performance, under the guidelines and with prior authorization, if appropriate, of the Central Bank. In addition, we are capable of acting as an agent in connection with securities in the open market, and in any exchange transactions contemplated under the legal provisions in effect governing the activity, under the guidelines and with the prior authorization, if appropriate, of the CNV. To that effect, we have full legal capacity to develop rights, incur obligations, and execute any kind of act and transaction related thereto. Furthermore, we are capable of having interests in other domestic or foreign financial institutions with the prior authorization of the Central Bank. Shareholders’ liability Shareholders’ liability for losses of a company is limited to the value of their shareholdings in the company. Under Argentine corporate law, however, shareholders who voted in favor of a resolution that is subsequently declared void by a court as contrary to Argentine laws or a company’s bylaws (or regulations, if any) may be held jointly and severally liable for damages to such company, other shareholders or third parties resulting from such resolution. See also"Risk Factors—Factors — Our shareholders may be subject to liability for certain votes of their securities”. Redemption and rights of withdrawal Our shares are subject to redemption in connection with a reduction in capital by the vote of a majority of shareholders at an extraordinary shareholders’ meeting. Any shares so redeemed must be cancelled by us. Whenever our shareholders approve a spin-off or merger in which we are not the surviving corporation, the change of our corporate legal status, a fundamental change in our corporate purpose, change of our domicile outside of Argentina, voluntary withdrawal from public offering or delisting, our continuation in the case of mandatory delisting or cancellation of the public offering authorization, or a total or partial recapitalization following a mandatory reduction of our capital or liquidation, any shareholder that voted against such action that was approved or did not attend the meeting at which the decision was taken, may withdraw and receive the book value of its shares, determined on the basis of our latest balance sheet prepared or that should have been prepared in accordance with Argentine laws and regulations, provided that such shareholder exercises its appraisal rights within a determined period. However, because of the absence of legal precedent directly on point, there is doubt as to whether holders of ADSs will be able to exercise appraisal rights either directly or through the depositary with respect to Class B shares represented by ADSs. Appraisal rights must be exercised within the five days following the adjournment of the meeting at which the resolution was adopted, in the event that the dissenting shareholder voted against such resolution, or within 15 days following such adjournment if the dissenting shareholder did not attend such meeting and can prove that he was a shareholder on the date of such meeting. In the case of merger or spin-off, appraisal rights may not be exercised if the shares to be received as a result of such transaction are authorized for public offering or listed. Appraisal rights are extinguished if the resolution giving rise to such rights is revoked at another shareholders’ meeting held within 75 days of the meeting at which the resolution was adopted. Payment on the appraisal rights must be made within one year of the date of the shareholders’ meeting at which the resolution was adopted, except when the resolution was to delist our stock or to continue following a mandatory delisting, in which case the payment period is reduced to 60 days from the resolution date. 88
Preemptive and accretion rights In the event of a capital increase, a holder of existing common shares of a given class has a preemptive right to subscribe for a number of shares of the same class sufficient to maintain the holder’s existing proportionate holdings of shares of that class. In addition, shareholders are entitled to the right to subscribe on pro-rata basis for the unsubscribed shares remaining at the end of a preemptive rights offering, known as accretion rights. 88
Holders of ADSs may be restricted in their ability to exercise preemptive rights if an annual report under the Securities Act relating thereto has not been filed or is not effective or an exemption is not available. Preemptive rights are exercisable during the 30 days following the last publication of notice to the shareholders in the Official Bulletin of the Republic of Argentina, or the Official Gazette and an Argentine newspaper of wide circulation. Pursuant to Argentine corporate law, in the case of public companies, such 30-day period may be reduced to a minimum of ten days if so approved by the company’s shareholders at an extraordinary shareholder’s meeting. Shares not subscribed by the shareholders by virtue of their exercise of preemptive rights or accretion rights may be offered to third parties. Voting rights Under our bylaws, each Class A share entitles the holder thereof to five votes at any meeting of our shareholders and Class B shares entitle the holders thereof to one vote per share. However, according to Argentine corporate law, shares entitle the holder to only one vote per share to vote the approval of: an early dissolution, a merger or spin-off when we are not the surviving entity, a reduction of capital stock and redemption of shares, a transformation from one type of entity to another, a limitation of shareholders’ preemptive rights, a transfer of our domicile outside Argentina, and a fundamental change of our corporate purpose set forth in our bylaws. In such cases Class A shares are entitled to only one vote per share and Class B shares are entitled to only one vote per share. In addition, pursuant to Argentine applicable law, as long as we remain public we cannot issue additional shares of any class of capital stock that could entitle the holder thereof to more than one vote per share. Registration requirements of foreign companies that hold Class B shares directly Under Argentine regulations, foreign companies that hold shares directly (and not as ADSs) in an Argentine company must register with the IGJ to exercise certain shareholder rights, including voting rights. The registration requires the filing of corporate and accounting documents in order to demonstrate that the foreign shareholder’s main activity is conducted outside of Argentina. Liquidation rights In the case of our liquidation or dissolution we are requested to communicate such event to the Central Bank, and our assets will be applied to satisfy our outstanding liabilities and proportionally distributed first among our holders of preferred stock as per the terms of the preferred stock, if any. If any surplus remains, it will be proportionally distributed among holders of our common stock. Ordinary and extraordinary meetings Shareholders’ meetings may be ordinary meetings or extraordinary meetings. We are required to convene and hold an ordinary meeting of shareholders within four months of the close of each fiscal year to consider the matters specified in the first two paragraphs of Section 234 of the Argentine Corporation Law, such as the approval of our financial statements, allocation of net income for such fiscal year, approval of the reports of the board of directors and the statutory audit committee and election and remuneration of directors and members of the statutory audit committee. In addition, pursuant to Decree 677/2001, at an ordinary shareholders’ meetings, our shareholders must consider (i) the disposition of, or creation of any lien over, our assets as long as such decision has not been performed under the ordinary course of business; (ii) the execution of administration or management agreements; and (iii) whether to approve the payment of any agreement providing assets or services to us as long as such payment is material when measured against the volume of the ordinary course of business and our shareholders’ equity. Other matters which may be considered at an ordinary meeting convened and held at any time include the responsibility of directors and members of the statutory audit committee, capital increases and the issuance of certain corporate bonds. Extraordinary shareholders’ meetings may be called at any time to consider matters beyond the authority of an ordinary meeting, including amendment of the bylaws, issuance of debentures, early dissolution, merger, spin off, reduction of capital stock and redemption of shares, transformation from one type of entity to another and limitation of shareholders’ preemptive rights. Notices of meetings Notices of shareholders’ meetings are governed by the provisions of Argentine Corporations Law, and in case of publicly traded companies, Law 17,811. Furthermore, notice of shareholders’ meetings must be published for five days in the Official Gazette, in an Argentine newspaper of wide circulation and in the publications of Argentine exchanges or securities markets in which our shares are traded, at least twenty (20) but not more than forty five (45) days prior to the date on which the meeting is to be held. Such notice must include information regarding the type of meeting to be held, the date, time and place of such meeting and the agenda. If a quorum is not available at such meeting, a notice for a second meeting, which must be held within 30 days of the date on which the first meeting was called, must be published for three days, at least eight days before the date of the second meeting. The above-described notices of shareholders’ meetings may be effected simultaneously for the second meeting to be held on the same day as the first meeting, only in the case of ordinary meetings. Shareholders’ meetings may be validly held without notice if all shares of our outstanding capital stock are present and resolutions are adopted by unanimous vote of such shares. 89
Quorum and voting requirements The quorum for ordinary meetings of shareholders on first call is a majority of the shares entitled to vote, and action may be taken by the affirmative vote of an absolute majority of the shares present that are entitled to vote on such action. If a quorum is not available at the first meeting a second meeting may be held at which action may be taken by the holders of an absolute majority of the shares present, regardless of the number of such shares. The quorum for an extraordinary shareholders’ meeting on first call is 60% of the shares entitled to vote, and if such quorum is not available, a second meeting may be held, for which the quorum is 20% of the shares entitled to vote. Action may be taken at extraordinary shareholders’ meetings by the affirmative vote of an absolute majority of shares present that are entitled to vote on such action, except that: the approval of a majority of shares with voting rights (for these purposes non-voting preferred shares shall have voting rights), without application of multiple votes, is required at both the first and second meeting for: (i) the transfer of our domicile outside Argentina, (ii) a fundamental change of the corporate purpose set forth in our bylaws, (iii) our anticipated dissolution, (iv) the total or partial redemption of shares, (v) our merger or spin-off, if we are not the surviving entity, or (vi) the transformation of our corporate legal status, in which cases resolutions shall be adopted by the affirmative vote of the majority of shares with the right to vote. Preferred shares will be entitled to one vote in these circumstances. Argentine corporate law reserves the right to cumulative voting in order to elect up to one third of the directors to fill vacancies of the board of directors, sharing such part with candidates voted for by means of the plural system. Cumulative voting is a system designed to protect minority interests, as it gives rise to the possibility, but does not ensure, that minority interests will be able to elect some of their candidates to the board of directors. Such system works by multiplying the number of members that are taking part in the proceeding by the number of contemplated vacancies, which cannot exceed one third of the vacancies. The larger the number of vacancies, the greater the possibility that minority groups or shareholders will win positions in the board of directors. Shareholders’ meetings may be called by the board of directors or the members of the statutory audit committee whenever required by law or whenever they deem it necessary. Also, the board or the members of the statutory audit committee are required to call shareholders’ meetings upon the request of shareholders representing an aggregate of at least five percent of our outstanding capital stock. If the board or the statutory audit committee fails to call a meeting following such a request, a meeting may be ordered by the CNV or by the courts. In order to attend a meeting, a shareholder must also deposit with us a certificate of book-entry shares registered in its name and issued by Caja de Valores S.A. at least three business days prior to the date on which the meeting is to be held. If so entitled to attend a meeting, a shareholder may be represented by proxy. Proxies may not be granted to our board, members of the statutory audit committee, officers or employees. Election of directors Currently, the shareholders present at any annual ordinary meeting may determine the size of the board of directors, provided that there shall be no less than three and no more than twelve directors. Any director so appointed will serve for one fiscal year. At the shareholders’ meeting on September 26, 2005, any director so appointed will serve for three fiscal years. If the shareholders elect more than eight board members, each director will be re-elected as a staggered board. At the time of the first annual meeting after the approval of the amendment in which the shareholders decide to elect more than eight board, members, the shareholders will designate approximately one-third of the directors to be reelected one year later, one-third to be reelected two years later, and one-third to be reelectedrenewed by thirds, provided that in all cases no less than three years later. Each group must contain at least three directors. After the first term, directors shall be electedrenewed each time. The annual ordinary shareholders’ meeting may also appoint an equal or lesser number of alternate directors, to hold office for three-year terms.the same term than regular directors, to fill any vacancy in the board occurring for any reason whatsoever, and shall further determine the order of substitution. Alternate directors shall hold office until the regular directors in whose place they have acted as substitutes shall resume office, and in case any such absence is permanent, until the next ordinary meeting of shareholders where at directors shall be appointed. Both regular and alternate directors may be re-elected indefinitely. Anti-takeover provisions Our bylaws do not contain any provision that would (i) oblige us to disclose information regarding our shareholders; (ii) have the effect of delaying, deferring or preventing a change in control, the last of which may happen only in the event of a merger, acquisition or public offering for acquisition. Form and transfer Our current capital stock is represented by book-entry shares. Our shareholders are required to hold their shares through book-entries directly made by Caja de Valores S.A. in the stock registry of the company carried by Caja de Valores S.A. or through book-entries with brokers, banks and other entities approved by the CNV that have accounts with Caja de Valores S.A., or with the participants of the Caja de Valores S.A..S.A. Caja de Valores S.A. is in charge of maintaining a stock registry on our behalf based on information received from shareholders that choose to hold their shares directly by registration on the stock registry of the company and from participants of the Caja de Valores S.A., and in accordance with Argentine law only those holders listed in the stock registry either directly or through participants of the Caja de Valores S.A. will be recognized as shareholders. Shares held by participants of the Caja de Valores S.A. have the same rights as shares recorded in our shareholders’ register. C. Material Contracts None. 90
D. Exchange controls Exchange rates On January 7, 2002, the Argentine congress enacted the Public Emergency Law, abandoning over ten years of fixed peso-U.S. dollar parity at Ps.1.00 per US$1.00. After devaluing the peso and setting the official exchange rate at Ps.1.40 per US$1.00, on February 11, 2002, the government allowed the peso to float. The shortage of U.S. dollars and their heightened demand caused the peso to further devalue significantly in the first half of 2002. Since June 30, 2002, the peso has appreciated versus the U.S. dollar from an exchange rate of Ps.3.80 per US$1.00 to an exchange rate of Ps.3.0785Ps. 3.7465 per US$1.00 at May 31, 2007.2009. 90
The following table sets forth the annual high, low, average and period-end exchange rates for the periods indicated, expressed in pesos per U.S. dollar and not adjusted for inflation. There can be no assurance that the peso will not depreciate again in the future, particularly while the restructuring of a substantial portion of Argentina’s foreign debt remains unresolved. The Federal Reserve Bank of New York does not report a noon buying rate for pesos. | | | | | | | | | | | | | | | | | | | Exchange Rates(1) | | | | High | | | Low | | | Average(2) | | | Period-end | | 2002 | | | 3.8675 | | | | 1.0000 | | | | 2.9785 | | | | 3.3630 | | 2003 | | | 3.3625 | | | | 2.7485 | | | | 2.9493 | | | | 2.9330 | | 2004 | | | 3.0718 | | | | 2.8037 | | | | 2.9424 | | | | 2.9738 | | 2005 | | | 3.0523 | | | | 2.8592 | | | | 2.9230 | | | | 3.0315 | | 2006 | | | 3.1072 | | | | 3.0305 | | | | 3.0741 | | | | 3.0695 | | 2007 | | | 3.1797 | | | | 3.0553 | | | | 3.1156 | | | | 3.1510 | | December 2007 | | | 3.1510 | | | | 3.1318 | | | | 3.1397 | | | | 3.1510 | | January 2008 | | | 3.1575 | | | | 3.1282 | | | | 3.1444 | | | | 3.1557 | | February 2008 | | | 3.1695 | | | | 3.1505 | | | | 3.1583 | | | | 3.1587 | | March 2008 | | | 3.1688 | | | | 3.1448 | | | | 3.1558 | | | | 3.1653 | | April 2008 | | | 3.1845 | | | | 3.1520 | | | | 3.1643 | | | | 3.1635 | | May 2008 | | | 3.1812 | | | | 3.0978 | | | | 3.1511 | | | | 3.0978 | | 2008 through May 2008 | | | 3.1845 | | | | 3.0978 | | | | 3.1554 | | | | 3.0978 | |
| | | | | | | | | | | | | | | | | | | Exchange Rates (1) | | | | | | | | | | | | Average | | | Period- | | | | High | | | Low | | | (2) | | | end | | 2003 | | | 3.3625 | | | | 2.7485 | | | | 2.9493 | | | | 2.9330 | | 2004 | | | 3.0718 | | | | 2.8037 | | | | 2.9424 | | | | 2.9738 | | 2005 | | | 3.0523 | | | | 2.8592 | | | | 2.9230 | | | | 3.0315 | | 2006 | | | 3.1072 | | | | 3.0305 | | | | 3.0741 | | | | 3.0695 | | 2007 | | | 3.1797 | | | | 3.0553 | | | | 3.1156 | | | | 3.1510 | | 2008 | | | 3.4537 | | | | 3.0128 | | | | 3.1614 | | | | 3.4537 | | December 2008 | | | 3.4537 | | | | 3.3763 | | | | 3.4226 | | | | 3.4537 | | January 2009 | | | 3.4875 | | | | 3.4497 | | | | 3.4640 | | | | 3.4875 | | February 2009 | | | 3.5595 | | | | 3.4860 | | | | 3.5115 | | | | 3.5595 | | March 2009 | | | 3.7167 | | | | 3.5905 | | | | 3.6540 | | | | 3.7135 | | April 2009 | | | 3.7208 | | | | 3.6738 | | | | 3.6934 | | | | 3.7198 | | May 2009 | | | 3.7465 | | | | 3.6928 | | | | 3.7245 | | | | 3.7465 | |
| | | (1) | | Until June 2002, asked closing quotations as quoted by Banco de la Nación Argentina. Since July 2002, the reference exchange rate as published by the Central Bank. | | (2) | | Based on daily closing price. |
Exchange controls In 2001 and 2002, the Central Bank, among other restrictive measures, restricted the transfer of U.S. dollars abroad without its prior approval. In 2003 and 2004, the government substantially eased these restrictions. However, in June 2005, the Argentine government imposed certain additional restrictions on inflows and outflows of foreign currency to the Argentine foreign exchange market. Pursuant to such restrictions, new indebtedness and debt refinancings with non-Argentine residents from the private sector entered in the local foreign exchange market must have a term of at least 365 calendar days, among others. Additionally, the regulation prohibits the prepayment of such indebtedness before the expiration of such term, irrespective of the payment method and whether or not liquidation includes a foreign exchange trade in the local market. The following transactions are exempted from this restriction: (i) foreign trade financings; (ii) purchase of primary stock and debt security issuances through public offerings and listed on self-regulated markets; and (iii) foreign financial indebtedness, provided that (a) the proceeds from the exchange settlement, net of taxes and expenses, are used for the purchase of foreign currency to cancel principal on foreign debt and/or to invest in long term foreign assets; or (b) they have an average term of not less than two years (including payments of principal and interest for purposes of the calculation), and to the extent they are applied to the net purchase of fixed assets, as defined by Argentine GAAP. As a result, any inflow of funds to the local foreign exchange market arising from, but not limited to: (i) foreign indebtedness, except in the above-mentioned instances; (ii) primary stock issuances of companies residing in Argentina not made pursuant to public offerings and not listed on self-regulated markets, to the extent they do not constitute foreign direct investments (i.e., represent at least a 10% interest in the local company); (iii) non-resident portfolio investments to hold Argentine currency and assets and liabilities in the financial and non-financial private sector, to the extent that they do not arise from the primary subscription of debt securities issued pursuant to a public offering and listed on a self-regulated market and/or the primary subscription of stock of companies residing in Argentina pursuant to a public offering and listed on a self-regulated market; and (iv) non-resident portfolio investments to purchase any right on securities issued by the public sector in the over-the-counter market, must comply with the following requirements, among others: (1) fund inflows may only be transferred out of the local foreign exchange market upon the lapse of a term of 365 calendar days as from the date on which the funds entered the country; and (2) the placement of a nominative, non-transferable and non-compensated deposit in U.S. dollars for an amount equal to the 30% of the amount involved in the transaction for a term of 365 calendar days, pursuant to the terms and under the conditions established in the applicable regulations. As of the date hereof, original maturity of certain debt securities issued pursuant to a primary public offering and listed on a self-regulated market shall be exempt from the minimum stay period of 365 calendar days for purposes of purchasing foreign currency to repay such debt. These restrictions do not apply to the proceeds received by us from the issuance and sale of notes under this program. 91
E. Taxation Material U.S. Federal Income Tax Considerations The following discussion is a summary of the material U.S. federal income tax considerations relating to the purchase, ownership and disposition of our Class B shares or ADSs. This discussion applies only to beneficial owners of Class B shares or ADSs that are “U.S. holders” (as defined below) that hold Class B shares or ADSs as “capital assets” (generally, property held for investment). This discussion is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), final, temporary and proposed Treasury regulations, administrative pronouncements of the IRS and judicial decisions, all as currently in effect and all of which are subject to change (possibly on a retroactive basis) and to different interpretations. This discussion does not purport to address all U.S. federal income tax considerations that may be relevant to a particular U.S. holder, and you are urged to consult your own tax advisor regarding your specific tax situation. The discussion does not address the tax considerations that may be relevant to U.S. holders in special tax situations, such as: | • | | dealers in securities or currencies; | | | • | | insurance companies; | | | • | | tax-exempt organizations; | | | • | | traders in securities that elect to mark to market; | | | • | | certain financial institutions; | | | • | | partnerships or other pass-through entities; | | | • | | holders whose functional currency for U.S. federal income tax purposes is not the U.S. dollar; | | | • | | U.S. expatriates; | | | • | | holders that hold Class B shares or ADSs as part of a hedge, straddle, conversion transaction, constructive sale transaction or other integrated transaction; | | | • | | holders that own, directly, indirectly or constructively, 10% or more of the total combined voting power of our shares; | | | • | | real estate investment trusts; or | | | • | | regulated investment companies. |
dealers in securities or currencies; tax-exempt organizations; traders in securities that elect to mark to market; certain financial institutions; partnerships or other pass-through entities; holders whose functional currency for U.S. federal income tax purposes is not the U.S. dollar; holders that hold Class B shares or ADSs as part of a hedge, straddle, conversion transaction, constructive sale transaction or other integrated transaction; holders that own, directly, indirectly, or constructively, 10% or more of the total combined voting power of our shares; real estate investment trusts; or regulated investment companies. This discussion does not address the estate, gift, or alternative minimum tax consequences of holding Class B shares or ADSs or the indirect consequences to holders of equity interests in partnerships or other entities that own our Class B shares or ADSs. Moreover, this discussion does not address the state, local, or non-U.S. income or other tax consequences of an investment in our Class B shares or ADSs, or any aspect of U.S. federal taxation other than income taxation. We are uncertain whether we currently are a passive foreign investment company (a “PFIC”) or will be a PFIC in a future tax year. As discussed below under “Passive Foreign Investment Companies,” the application of the PFIC rules to banks is unclear under present federal U.S. federal income tax law. A determination that we are a PFIC generally will result in unfavorable consequences to a U.S. holder. You should carefully consider the discussion under “Passive Foreign Investment Companies” and consult your own tax advisor regarding the consequences of investing in a PFIC. Unless otherwise noted, the following discussion assumes that we are not a PFIC. You should also consult your own tax advisor regarding the U.S. federal, state, local, and foreign income and other tax consequences of purchasing, owning and disposing of our Class B shares or ADSs in your particular circumstances. For the purposes of this discussion, you are a ''U.S. holder’’ if you are a beneficial owner of Class B shares or ADSs and you are for U.S. federal income tax purposes: | • | | an individual who is a citizen or resident of the United States; | | | • | | a corporation, or any other entity taxable as a corporation, created or organized in or under the laws of the United States, any state thereof or the District of Columbia; | | | • | | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or | | | • | | a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) the trust has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person. |
an individual who is a citizen or resident of the United States; a corporation, or any other entity taxable as a corporation, created or organized in or under the laws of the United States, any state thereof or the District of Columbia; an estate the income of which is subject to U.S. federal income taxation regardless of its source; or a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) the trust has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person. If a partnership holds our Class B shares or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. A prospective investor who is a partner of a partnership holding our Classclass B shares or ADSs shares should consult its own tax advisor. In general, for U.S. federal income tax purposes, U.S. holders that are beneficial owners of ADSs will be treated as the beneficial owners of the Class B shares represented by those ADSs. 92
Taxation of Dividends. Distributions of cash with respect to the Class B shares or ADSs (other than distributions in redemption of the Class B shares that are treated as sales or exchanges under Section 302(b) of the Code or upon our liquidation) will, to the extent made from our current or accumulated earnings and profits as determined under U.S. federal income tax principles, constitute dividends for U.S. federal income tax purposes. Whether such current or accumulated earnings and profits will be sufficient for all such distributions on the Class B shares or ADSs to qualify as dividends for U.S. federal income tax purposes depends on our future profitability and other factors, many of which are beyond our control. 92
We do not currently maintain calculations of our earnings and profits under U.S. federal income tax principles. Unless and until these calculations are made, distributions should be presumed to be taxable dividends for U.S. federal income tax purposes. As used below, the term ''dividend’’ means a distribution that constitutes a dividend for U.S. federal income tax purposes. In general, cash dividends (including amounts withheld in respect of Argentine taxes) paid with respect to: | • | | the Class B shares generally will be includible in the gross income of a U.S. holder as ordinary income on the day on which the dividends are received by the U.S. holder; or | | | • | | the Class B shares represented by ADSs generally will be includible in the gross income of a U.S. holder as ordinary income on the day on which the dividends are received by the depositary; |
the Class B shares generally will be includible in the gross income of a U.S. holder as ordinary income on the day on which the dividends are received by the U.S. holder; or the Class B shares represented by ADSs generally will be includible in the gross income of a U.S. holder as ordinary income on the day on which the dividends are received by the depositary; and, in either case, these dividends will not be eligible for the dividends received deduction allowed to corporations. To the extent that a distribution by us exceeds the amount of our earnings and profits, it will be treated as a non-taxable return of capital to the extent of the U.S. holder’s adjusted tax basis in the Class B shares or ADSs, and thereafter as capital gain. Subject to certain exceptions for short-term and hedged positions, the amount of dividends received by certain U.S. holders (including individuals) with respect to the ADSs will be subject to taxation at a maximum rate of 15% under current law if the dividends represent ''qualified dividend income.’’ Dividends paid on the ADSs will be treated as qualified dividend income if (i) the ADSs are readily tradable on an established securities market in the United States and (ii) we were not in the year prior to the year in which the dividend was paid, and are not in the year in which the dividend is paid, a PFIC. Under current guidance recently issued by the IRS, the ADSs should qualify as readily tradable on an established securities market in the United States so long as they are listed on the New York Stock Exchange, but no assurances can be given that the ADSs will be or remain readily tradable under future guidance. See below for a discussion of our potential PFIC classification. Based on existing IRS guidance, it is not entirely clear whether dividends received with respect to the Class B shares will be treated as qualified dividend income, because the Class B shares are not themselves listed on a U. S. exchange. In addition, the U.S. Treasury Department has announced its intention to promulgate additional procedures pursuant to which holders of ADSs or Class B stock and intermediaries through whom such securities are held will be permitted to rely on certifications from issuers to establish that dividends are treated as qualified dividend income. Because such procedures have not yet been issued, we are not certain that we will be able to comply with them. You should consult your own tax advisors regarding the availability of the preferential dividend tax rate in the light of your own particular circumstances. Dividends paid in pesos will be includible in the gross income of a U.S. holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day they are received by the U.S. holder, in the case of Class B shares, or the depositary, in the case of Class B shares represented by ADSs, regardless of whether the payment is in fact converted to U.S. dollars. If dividends paid in pesos are converted into U.S. dollars on the day they are received by the U.S. holder or the depositary, as the case may be, U.S. holders should not be required to recognize foreign currency gain or loss in respect of the dividend income. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is included in the gross income of a U.S. holder through the date such payment is converted into dollars (or otherwise disposed of) will be treated as U.S. source ordinary income or loss. However, U.S. holders should consult their own tax advisors regarding the treatment of any foreign currency gain or loss if any pesos received by the U.S. holder or the depositary are not converted into U.S. dollars on the date of receipt. A U.S. holder will be entitled, subject to a number of complex limitations and conditions, to claim a U.S. foreign tax credit in respect of any Argentine income taxes withheld on dividends received on shares. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, the dividends should generally constitute “passive category income,” or in the case of certain U.S. holders, “general category income.” U.S. holders who do not elect to claim a credit for any foreign taxes paid during the taxable year may instead claim a deduction of such Argentine income taxes, provided that the U.S. holder elects to deduct (rather than credit) all foreign income taxes paid or accrued for the taxable year. Dividends received with respect to the common shares will be treated as foreign source income, which may be relevant in calculating a U.S. holder’s foreign tax credit limitation. The rules relating to computing foreign tax credits or deducting foreign taxes are extremely complex, and U.S. holders are urged to consult their independent tax advisors regarding the availability of foreign tax credits with respect to any Argentine income taxes withheld from a dividend on the common shares. The IRS has expressed concern that intermediaries in connection with depositary arrangements may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. persons who are holders of depositary shares. Accordingly, investors should be aware that the discussion above regarding the availability of foreign tax credits for Argentine withholding tax on dividends paid with respect to Class B shares represented by ADSs could be affected by future action taken by the IRS. Taxation of Capital Gains. Deposits and withdrawals of Class B shares by U.S. holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes. 93
In general, gain or loss realized by a U.S. holder on the sale, redemption or other taxable disposition of Class B shares or ADSs will be subject to U.S. federal income taxation as capital gain or loss in an amount equal to the difference between the amount realized (including the gross amount of the proceeds of the sale or other taxable disposition before the deduction of any Argentine tax) on the taxable disposition and such U.S. holder’s adjusted basis in the Class B shares or the ADSs. Capital gains of certain non-corporate U.S. holders, including individuals, derived with respect to capital assets held for more than one year may be eligible for various reduced rates of taxation, which rates currently are scheduled to increase on January 1, 2011. For example, for capital assets held for over one year, the maximum rate of tax under current law generally will be 15% (rather than the higher rates of tax generally applicable to items of ordinary income). The deductibility of capital losses is subject to limitations. Any gain or loss realized by a U.S. holder will generally be treated as a U.S. source gain or loss for U.S. foreign tax credit purposes. 93
If Argentine withholding tax is imposed on the sale or disposition of Class B shares or ADSs, the amount realized by a U.S. holder will include the gross amount of the proceeds of such sale or disposition before deduction of the Argentine withholding tax. The availability of U.S. foreign tax credits for these Argentine taxes and any Argentine taxes imposed on distributions that do not constitute dividends for U.S. tax purposes is subject to various limitations and involves the application of rules that depend on a U.S. holder’s particular circumstances. In particular, because any gain from the sale or other disposition of Class B Shares or ADSs generally will be treated as U.S. source income, a U.S. holder may not be able to fully utilize its U.S. foreign tax credits in respect of such Argentine withholding taxes unless such U.S. holder has other income from foreign sources. U.S. holders are urged to consult their own tax advisors regarding the application of the U.S. foreign tax credit rules to their investment in, and disposition of, Class B shares or ADSs. Passive Foreign Investment Companies. U.S. holders should carefully consider the discussion below regarding our potential treatment as a PFIC for U.S. federal income tax purposes. In general, if during any taxable year of a non-U.S. corporation, 75% or more of the corporation’s gross income consists of certain types of “passive” income, or the average value during a taxable year of the ''passive assets’’ of the corporation (generally assets that generate passive income) is 50% or more of the average value of all the corporation’s assets, the corporation will be treated as a PFIC under U.S. federal income tax law. Passive income for this purpose generally includes interest, dividends, royalties, rents and gains from commodities and securities transactions. Certain exceptions are provided, however, for passive income derived in the conduct of an active business. We are unable to determine if we are a PFIC because the application of the PFIC rules to banks is unclear under present U.S. federal income tax law. Banks generally derive a substantial part of their income from assets that are interest bearing or that otherwise could be considered passive under the PFIC rules. The IRS has issued a notice and has proposed regulations that exclude from passive income any income derived in the active conduct of a banking business by a qualifying foreign bank (the ''active bank exception’’). The IRS notice and proposed regulations have different requirements for qualifying as a foreign bank, and for determining the banking income that may be excluded from passive income under the active bank exception. Moreover, the proposed regulations have been outstanding since 1994 and will not be effective unless finalized. Because final regulations have not been issued and because the notice and the proposed regulations are inconsistent, our status under the PFIC rules is subject to considerable uncertainty. While we conduct, and intend to continue to conduct, a significant banking business, there can be no assurance that we will satisfy the specific requirements for the active bank exception under either the IRS notice or the proposed regulations. In this regard, we presently derive significant income from securities that may not constitute banking income for purposes of the active bank exception. Accordingly, U.S. holders could be subject to U.S. federal income tax under the rules described below. U.S. holders should consult their tax advisors regarding this issue. If we are treated as a PFIC for any taxable year, a U.S. holder would be subject to special rules (and may be subject to increased tax liability and form filing requirements) with respect to (a) any gain realized on the sale or other disposition of Class B shares or ADSs, and (b) any ''excess distribution’’ made by us to the U.S. holder (generally, any distribution during a taxable year in which distributions to the U.S. holder on the Class B shares or ADSs exceed 125% of the average annual distributions the U.S. holder received on the Class B shares or ADSs during the preceding three taxable years or, if shorter, the U.S. holder’s holding period for the Class B shares or ADSs). Under those rules, (a) the gain or excess distribution would be allocated ratably over the U.S. holder’s holding period for the Class B shares or ADSs, (b) the amount allocated to the taxable year in which the gain or excess distribution is realized and to taxable years before the first day on which we became a PFIC would be taxable as ordinary income, (c) the amount allocated to each prior year in which we were a PFIC would be subject to U.S. federal income tax at the highest tax rate in effect for that year and (d) the interest charge generally applicable to underpayments of U.S. federal income tax would be imposed in respect of the tax attributable to each prior year in which we were a PFIC. In addition, as discussed above, a U.S. holder would not be entitled to (if otherwise eligible for) the preferential reduced rate of tax payable on certain dividend income. A U.S. holder may mitigate these effects by electing mark-to-market treatment for its ADSs or Class B shares, provided the relevant shares constitute ''marketable stock’’ as defined in Treasury regulations. Our ADSs and our Class B shares will be ''marketable stock’’ if they are ''regularly traded’’ on a ''qualified exchange or other market’’. The term ''qualified exchange or other market’’ includes the New York Stock Exchange. Our ADSs will be ''regularly traded’’ if they are traded on at least 15 days during each calendar quarter, other than in de minimis quantities. For the calendar year of our initial public offering, our ADSs will be regularly traded if they are regularly traded, other than in de minimis amounts, on one-sixth of the days remaining in the quarter in which the offering occurred, and on at least 15 days during each remaining quarter of the calendar year. No assurance can be provided that our ADSs will be characterized as regularly traded on a qualified exchange or other market for this purpose. Our Class B shares will be treated as listed on a ''qualified exchange or other market’’ for purposes of the relevant Treasury regulations if the exchange on which they are listed has sufficient trading volume, listing, financial disclosure and surveillance, is regulated or supervised by a governmental authority of the country in which the market is located, and meets certain other characteristics. It is unclear whether the Buenos Aires Stock Exchange would meet these requirements and whether there would be sufficient trading of the Class B shares for the Class B shares to be characterized as ''regularly traded.’’ It is therefore unclear whether a U.S. holder would be able to elect mark-to-market treatment for the Class B shares. 94
A U.S. holder electing the mark-to-market regime generally would compute gain or loss at the end of each taxable year as if the Class B shares or ADSs had been sold at fair market value. Any gain recognized by the U.S. holder under mark-to-market treatment, or on an actual sale, would be treated as ordinary income, and the U.S. holder would be allowed an ordinary deduction for any decrease in the value of Class B shares or ADSs as of the end of any taxable year, and for any loss recognized on an actual sale, but only to the extent, in each case, of previously included market-to-market income not offset by previously deducted decreases in value. Any loss on an actual sale of Class B shares or ADSs would be a capital loss to the extent in excess of previously included mark-to-market income not offset by previously deducted decreases in value. A U.S. holder’s tax basis in Class B shares or ADSs would increase or decrease by gain or loss taken into account under the mark-to-market regime. 94
A mark-to-market election under the PFIC rules applies to all future years of an electing U.S. holder during which the Class B shares or ADSs are regularly traded on a qualifying exchange, unless revoked with the IRS’s consent. If we are characterized as a PFIC and, at any time, we have non-U.S. subsidiaries that are classified as PFICs, U.S. holders generally will be deemed to own, and also would be subject to the PFIC rules with respect to, their indirect ownership interests in that lower-tier PFIC. If we are characterized as a PFIC, the U.S. holder could incur liability for the deferred tax and interest charge described above if eithereither: (1) we receive a distribution from, or dispose of all or part of our interest in, the lower-tier PFIC or (2) the U.S. holder disposes of all or part of its Class B shares or ADSs. A mark-to-market election under the PFIC rules with respect to shares would not apply to a lower-tier PFIC, and a U.S. holder would not be able to make such a mark-to-market election in respect of its indirect ownership interest in that lower-tier PFIC. Consequently, U.S. holders of shares could be subject to the PFIC rules with respect to income of the lower-tier PFIC the value of which already had been taken into account indirectly via mark-to-market adjustments. Furthermore, if we are characterized as a PFIC, a U.S. holder will be required to file an IRS Form 8621. Information Reporting and Backup Withholding. Information reporting requirements will apply to dividends in respect of the Class B shares or ADSs or the proceeds from the sale, exchange, or redemption of the Class B shares or ADSs paid within the United States (and, in some cases, outside of the United States) to U.S. holders, unless, in either case, the U.S. holder is an exempt recipient (such as a corporation). A 28% backup withholding tax may apply to such amounts if the U.S. holder fails to provide an accurate taxpayer identification number or to report interest and dividends required to be shown on its U.S. federal income tax returns. The amount of any backup withholding from a payment to a U.S. holder will be allowed as a credit against the U.S. holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS. Material Argentine Tax Considerations The following discussion is a summary of the of the material Argentine tax considerations relating to the purchase, ownership and disposition of our Class B shares or ADSs. Dividends tax. Dividends paid on our Class B shares or ADSs, whether in cash, property or other equity securities, are not subject to income tax withholding, except for dividends paid in excess of our taxable accumulated income at the previous fiscal period which are subject to withholding at the rate of 35% applicable on such excess and regarding both local and foreign shareholders. Capital gains tax. Due to the amendments made to the Argentine Income Tax Law by Law 25,414, Decree 493/2001 (the “AITL”) and the abrogation of Law 25,414 by 25,556, it is not clear whether certain amendments are in effect. Although opinion No. 351 of the National Treasury General Attorney Office solved the most important matters related to capital gains, certain issues still remain unclear. | • | | Resident individuals. Pursuant to a reasonable construction of the AITL: (i) income obtained from the sale, exchange or other disposition of our Class B shares or ADSs by resident individuals who do not sell or dispose of Argentine shares on a regular basis would not be subject to Argentine income tax; and (ii) although there still exists uncertainty regarding this issue, income obtained from the sale, exchange or other disposition of our Class B shares or ADSs by resident individuals who sell or dispose of Argentine shares on a regular basis should be exempt from Argentine income tax. | | | • | | Foreign beneficiaries. Capital gains obtained by non-residents or foreign entities from the sale, exchange or other disposition of our Class B shares or ADSs are exempt from income tax. Pursuant to a reasonable construction of the AITL, and although the matter is not completely free from doubt, such treatment should also apply to those foreign beneficiaries that qualify as offshore entities. | | | • | | Local entities. Capital gains obtained by Argentine entities (in general, entities organized or incorporated under Argentine law, certain traders and intermediaries, local branches of non-Argentine entities, sole proprietorships and individuals carrying on certain commercial activities in Argentina) derived from the sale, exchange or other disposition of our Class B shares or ADSs are subject to income tax at the rate of 35%. Losses arising from the sale of our Class B shares or ADSs can be offset against the same type of income. |
Foreign beneficiaries. Capital gains obtained by non-residents or foreign entities from the sale, exchange or other disposition of our Class B shares or ADSs are exempt from income tax. Pursuant to a reasonable construction of the AITL, and although the matter is not completely free from doubt, such treatment should also apply to those foreign beneficiaries that qualify as offshore entities. Local entities. Capital gains obtained by Argentine entities (in general, entities organized or incorporated under Argentine law, certain traders and intermediaries, local branches of non-Argentine entities, sole proprietorships and individuals carrying on certain commercial activities in Argentina) derived from the sale, exchange or other disposition of our Class B shares or ADSs are subject to income tax at the rate of 35%. Losses arising from the sale of our Class B shares or ADSs can be offset against the same type of income. 95
Personal assets tax. Argentine entities, such as us, have to pay the personal assets tax corresponding to Argentine and foreign individuals and foreign entities for the holding of our shares at December 31 of each year. The applicable tax rate is 0.5% and is levied on thevalor patrimonial proporcional, or the book value, of the shares arising from the last balance sheet. Pursuant to the Personal Assets Tax Law, the Argentine company is entitled to seek reimbursement of such paid tax from the applicable Argentine individuals and/or foreign shareholders. Value added tax. The sale, exchange or other disposition of our Class B shares or ADSs and the distribution of dividends are exempted from the value added tax. Transfer taxes. The sale, exchange or other disposition of our Class B shares or ADSs is not subject to transfer taxes. Stamp taxes. Argentine residents may be subject to stamp tax in certain Argentine provinces in case transfer of our Class B shares or ADSs is performed or executed in such jurisdiction by means of written agreements. No stamp taxes are levied in the City of Buenos Aires. 95
Other taxes. There are no Argentine inheritance or succession taxes applicable to the ownership, transfer or disposition of our Class B shares or ADSs. In addition, neither the minimum presumed income tax nor any local gross turnover tax is applicable to the ownership, transfer or disposition of our Class B shares or ADSs. Tax treaties. Argentina has signed tax treaties for the avoidance of double taxation with Australia, Austria, Belgium, Bolivia, Brazil, Canada, Chile, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Spain, Sweden, Switzerland and the United Kingdom. There is currently no tax treaty or convention in effect between Argentina and the United States. It is not clear when, if ever, a treaty will be ratified or entered into effect. As a result, the Argentine tax consequences described in this section will apply, without modification, to a holder of our Class B shares or ADSs that is a U.S. resident. Foreign shareholders located in certain jurisdictions with a tax treaty in force with Argentina may be exempted from the payment of the personal asset tax. F. Dividends and Paying Agents Not applicable. G. Statement by Experts Not applicable. H. Documents on Display We are required to file annual reports, including exhibits, and other information with the SEC and to furnish interim information on Form 6-K. You may read and copy any documents filed by the Company at the SEC’s public reference room at 100 FifthF Street, N.E., Room 1580,NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC also maintains a website at http://www.sec.gov which contains reports and other information regarding registrants that file electronically with the SEC. We are subject to the reporting requirements of the Exchange Act of 1934, as applied to foreign private issuers. Because we are a foreign private issuer, the SEC’s rules do not require us to deliver proxy statements or to file quarterly reports. In addition, our “insiders” are not subject to the SEC’s rules that prohibit short-swing trading. We prepare quarterly and annual reports containing consolidated financial statements in accordance with Central Bank Rules. Our annual consolidated financial statements are certified by an independent accounting firm. We have appointed The Bank of New York to act as depositary for our ADSs. During the time the deposit agreement remains in force, we will furnish the depositary with: summaries of all notices of general meetings of shareholders and other reports and communications that are made generally available to our shareholders. The depositary will, as provided in the deposit agreement, if we so request, arrange for the mailing of summaries in English of the reports and communications to all record holders of our ADSs. Any record holder of ADSs may read the reports, notices, or summaries thereof, and communications at the depositary’s office located at 101 Barclay Street, New York, New York 10286. I. Subsidiary Information Not applicable. 96
Item 11. Quantitative and Qualitative Disclosure About Market Risk Market Risk Market risk is the risk of loss arising from fluctuations in financial markets variables such as interest rates, foreign exchange rates and other rates or prices. This risk is a consequence of our lending, trading and investments businesses and mainly consists of interest rate risk, foreign exchange risk. We evaluate, upgrade and improve market risks measurements and controls on a daily basis. In order to measure significant market risks (whether they arise in trading or non-trading portfolios) we use the value at risk methodology (“VaR”). This methodology is based on statistical methods that take into account many variables that may cause a change in the value of our portfolios, including interest rates, foreign exchange rates, securities prices, volatility and any correlation among them. VaR is an estimation of potential losses that could arise from reasonably likely adverse changes in market conditions. It expresses the maximum amount of loss expected (given confidence interval) over a specified time period, or “time horizon,” if that portfolio were held unchanged over that time period. 96
All VaR models, while forward-looking, are based on past events and are dependent upon the quality of available market data. The quality of our VaR’s models is therefore continuously monitored. As calculated by Banco Macro, VaR is an estimate of the expected maximum loss in the market value of a given portfolio over a five-day horizon at a one-tailed 99% confidence interval. We assume a five day holding period and adverse market movements of 2.32 standard deviations as the standard for risk measurement and comparison. The following table and graph shows the 5-day 99% confidence VaR for Banco Macro combined trading portfolios for 20072008 (in million of Pesos): | | | | | | | 20072008 | | Minimum | | | 70.549.7 | | Maximum | | | 134.5124.7 | | Average | | | 95.384.8 | | December 20072008 | | | 127.449.9 | |
In order to take advantage of good trading opportunities we have sometimes increased risk, however during periods of uncertainty have also reduced it. The main source of our VaR is the fixed income securities. Interest Rate Risk Interest-rate risk is the effect on our net interest income of the fluctuations of market interest rates. Sensitivity to interest rate arises in our normal course of business as the re-pricingrepricing characteristics of its interest-earning assets do not necessarily match those of its interest-bearing deposits and other borrowings. The re-pricingrepricing structure of assets and liabilities is matched when an equal amount of assets and liabilities re-price for any given period. Any excess of assets or liabilities over these matched items results in a gap or mismatch. Our interest rate sensitivity analysis measures the risk arising from the different sensitivity of assets and liabilities when interest rate changes occur (“duration” approach). It covers all the assets and liabilities excluding tradable portfolios. In this case our VaR model or maximum potential loss in the net economic value of the portfolio of assets and liabilities due to interest rate risk increases, considers a 3-month horizon and with a confidence level of 99%. Our methodology also captures the real interest rate risk, which is the risk arising from the mismatch produced as a consequence of an imperfect correlation between inflation rate movements and financing interest rate variations. The following table shows the 3-month 99% confidence VaR for Banco Macro combined interest rate position for 20072008 (in millionmillions of Pesos): | | | | | | | 20072008 | | Minimum | | | 5.9105.7 | | Maximum | | | 102.3204.5 | | Average | | | 28.1165.8 | | December 20072008 | | | 101.1181.8 | |
Foreign Exchange Risk The following table shows the VaR for Banco Macro combined foreign exchange position for 20072008 (in millionmillions of Pesos): | | | | | | | 20072008 | | Minimum | | | 2.82.4 | | Maximum | | | 5.417.9 | | Average | | | 4.16.7 | | December 20072008 | | | 5.017.9 | |
97
Equity and Commodity Price Risk Equity and commodity risk are the risks associated with adverse movements in the value of equity securities and commodities or related indexes. We do not have any material exposure to either of them. Item 12. Description of Securities Other Than Equity Securities Not applicable. 97
PART II Item 13. Defaults, Dividend Arrearages and Delinquencies None. Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds None. Item 15. Controls and Procedures Disclosure Controls and Procedures We carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of December 31, 2007.2008. There are, as described below, inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon and as of the date of our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Securities Exchange Act is recorded, processed, summarized and reported as and when required. Management’s Annual Report on Internal Control over Financial Reporting The management of Banco Macro is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Banco Macro’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Banco Macro’s internal control over financial reporting includes those policies and procedures that: | a) | | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Bank; |
| b) | | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and directors of the Bank; and |
| c) | | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Bank’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Banco Macro’s management assessed the effectiveness of the Bank’s internal control over financial reporting as of December 31, 2007.2008. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control —- Integrated Framework. Based on its assessment and those criteria, the Bank’s management concluded that, as of December 31, 20072008 the Bank’s internal control over financial reporting was effective. 98
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2007,2008, has been audited by Pistrelli, Henry Martin y Asociados S.R.L. (Member of Ernst & Young Global), an independent registered public accounting firm, as stated in their report which appears herein. 98
Attestation Report of the Independent Registered Public Accounting Firm Banco Macro’s independent registered public accounting firm, Pistrelli, Henry Martin y Asociados S.R.L. (Member of Ernst & Young Global), has issued an attestation report on the effectiveness of the Bank’s internal control over financial reporting. The report follows below: REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Directors and Shareholders of BANCO MACRO S.A. Sarmiento 447 City of Buenos Aires We have audited the internal control over financial reporting of BANCO MACRO S.A. and its subsidiaries (a bank organized under Argentine legislation) and its subsidiaries (the “Company”) as of December 31, 2007,2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Bank’sCompany’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, BANCO MACRO S.A. and its subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007,2008, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States of America), the consolidated balance sheets of BANCO MACRO S.A. and its subsidiaries as of December 31, 20072008 and 2006,2007, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 20072008 of BANCO MACRO S.A. and its subsidiaries, and our report dated June 24, 200818, 2009 expressed an unqualified opinion on those consolidated financial statements.thereon. City of Buenos Aires, June 24, 200818, 2009 PISTRELLI, HENRY MARTIN Y ASOCIADOS S.R.L.
Member of Ernst & Young Global NORBERTOCARLOS M. NACUZZI SZPUNAR
Partner 99
Changes in Internal Control Over Financial Reporting There has been no change in our internal control over financial reporting during 20072008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 99
Item 16A. Audit Committee Financial Expert The board of directors has determined that Guillermo Eduardo Stanley, independent member of the audit committee, meets the attributes defined in Item 16A of Form 20-F for “audit committee financial experts”. Item 16B. Code of Ethics In addition to the general code of ethics that applies to all of our employees, we have adopted a code of ethics that applies specifically to our principal executive officers, and principal financial and accounting officer and controller, as well as persons performing similar functions. The text of our code of ethics for our principal executive officers and principal financial and accounting officer and controller is posted on our web site at: www.macro.com.ar. There has been no change in our Code of Ethics during the period covered by this annual report. Item 16C. Principal Accountant Fees and Services Fees Paid to the Company’s Principal Accountant In 2006 Pistrelli, Henry Martin y Asociados S.R.L. (Member of Ernst & Young Global) served as our principal external auditor. Fees payable to Pistrelli, Henry Martin y Asociados S.R.L. (Member of Ernst & Young Global) in 2007 and 2008 are detailed below. | | | | | | | | | | | | | | | | | | | For the year ended December 31, | | | For the year ended December 31, | | Thousands of Pesos | | 2006 | | 2007 | | | 2007 | | 2008 | | | | | Audit Fees | | 6,681 | | 7,074 | | | 7,074 | | 9,097 | | Audit Related Fees | | 550 | | 1,733 | | | 1,733 | | 442 | | All Other Fees | | 228 | | 127 | | | 127 | | 35 | | | | | | | | | | | | | Total | | 7,459 | | 8,934 | | | 8,934 | | 9,574 | | | | | | | | | | | | |
Audit Fees Audit fees were paid for professional services rendered by the auditors for the audit of our consolidated financial statements. Audit-Related Fees Audit-related fees are typically services that are reasonably related to the performance of the audit or review of the consolidated financial statements and are not reported under the audit fees item above. This item includes fees for attestation services on our financial information. All Other Fees Fees disclosed in the table above under “All Other Fees” consisted of other fees paid for professional services.services. Audit Committee’s Pre-approval Policies and Procedures Our audit committee is responsible for, among other things, the oversight of our independent auditors. On a yearly basis, the audit committee reviews together with management and the independent auditor, the audit plan, audit related services and other non-audit services and approves the related fees. 100
Item 16D. Exemptions from the Listing Standards for Audit Committees Not applicable. Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | | | | | | maximum number of | | | | number of | | | Average | | | Total number of | | | shares/Pesos that may yet be | | | | shares | | | Price paid | | | shares purchased as | | | purchased under the program | | Period | | purchased | | | per share | | | part of the program | | | in Shares | | | in $ | | 1: January 8 – February 7 (1) | | | 291,432 | | | | 6.871 | | | | 291,432 | | | | 29,708,568 | | | | 207,997,588 | | 2: February 8 – March 7 (1) | | | 1,148,000 | | | | 6.939 | | | | 1,439,432 | | | | 28,560,568 | | | | 200,034,371 | | 3: March 8 – April 7 (1) | | | — | | | | — | | | | — | | | | — | | | | — | | 4: April 8 – May 7 (1) | | | — | | | | — | | | | — | | | | — | | | | — | | 5: May 8 – June 7 (2)(3)(4) | | | 3,908,527 | | | | 6.766 | | | | 5,347,959 | | | | 24,652,041 | | | | 174,018,787 | | 6: June 8 – June 27(3)(4)(5) | | | 9,004,153 | | | | 6.151 | | | | 14,352,112 | | | | 15,647,888 | | | | 118,781,341 | | TOTAL | | | 14,352,112 | | | | 6.682 | | | | 14,352,112 | | | | 15,647,888 | | | | 118,781,341 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maximum number of shares/Pesos | | | | Total number of | | | | | | | Total number of | | | that may yet be purchased under the | | | | shares | | | Average price | | | shares purchased as | | | program | | Period | | purchased | | | paid per share | | | part of the program | | | in Shares | | | in $ | | Month #1 January 1- 31 | | | 291,432 | | | | 6.871 | | | | 291,432 | | | | 29,708,568 | | | | 207,997,588 | | Month #2 February 1- 29 | | | 1,148,000 | | | | 6.939 | | | | 1,439,432 | | | | 28,560,568 | | | | 200,030,622 | | Month #3 March 1- 31 | | | — | | | | — | | | | 1,439,432 | | | | 28,560,568 | | | | 200,030,622 | | Month #4 April 1- 30 | | | — | | | | — | | | | 1,439,432 | | | | 28,560,568 | | | | 200,030,622 | | Month #5 May 1- 31 | | | 3,580,870 | | | | 6.655 | | | | 5,020,302 | | | | 24,979,698 | | | | 176,261,596 | | Month #6 June 1- 30 | | | 7,970,482 | | | | 6.108 | | | | 12,990,784 | | | | 17,009,216 | | | | 115,048,015 | | Month #7 July 1- 30 | | | 14,752,394 | | | | 5.550 | | | | 27,743,178 | | | | 22,256,822 | | | | 112,030,278 | | Month #8 August 1- 31 | | | 14,560,016 | | | | 5.830 | | | | 42,303,194 | | | | 7,696,806 | | | | 40,293,946 | | Month #9 September 1- 30 | | | 5,143,270 | | | | 5.741 | | | | 47,446,464 | | | | 5,082,578 | | | | 10,767,691 | | Month #10 October 1- 31 | | | 13,219,536 | | | | 3.839 | | | | 60,666,000 | | | | 41,334,000 | | | | 152,055,524 | | Month #11 November 1- 30 | | | 12,252,676 | | | | 3.136 | | | | 72,918,676 | | | | 29,081,324 | | | | 124,147,791 | | Month #12 December 1- 31 | | | 2,622,842 | | | | 3.842 | | | | 75,541,518 | | | | 26,458,482 | | | | 112,213,159 | | | | | | | | | | | | | | | | | | | | | | | 2009 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Month #1 January 1- 31 | | | 4,158,482 | | | | 3.853 | | | | 79,700,000 | | | | 22,300,000 | | | | 97,531,279 | | Month #2 February 1- 28 | | | 6,520,000 | | | | 3.706 | | | | 86,220,000 | | | | 15,780,000 | | | | 67,587,946 | | Month #3 March 1- 31 | | | 3,352,873 | | | | 3.631 | | | | 89,572,873 | | | | 12,427,127 | | | | 61,462,567 | | Month #4 April 1- 29 | | | 1,068,819 | | | | 3.841 | | | | 90,641,692 | | | | 11,358,308 | | | | 57,564,636 | | | | | | | | | | | | | | | | | | | TOTAL | | | 90,641,692 | | | | 4.826 | | | | 90,641,692 | | | | 11,358,308 | | | | 57,564,636 | | | | | | | | | | | | | | | | | |
Repurchase original program and modifications | | | 1. | | On January 8, 2008 the Board of Directors of the Bank decided to establish the following terms and conditions for the acquisition of its own shares issued by the Bank under the provisions of Section 68 of Law 17,811 (added by Decree number 677/2001) and the Rules of the CNV: (a) maximum amount of the investment: Up to Ps. 210,000,000; (b) maximum number of shares to be acquired: Up to 30,000,000 common, book entry, Class B shares with a par value of Ps$. 1 (one Peso) each and entitled to 1 (one) vote per share, (the “Shares”), in the form of shares or American Depositary Shares or ADS representing 10 shares each, which amount does not exceed the limitation of the 10% of the capital of the Bank, as established by the applicable Argentine laws and regulations; (c) payable price: Between Ps. 6.50 per share and up to Ps. 7.00 per share, and (d) term for the acquisition: 120 calendar days from the date of publication of the relevant information in the Bulletin of the Buenos Aires Stock Exchange, subject to any renewal or extension to be duly informed to the public in such Bulletin. |
| 2. | | On May 8, 2008 the Board of Directors of the Bank decided to extend the term for the acquisition of certain shares issued by the Bank for 30 additional calendar days. |
| 3. | | On May 14, 2008 the Board of Directors of the Bank decided to amend the price range of certain shares issued by the Bank, fixing such range between Ps. 6.00 per share and up to Ps$. 7.00 per share. | | | 4. | | On June 6, 2008 the Board decided to extend the term until July 6, 2008. |
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| 5. | | Since June 25, 2008 the abovementioned price ranges was fixed between Ps. 5.00 per share and up to Ps$. 7.00 per share. | | | 6. | | On July 4, 2008 the Board decided to extend the term until August 6, 2008. |
| 7. | | On July 15, 2008 the Board of Directors of the Bank decided to extend the maximum amount up to Ps. 290,000,000 and the maximum number of shares up to 50,000,000, to amend the price range of certain shares issued by the Bank, fixing such range between Ps. 4.00 per share and up to Ps$. 7.00 per share and to extend the term until September 5, 2008. |
| 8. | | On September 4, 2008 the Board of Directors of the Bank decided to extend the maximum number of shares up to 52,529,042 and to amend the price range of certain shares issued by the Bank, fixing such range between Ps. 4.00 per share and up to Ps$. 6.00 per share and to extend the term until October 5, 2008. |
| 9. | | On October 1, 2008 the Board of Directors of the Bank decided to extend the maximum amount up to Ps. 360,000,000 and the maximum number of shares up to 60,000,000 and to extend the term until November 4, 2008. |
| 10. | | On October 20, 2008 the Board of Directors of the Bank decided to amend the price range of certain shares issued by the Bank, fixing such range between Ps. 3.00 per share and up to Ps$. 6.00 per share. |
| 11. | | On October 22, 2008 the Board of Directors of the Bank decided to extend the maximum amount up to Ps. 390,000,000 and the maximum number of shares up to 68,000,000 and to amend the price range of certain shares issued by the Bank, fixing such range between Ps. 1.00 per share and up to Ps$. 6.00 per share. |
| 12. | | On October 29, 2008 the Board of Directors of the Bank decided to extend the maximum amount up to Ps. 495,000,000 and the maximum number of shares up to 102,000,000, to amend the price range of certain shares issued by the Bank, fixing such range between Ps. 0.01 per share and up to Ps$. 4.00 per share and to extend the term until December 19, 2008. | | | 13. | | On December 18, 2008 the Board decided to extend the term until December 31, 2008. | | | 14. | | On December 30, 2008 the Board decided to extend the term until February 27, 2009. | | | 15. | | On February 26, 2009 the Board decided to extend the term until April 15, 2009. |
| 16. | | On April 15, 2009 the Board decided to extend the term until April 30, 2009. |
In accordance with the above, since January 21, 2008 and until June 27, 2008April 29, 2009, the Bank acquired 13,204,11289,493,692 common Class B shares with a face value of Ps. 1 and entitled to 1 vote each and 114,800 ADSs (equivalent to 1,148,000 common Class B shares with a face value of Ps. 1 and entitled to 1 vote each) for a total amount of Ps.91,218,659.Ps. 437,435,364. On April 21, 2009, the Bank reduced its capital stock in an amount of Ps. 60,000,000, representing 60,000,000 Class B shares, with a par value of Ps. 1 each and entitled to 1 vote per share. Purchases of Corporate Bonds by the Issuer and Affiliated Purchasers | | | | | | | | | Period | | Series 2 v/n US$ | | | Series 3 v/n US$ | | 2008 | | | | | | | | | January 1- 31 | | | 9,500,000 | | | | — | | February 1- 29 | | | — | | | | — | | March 1- 31 | | | — | | | | — | | April 1- 30 | | | — | | | | — | | May 1- 31 | | | — | | | | — | | June 1- 30 | | | — | | | | — | | July 1- 30 | | | — | | | | — | | August 1- 31 | | | — | | | | — | | September 1- 30 | | | 10,850,000 | | | | | | October 1- 31 | | | 12,375,000 | | | | 1,500,000 | | November 1- 30 | | | 1,300,000 | | | | 6,160,000 | | December 1- 31 | | | 8,530,000 | | | | 800,000 | | | | | | | | | Total 2008 | | | 42,555,000 | | | | 8,460,000 | | | | | | | | | | | | | | | | | | 2009 | | | | | | | | | January 1- 31 | | | — | | | | — | | February 1- 29 | | | — | | | | 200,000 | | March 1- 31 | | | — | | | | — | | April 1- 30 | | | — | | | | 4,500,000 | | May 1- 31 | | | 1,050,000 | | | | 21,020,000 | | | | | | | | | Total 2009 | | | 1,050,000 | | | | 25,720,000 | | | | | | | | | | | | | | | | | | Total Repurchased | | | 43,605,000 | | | | 34,180,000 | | | | | | | | |
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As of December 31, 2008, the Bank repurchased non subordinated corporate bonds of this class for a face value amount of US$ 42,555,000, having formally cancelled a face value amount of US$ 32,725,000. Therefore, as of December 31, 2008, the residual capital totals a face value of US$ 117,275,000. As of May 31, 2009, such repurchases of this class of non subordinated corporate bonds totals a face value amount in pesos equivalent to US$ 43,605,000, and the amount of the formal cancels totals a face value amount in pesos equivalent to US$ 42,555,000. As of December 31, 2008, the Bank repurchased non subordinated corporate bonds of this class for a face value amount in pesos equivalent to US$ 8,460,000 having formally cancelled a face value amount of US$ 1,500,000. Therefore, the remaining principal totals a face value amount in pesos equivalent to US$ 98,500,000. As of May 31, 2009, such repurchases of this class of non subordinated corporate bonds totals a face value amount in pesos equivalent to US$ 34,180,000, and the amount of the formal cancels totals a face value amount in pesos equivalent to US$ 26,660,000. Item 16G. Comparison of New York stock exchange corporate governance standards and Argentine corporate governance practices. Companies listed on the New York Stock Exchange (“NYSE”) must comply with certain standards regarding corporate governance as codified in Section 303A of NYSE’s Listed Company Manual, as amended. Nevertheless, Banco Macro S.A. (the “Bank”), while a listed company, qualifies also as a foreign private issuer and, as such, is permitted to follow its home country corporate governance practices, governed by the Business Companies Law, Decree No. 677/01 and the Standards of the Argentine Securities Commission (the “CNV”), in lieu of the provisions of Section 303A, except that it is required to comply with Sections 303A.06, 303A.11 and 303A.12(b) and (c). Accordingly: (i) we must satisfy the Audit Committee requirements of Rule 10A-3 under the Securities Exchange Act of 1934 (the “Exchange Act”) (Section 303A.06); (ii) we must provide a brief description of any significant differences between our corporate governance practices and those followed by U.S. companies under NYSE listing standards (Section 303A.11); and (iii) (y) our Chief Executive Officer (as of the date hereof, Mr. Jorge Brito) must promptly notify the NYSE in writing after any executive officer of the Bank becomes aware of any material non-compliance with the applicable NYSE corporate governance rules (Section 303A.12(b)); and (z) we must submit an executed Written Affirmation annually to the NYSE (Section 303A.12(c)). As required by Section 303A.11 of NYSE’s Listed Company Manual, the table below discloses any significant differences between the NYSE rules and the Bank’s corporate governance practices pursuant to Argentine corporate governance rules. | | | NYSE Corporate Governance Standards - Section 303.A | | Banco Macro Corporate Practices | | | | 303A.01-Independent Directors-Listed companies must have a majority of independent directors on its board of directors. | | Neither Argentine law nor our by-laws require us to have a majority of independent directors. | | | | 303A.02-Independence Tests-No director qualifies as “independent” unless the board of directors affirmatively determines that the director has no material relationship with the listed company (whether directly or as a partner, shareholder, or officer of an organization that has a relationship with the company), and emphasizes that the concern is independence from management. The board is also required, on a case by case basis, to express an opinion with regard to the independence or lack of independence, of each individual director. | | Pursuant to General Resolution No. 368/01 of the CNV, as amended (T.O. 2001), a director is not independent if such director is:
(a) a member of management or an employee of shareholders who hold material holdings in the listed company or of other entities in which these shareholders have material holdings or over which these shareholders exercise a material influence;
(b) is currently an employee or has, in the last three years, been an employee of the listed company;
(c) a person who has a professional relationship or is part of a company or professional association that maintains professional relations with, or that receives remunerations or fees (other than directors’ fees) from, the listed company or from shareholders that have material holdings in the listed company, or with a company in which such shareholders have material holdings or exercise a material influence; | | | | | | (d) a person who has material holdings in the listed company or in an entity that has material holdings in, or exercises a material influence over, the listed company; | | | |
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| | | NYSE Corporate Governance Standards - Section 303.A | | Banco Macro Corporate Practices | | | | | | (e) a person who provides goods or services to the listed company or to shareholders that have material holdings in or exercise a material influence over the listed company and receives compensation for such services that is substantially higher than that received as director of the listed company; or | | | | | | (f) the member is married or is a family member to an individual who would not qualify as independent. | | | | | | “Material holdings” are shareholdings, either directly or indirectly, that represent at least 35% of the capital stock of the relevant entity, or a smaller percentage when the person has the right to elect one or more directors per class of shares or by having entered into agreements with other shareholders relating to the governance and the management of the relevant entity or of its controlling shareholders. | | | | 303A.03-Executive Sessions-Non-management directors of each listed company must meet at regularly scheduled executive sessions without management. | | Neither Argentine law nor our by-laws require the holding of such meetings and we do not hold non-management directors meetings.
Our by-laws provide, however, that the board shall meet as often as required by the interests of the Bank and at least once a month. | | | | 303A.04-Nominating/Corporate Governance Committee- Listed companies must have a nominating/corporate governance committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties. | | Neither Argentine law nor our by-laws require the establishment of a nominating/corporate governance committee. We do not have a nominating/corporate governance committee.
Directors are nominated and appointed by the shareholders. | | | | 303A.05-Compensation Committee-Listed companies must have a compensation committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties. | | Neither Argentine law nor our by-laws require the establishment of a compensation committee. We do not have a compensation committee.
The compensation of our directors is determined at the annual ordinary shareholders’ meeting. Additionally, the audit committee must issue an opinion regarding the reasonableness and adequacy of such compensation. | | | | 303A.06/07-Audit Committee/Requirements-Listed companies must have an audit committee that satisfies the requirements of Rule 10A-3 under the Exchange Act.(a) The audit committee must have a minimum of three members. All of its members shall be financially literate or must acquire such financial knowledge within a reasonable period and at least one of its members shall have experience in accounting or financial administration. In addition to any requirement of Rule 10A-3(b)(1), all audit committee members must satisfy the requirements for independence set out in Section 303A.02. (b) If a member of the audit committee is simultaneously a member of the audit committee of more than three public companies, and the listed company does not limit the number of audit committees on which its members may serve, then, in each case the board of directors shall determine whether the simultaneous service would prevent such members from effectively serving on the listed company’s audit committee, and shall disclose in the annual proxy statement of the company or in the company’s annual report on Form 10-K, which is filed with the SEC. (c) The audit committee must have a written charter that establishes the duties and responsibilities of its members, including, at a minimum, some of the duties and responsibilities required by Rule 10A-3 of the Exchange Act and the following responsibilities set forth in NYSE Sections 303A.07(c)(iii)(A)-H) of the NYSE Manual. | | (a) Argentine law requires that the audit committee be composed of three or more members from the Board of Directors (with a majority of independent directors), all of whom must be well-versed in business, financial or accounting matters. In addition, we are not required to satisfy the audit committee requirements of Rule 10A-3. All of the members of our Audit Committee, as appointed on April 24, 2009, satisfy the independence requirements of Rule 10A-3.
(b) A comparable provision, relating to an audit committee member’s simultaneous membership on the audit committee of other public companies, does not exist under Argentine law or CNV standards.
(c) The responsibilities of an audit committee, as provided in Decree No. 677/2001 and the CNV standards, are essentially the same as those provided for under Rule 10A-3 of the Exchange Act, including, but not limited to, the following:
A. discussing the adequacy of its charter and reporting any proposed changes to the Board of Directors;
B. overseeing the performance of internal control systems, the administrative-accounting system and of all financial information or other facts which could be submitted to the controlling authorities in compliance with the applicable reporting regime; |
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| | | NYSE Corporate Governance Standards - Section 303.A | | Banco Macro Corporate Practices | | | | A. at least annually, obtain and review a report by the independent auditor describing: the firm’s internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (to assess the auditor’s independence) all relationships between the independent auditor and the listed company;
B. meet to review and discuss the listed company’s annual audited consolidated financial statements and quarterly financial statements with management and the independent auditor, including reviewing the company’s specific disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;
C. discuss the listed company’s earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies;
D. discuss policies with respect to risk assessment and risk management;
E. meet separately, periodically, with management, with internal auditors (or other personnel responsible for the internal audit function) and with independent auditors;
F. review with the independent auditor any audit problems or difficulties and management’s response;
G. set clear hiring policies for employees or former employees of the independent auditors; and
H. report regularly to the board of directors.
(d) 303A.07(d) provides that each company must have an internal audit function to provide management and the audit committee with ongoing assessments of the company’s risk management processes. | | C. issuing an opinion about the Board of Directors’ proposal for the appointment of the external auditors to be retained by the Bank, and ensuring that auditors are objective and independent;
D. reviewing external and internal auditors’ plans, evaluating their performance, and issuing an opinion to that end;
E. analyzing the different services provided by the external auditors;
F. reporting on the fees invoiced by external auditors for other related services that secure third-party reliability;
G. supervising the enforcement of the Bank’s risk management information policies;
H. providing the market with full disclosure with respect to transactions that give rise to conflict of interests with the Bank’s members or controlling shareholders;
I. issuing an opinion on the reasonableness of any proposal regarding Directors, management fees and stock option plans proposed by the Board of Directors;
J. issuing an opinion on the compliance with applicable legal requirements and on the reasonableness of the terms of any issuance of stock or convertible securities that exclude or limit shareholders’ preferential subscription rights;
K. assessing compliance with relevant rules of conduct;
L. issuing a related-party transaction opinion as provided by applicable regulations;
M. preparing an performance plan annually for each fiscal year which is presented to the Bank’s Board of Directors and the Supervisory Committee; and
N. complying with all other obligations imposed by applicable laws and regulations. | | 303A.08-Shareholder Approval of Equity Compensation Plans-Shareholders must be given the opportunity to vote on equity compensation plans and material revisions thereto, except for employment inducement awards, certain grants, plans and amendments in the context of mergers and acquisitions, and certain specific types of plans. | | We do not currently offer equity-based compensation to our directors, executive officers or employees, and have no policy on this matter. | | | | 303A.09-Corporate Governance Guidelines-Listed companies must adopt and disclose corporate governance guidelines. | | Neither Argentine law nor our by-laws require the adoption or disclosure of corporate governance guidelines. The CNV, through General Resolution 516/07, issued a recommended Code of Corporate Governance for listed companies, which has recently been adopted by the Bank. | | | | 303A.10-Code of Business Conduct and Ethics- Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. | | Neither Argentine law nor our by-laws require the adoption or disclosure of a code of business conduct. We, however, have adopted a code of business conduct that applies to all our employees. In addition, we have adopted a specific Code of Ethics for our Directors and Senior Financial Officers. |
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| | | NYSE Corporate Governance Standards - Section 303.A | | Banco Macro Corporate Practices | | | | 303A.12 Certification Requirements-
(a) Each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards, qualifying the certification to the extent necessary. | | Comparable provisions do not exist under Argentine law and CNV standards. Nevertheless, the Bank has complied with the certification requirements under Section 303A.12 of the NYSE rules. | | | | (b) Each listed company CEO must promptly notify the NYSE in writing after any executive officer of the listed company becomes aware of any material non-compliance with any applicable provisions of this Section 303A. | | | | | | (c) Each listed company must submit an executed Written Affirmation annually to the NYSE. In addition, each listed company must submit an interim Written Affirmation each time a change occurs to the board or any of the committees subject to Section 303A. | | |
PART III Item 17. Financial Statements We have responded to Item 18 in lieu of responding to this Item. Item 18. Financial Statements See pages F-1 through F-118F-122 of this annual report. 101
Item 19. Exhibits EXHIBIT INDEX | | | | | Exhibit | | | Number | | Description | | | | | | | 1.1 | * | | Amended and Restated Bylaws of Banco Macro S.A., as amended on April 28, 2006, is incorporated by reference to the annual report on Form 20-f filed on July 13, 2007 (File No. 001-32-827).21, 2009. | | | | | | | 2.1 | | | Deposit Agreement among the registrant, The Bank of New York, as depositary, and the holders from time to time of American depositary shares issued thereunder, including the form of American depositary receipts, incorporated by reference to the Registration Statement on Form F-1, as amended, filed by Banco Macro S.A. on March 20, 2006 (File No. 333-130901). | | | | | | | 8 | | | See Note 4.1 to our financial statements for information regarding our subsidiaries. | | | | | | | 12.1 | * | | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | | | 12.2 | * | | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | | | 13.1 | * | | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | | | | | 13.2 | * | | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
102106
SIGNATURE The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. | | | | | | BANCO MACRO S.A.
| | | | | | By: | | /s/ Jorge Horacio Brito | | | | Name: | Jorge Horacio Brito | | | | Title: | Title: | Chief Executive Officer | |
Date: June 30, 200823, 2009 103107
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE YEARS ENDED DECEMBER 31, 2007,2008, TOGETHER WITH THE REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F - 1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Directors and Shareholders of BANCO MACRO S.A. Sarmiento 447 City of Buenos Aires We have audited the accompanying consolidated balance sheets of BANCO MACRO S.A. (a bank organized under Argentine legislation) and its subsidiaries as of December 31, 20072008 and 2006,2007, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2007.2008. These financial statements are the responsibility of the Bank’s Management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the 2006 financial statements of NUEVO BANCO BISEL S.A., a consolidated subsidiary, which statements reflect total assets of thousand of Ps. 2,867,936 as of December 31, 2006, and net income of thousand of Ps. 65,079 for the period from August 11, 2006 (acquisition date) through December 31, 2006. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for NUEVO BANCO BISEL S.A., is based solely on the report of the other auditors. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and, for 2006, the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of BANCO MACRO S.A. and its subsidiaries as of December 31, 20072008 and 2006,2007, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2007,2008, in accordance with the accounting principles prescribed by the Central Bank of Argentine Republic rules applicable to the consolidated financial statements, which differ in certain respects from the accounting principles generally accepted in the United States of America (see Notenote 35 to the consolidated financial statements). As discussed in Notesnotes 4.2. and 4.4.s) to the financial statements, in 2007 the Bank adopted a new Central Bank standard and changed its method of presenting the statement of cash flows. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States of America), the internal control over financial reporting of BANCO MACRO S.A. and its subsidiaries as of December 31, 2007,2008, based on criteria established in Internal Control –— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 24, 200818, 2009 expressed an unqualified opinion thereon. City of Buenos Aires, June 24, 200818, 2009 PISTRELLI, HENRY MARTIN Y ASOCIADOS S.R.L. Member of Ernst & Young Global NORBERTOCARLOS M. NACUZZISZPUNAR Partner
F - 2
Report of Independent Registered Public Accounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders’ and theThe Board of Directors of Nuevo Banco Bisel S.A.We have audited the accompanying balance sheet of Nuevo Banco Bisel S.A. (the “Bank”) as of December 31, 2006, and the related statements of income, of changes in shareholders’ equity and of cash flows for the 143 days period from August 11, 2006 through December 31, 2006. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Nuevo Banco Bisel S.A. at December 31, 2006 and the results of their operations and their cash flows for the period from August 11, 2006 through December 31, 2006, in conformity with Argentine Central Bank (“BCRA”) accounting rules. As described in Note 31 to the financial statements, BCRA accounting rules differ in certain significant respects from, and is a comprehensive basis of accounting other than, accounting principles generally accepted in the United States of America (“US GAAP”). Information relating to the nature and effect of the differences between BCRA accounting rules and US GAAP is presented in Note 31 to the financial statements. Price Waterhouse & Co. S.R.L. Marcelo Trama Partner Buenos Aires, Argentina July 11, 2007. Note: The financial statements of Nuevo Banco Bisel S.A. referred to in the report above have not been included in this 20-F.20-F F - 3
BANCO MACRO S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 20072008 AND 20062007 (StatedFigures stated in thousands of pesos) | | | | | | | | | | | | | | | | | | | 2007 | | 2006 (1) | | | 2008 | | 2007 (1) | | ASSETS | | | | | | CASH | | | Cash on hand | | 790,869 | | 564,191 | | | 1,008,136 | | 790,869 | | Due from banks and correspondents | | | Central Bank of Argentina | | 2,022,463 | | 1,551,399 | | | 2,059,057 | | 2,022,463 | | Local Others | | 4,262 | | 13,777 | | | 9,225 | | 4,262 | | Foreign | | 299,647 | | 497,433 | | | 447,263 | | 299,647 | | Other | | 185 | | 108 | | | 216 | | 185 | | | | | | | | | | | | | | | 3,117,426 | | 2,626,908 | | | 3,523,897 | | 3,117,426 | | | | | | | | | | | | | | | | GOVERNMENT AND PRIVATE SECURITIES | | | Holdings in investment accounts | | | 448,305 | | — | | Holdings for trading or financial intermediation | | 358,413 | | 304,065 | | | 344,467 | | 358,399 | | Unlisted government securities | | | 69,958 | | 20,151 | | Instruments issued by the Central Bank of Argentina | | 3,478,246 | | 2,787,019 | | | 3,838,911 | | 3,478,246 | | Unlisted government securities | | 20,137 | | 13,441 | | | Investments in listed private securities | | 93,956 | | 118,459 | | | 77,685 | | 93,956 | | Less: Allowances | | | (27 | ) | | | (29 | ) | | | (27 | ) | | | (27 | ) | | | | | | | | | | | | | | 3,950,725 | | 3,222,955 | | | 4,779,299 | | 3,950,725 | | | | | | | | | | | | | | | | LOANS | | | To the non-financial government sector | | 732,481 | | 774,273 | | | 744,507 | | 732,481 | | To the financial sector | | | Interfinancing | | 65,789 | | 395,000 | | | Interfinancing — (granted call) | | | 42,030 | | 65,789 | | Other financing to Argentine financial institutions | | 94,496 | | 39,065 | | | 37,836 | | 94,496 | | Accrued interest, adjustments, foreign exchange and quoted price differences receivables | | 1,417 | | 2,865 | | | 557 | | 1,417 | | To the non-financial private sector and foreign residents | | | Overdrafts | | 1,504,657 | | 1,103,270 | | | 1,556,433 | | 1,375,075 | | Documents | | 1,081,675 | | 543,734 | | | 1,348,585 | | 1,213,669 | | Mortgage loans | | 619,781 | | 426,138 | | | 738,592 | | 619,781 | | Pledged loans | | 347,989 | | 300,949 | | | 339,895 | | 347,989 | | Personal loans | | 3,207,547 | | 1,431,105 | | | 3,806,442 | | 3,207,547 | | Credit cards | | 722,032 | | 497,872 | | | 869,101 | | 722,032 | | Other | | 1,718,978 | | 1,131,315 | | | 2,071,927 | | 1,718,978 | | Accrued interest, adjustments, foreign exchange and quoted price differences receivables | | 153,902 | | 101,744 | | | 195,026 | | 153,902 | | Less: Unposted payments | | | (69 | ) | | | (139 | ) | | | (29 | ) | | | (69 | ) | Less: Unearned discount | | | (20,836 | ) | | | (11,505 | ) | | | (32,596 | ) | | | (23,248 | ) | Less: Allowances | | | (220,422 | ) | | | (208,581 | ) | | | (438,348 | ) | | | (220,422 | ) | | | | | | | | | | | | | | 10,009,417 | | 6,527,105 | | | 11,279,958 | | 10,009,417 | | | | | | | | | | | | |
| | | (1) | | See note 4.2. to the accompanying financial statements. |
F - 4
(Contd.) BANCO MACRO S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 20072008 AND 20062007 (StatedFigures stated in thousands of pesos) | | | | | | | | | | | | | | | | | | | 2007 | | 2006 (1) | | | 2008 | | 2007 (1) | | OTHER RECEIVABLES FROM FINANCIAL INTERMEDIATION | | | Central Bank of Argentina | | 191,475 | | 119,954 | | | 412,305 | | 191,475 | | Amounts receivable from spot and forward sales pending settlement | | 428,581 | | 213,605 | | | 494,737 | | 428,581 | | Securities and foreign currency receivable from spot and forward purchases pending settlement | | 149,275 | | 140,717 | | | 54,282 | | 149,275 | | Premiums on options taken | | 868 | | | Unlisted corporate bonds | | 44,257 | | 12,661 | | | 53,389 | | 44,257 | | Receivables from forward transactions without delivery of underlying asset | | | 109 | | — | | Other receivables not covered by debtors classification standards | | 549,677 | | 557,870 | | | 597,319 | | 549,677 | | Receivables from forward transactions without delivery of underlying asset | | — | | 110 | | | Other receivables covered by debtors classification standards | | 69,969 | | 47,108 | | | 70,512 | | 69,969 | | Less: Allowances | | | (206,939 | ) | | | (178,319 | ) | | | (228,588 | ) | | | (206,939 | ) | | | | | | | | | | | | | | 1,226,295 | | 914,574 | | | 1,454,065 | | 1,226,295 | | | | | | | | | | | | | | | | ASSETS SUBJECT TO FINANCIAL LEASES | | | Assets subject to financial leases | | 372,866 | | 282,129 | | | 360,781 | | 372,866 | | Less: Allowances | | | (4,898 | ) | | | (3,489 | ) | | | (5,391 | ) | | | (4,898 | ) | | | | | | | | | | | | | | 367,968 | | 278,640 | | | 355,390 | | 367,968 | | | | | | | | | | | | | | | | INVESTMENTS IN OTHER COMPANIES | | | In financial institutions | | 439 | | 429 | | | 483 | | 439 | | Other | | 10,669 | | 11,116 | | | 10,286 | | 10,669 | | Less: Allowances | | | (697 | ) | | | (1,172 | ) | | | (247 | ) | | | (697 | ) | | | | | | | | | | | | | | 10,411 | | 10,373 | | | 10,522 | | 10,411 | | | | | | | | | | | | | | | | OTHER RECEIVABLES | | | Receivables from sale of assets | | 26,074 | | 26,330 | | | 43,358 | | 26,074 | | Minimum presumed income tax – Tax credit | | 45,293 | | 47,780 | | | Minimum presumed income tax — Tax credit | | | 25,767 | | 45,293 | | Other | | 209,345 | | 155,038 | | | 196,000 | | 209,345 | | Accrued interest and adjustments receivable from sale of assets | | 544 | | 302 | | | Accrued interest and adjustments on receivables from sale of assets | | | 2,502 | | 544 | | Other accrued interest and adjustments receivable | | 58 | | 66 | | | — | | 58 | | Less: Allowances | | | (27,034 | ) | | | (36,153 | ) | | | (15,838 | ) | | | (27,034 | ) | | | | | | | | | | | | | | 254,280 | | 193,363 | | | 251,789 | | 254,280 | | | | | | | | | | | | | | | | BANK PREMISES AND EQUIPMENT, NET | | 373,111 | | 336,251 | | | 430,842 | | 373,111 | | | | | | | | | | | | | | | | OTHER ASSETS | | 206,580 | | 202,765 | | | 137,357 | | 206,580 | | | | | | | | | | | | | | | | INTANGIBLE ASSETS | | | Goodwill | | 71,916 | | 81,164 | | | 63,477 | | 71,916 | | Organization and development costs, including amparos | | 191,061 | | 110,015 | | | 135,069 | | 128,047 | | | | | | | | | | | | | | | 262,977 | | 191,179 | | | 198,546 | | 199,963 | | | | | | | | | | | | | | | | ITEMS PENDING ALLOCATION | | 2,056 | | 859 | | | 3,332 | | 2,056 | | | | | | | | | | | | | | | | TOTAL ASSETS | | 19,781,246 | | 14,504,972 | | | 22,424,997 | | 19,718,232 | | | | | | | | | | | | |
| | | (1) | | See note 4.2. to the accompanying financial statements. |
F - 5
(Contd.) BANCO MACRO S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 20072008 AND 20062007 (StatedFigures stated in thousands of pesos) | | | | | | | | | | | | | | | | | | | 2007 | | 2006 (1) | | | 2008 | | 2007 (1) | | LIABILITIES | | | | | | DEPOSITS | | | From the non-financial government sector | | 1,774,121 | | 1,295,630 | | | 3,937,961 | | 1,774,121 | | From the financial sector | | 13,310 | | 5,078 | | | 22,438 | | 13,310 | | From the non-financial private sector and foreign residents | | | Checking accounts | | 2,599,682 | | 1,876,232 | | | 2,581,060 | | 2,599,682 | | Savings accounts | | 2,780,350 | | 2,097,362 | | | 2,716,913 | | 2,780,350 | | Time deposits | | 5,907,005 | | 4,380,981 | | | 6,031,882 | | 5,907,005 | | Investment accounts | | 63,063 | | 18,836 | | | 155,936 | | 63,063 | | Other | | 391,176 | | 360,195 | | | 321,020 | | 391,176 | | Accrued interest, adjustments, foreign exchange and quoted price differences payables | | 62,442 | | 36,703 | | | 61,147 | | 62,442 | | | | | | | | | | | | | | | 13,591,149 | | 10,071,017 | | | 15,828,357 | | 13,591,149 | | | | | | | | | | | | | | | | OTHER LIABILITIES FROM FINANCIAL INTERMEDIATION | | | Central Bank of Argentina – Other | | 347,896 | | 386,089 | | | Central Bank of Argentina — Other | | | 302,760 | | 347,896 | | Banks and international institutions | | 160,939 | | 176,687 | | | 224,968 | | 160,939 | | Non-subordinated Corporate Bonds | | 780,590 | | | 708,354 | | 780,590 | | Amounts payable for spot and forward purchases pending settlement | | 158,765 | | 132,434 | | | 68,499 | | 158,765 | | Securities and foreign currency to be delivered under spot and forward sales pending settlement | | 445,799 | | 217,066 | | | 679,495 | | 445,799 | | Premiums on options sold | | 2 | | 868 | | | — | | 2 | | Financing received from Argentine financial institutions | | | | | | | Interfinancing – (received call) | | 46,000 | | 25,000 | | | Interfinancing — (received call) | | | 25,000 | | 46,000 | | Other financing received from Argentine financial institutions | | 90,806 | | 22,982 | | | 24,139 | | 90,806 | | Accrued interest payables | | 53 | | 23 | | | 16 | | 53 | | Forward transactions amounts pending settlement without delivery of underlying asset | | | 5,949 | | — | | Other | | 492,799 | | 250,091 | | | 625,981 | | 493,613 | | Accrued interest, adjustments, foreign exchange and quoted price differences payables | | 47,387 | | 25,876 | | | 49,783 | | 47,387 | | | | | | | | | | | | | | | 2,571,036 | | 1,237,116 | | | 2,714,944 | | 2,571,850 | | | | | | | | | | | | | | | | OTHER LIABILITIES | | | Dividends payables | | 1 | | 662 | | | — | | 1 | | Profesional fees | | 732 | | 9 | | | Professional fees | | | 676 | | 732 | | Other | | 241,296 | | 188,260 | | | 442,026 | | 240,482 | | | | | | | | | | | | | | | 242,029 | | 188,931 | | | 442,702 | | 241,215 | | | | | | | | | | | | | | | | PROVISIONS | | 164,347 | | 104,870 | | | 83,004 | | 101,333 | | | | | | | | | | | | | | | | SUBORDINATED CORPORATE BONDS | | 490,695 | | 507,844 | | | 521,681 | | 490,695 | | | | | | | | | | | | | | | | ITEMS PENDING ALLOCATION | | 1,644 | | 2,052 | | | 2,105 | | 1,644 | | | | | | | | | | | | | | | | MINORITY INTEREST IN SUBSIDIARIES | | 12,640 | | 78,045 | | | 15,607 | | 12,640 | | | | | | | | | | | | | | | | TOTAL LIABILITIES | | 17,073,540 | | 12,189,875 | | | 19,608,400 | | 17,010,526 | | | | | | | | | | | | | | | | SHAREHOLDERS’ EQUITY | | 2,707,706 | | 2,315,097 | | | 2,816,597 | | 2,707,706 | | | | | | | | | | | | | | | | TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | 19,781,246 | | 14,504,972 | | | 22,424,997 | | 19,718,232 | | | | | | | | | | | | |
| | | (1) | | See note 4.2. to the accompanying financial statements. |
The accompanying notes 1 through 35 to the consolidated financial statements are an integral part of these statements. F - 6
(Contd.)
BANCO MACRO S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 20072008 AND 20062007 MEMORANDUM ACCOUNTS (StatedFigures stated in thousands of pesos) | | | | | | | | | | | 2007 | | | 2006 (1) | | DEBIT-BALANCE ACCOUNTS | | | | | | | | | | Contingent | | | | | | | | | - Guarantees received | | | 3,229,071 | | | | 2,718,097 | | - Other not covered by debtors classification standards | | | 524 | | | | 459 | | - Contingent debit-balance contra accounts | | | 469,232 | | | | 567,981 | | | | | | | | | | | | 3,698,827 | | | | 3,286,537 | | | | | | | | | | | | | | | | | | Control | | | | | | | | | - Receivables classified as uncollectibility | | | 832,822 | | | | 879,769 | | - Other (see note 11.2) | | | 4,931,358 | | | | 5,028,310 | | - Control debit-balance contra accounts | | | 183,684 | | | | 133,044 | | | | | | | | | | | | 5,947,864 | | | | 6,041,123 | | | | | | | | | | | | | | | | | | Derivatives | | | | | | | | | - Notional value of call options taken | | | — | | | | 159,804 | | - Notional value of put options taken | | | — | | | | 50,649 | | - Notional value of forward transactions without delivery of underlying asset | | | 331,411 | | | | — | | - Interest rate swap | | | 36,238 | | | | — | | - Derivatives debit-balance contra accounts | | | 209,196 | | | | 364,322 | | | | | | | | | | | | 576,845 | | | | 574,775 | | | | | | | | | | | | | | | | | | Trust activity | | | | | | | | | - Trust funds (see note 13.) | | | 574,302 | | | | 430,735 | | | | | | | | | | | | 574,302 | | | | 430,735 | | | | | | | | | | | | | | | | | | TOTAL | | | 10,797,838 | | | | 10,333,170 | | | | | | | | |
| | | | | | | | | | | 2008 | | | 2007 (1) | | | | | | | | | | | DEBIT-BALANCE ACCOUNTS | | | 13,368,350 | | | | 10,797,838 | | | | | | | | | | | | | | | | | | Contingent | | | 3,669,663 | | | | 3,698,827 | | Guarantees received | | | 3,295,985 | | | | 3,229,071 | | Other not covered by debtors classification standards | | | 346 | | | | 524 | | Contingent debit-balance contra accounts | | | 373,332 | | | | 469,232 | | | | | | | | | | | Control | | | 5,435,013 | | | | 5,947,864 | | Receivables classified as irrecoverable | | | 774,299 | | | | 832,822 | | Other | | | 4,401,411 | | | | 4,931,358 | | Control debit-balance contra accounts | | | 259,303 | | | | 183,684 | | | | | | | | | | | Derivatives | | | 3,598,362 | | | | 576,845 | | Notional value of call options taken | | | 24,349 | | | | — | | Notional value of forward transactions without delivery of underlying asset | | | 2,219,777 | | | | 331,411 | | Interest rate swap | | | 39,422 | | | | 36,238 | | Derivatives debit-balance contra accounts | | | 1,314,814 | | | | 209,196 | | | | | | | | | | | Trust activity | | | 665,312 | | | | 574,302 | | Trust funds | | | 665,312 | | | | 574,302 | |
| | | (1) | | See note 4.2. to the accompanying financial statements. |
F - 7
(Contd.) BANCO MACRO S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 20072008 AND 20062007 MEMORANDUM ACCOUNTS (StatedFigures stated in thousands of pesos) | | | | | | | | | | | 2007 | | | 2006 (1) | | CREDIT-BALANCE ACCOUNTS | | | | | | | | | | | | | | | | | | Contingent | | | | | | | | | - Unused portion of loans granted covered by debtors classification standards | | | — | | | | (9,120 | ) | - Guarantees provided to the Central Bank of Argentina | | | (163,122 | ) | | | (180,908 | ) | - Other guarantees provided covered by debtors classification standards | | | (115,930 | ) | | | (243,057 | ) | - Other guarantees provided not covered by debtors classification standards | | | (58,773 | ) | | | (43,289 | ) | - Other covered by debtors classification standards | | | (131,407 | ) | | | (91,607 | ) | - Contingent credit-balance contra accounts | | | (3,229,595 | ) | | | (2,718,556 | ) | | | | | | | | | | | (3,698,827 | ) | | | (3,286,537 | ) | | | | | | | | | Control | | | | | | | | | - Checks to be credited | | | (183,684 | ) | | | (133,044 | ) | - Control credit-balance contra accounts | | | (5,764,180 | ) | | | (5,908,079 | ) | | | | | | | | | | | (5,947,864 | ) | | | (6,041,123 | ) | | | | | | | | | | | | | | | | | Derivatives | | | | | | | | | - Notional value of call options sold | | | (549 | ) | | | (91,071 | ) | - Notional value of put options sold | | | (113,809 | ) | | | (245,675 | ) | - Notional value of forward transactions without delivery of underlying asset | | | (94,838 | ) | | | (27,576 | ) | - Derivatives credit-balance contra accounts | | | (367,649 | ) | | | (210,453 | ) | | | | | | | | | | | (576,845 | ) | | | (574,775 | ) | | | | | | | | | | | | | | | | | Trust activity | | | | | | | | | - Trust activity credit-balance contra accounts | | | (574,302 | ) | | | (430,735 | ) | | | | | | | | | | | (574,302 | ) | | | (430,735 | ) | | | | | | | | | | | | | | | | | TOTAL | | | (10,797,838 | ) | | | (10,333,170 | ) | | | | | | | |
| | | | | | | | | | | 2008 | | | 2007 (1) | | | | | | | | | | | CREDIT-BALANCE ACCOUNTS | | | (13,368,350 | ) | | | (10,797,838 | ) | | | | | | | | | | | | | | | | | Contingent | | | (3,669,663 | ) | | | (3,698,827 | ) | Guarantees provided to the Central Bank of Argentina | | | (141,353 | ) | | | (163,122 | ) | Other guarantees provided covered by debtors classification standards | | | (84,136 | ) | | | (115,930 | ) | Other guarantees provided not covered by debtors classification standards | | | (57,758 | ) | | | (58,773 | ) | Other covered by debtors classification standards | | | (90,085 | ) | | | (131,407 | ) | Contingent credit-balance contra accounts | | | (3,296,331 | ) | | | (3,229,595 | ) | | | | | | | | | | Control | | | (5,435,013 | ) | | | (5,947,864 | ) | Checks to be credited | | | (259,303 | ) | | | (183,684 | ) | Control credit-balance contra accounts | | | (5,175,710 | ) | | | (5,764,180 | ) | | | | | | | | | | Derivatives | | | (3,598,362 | ) | | | (576,845 | ) | Notional value of call options sold | | | — | | | | (549 | ) | Notional value of put options sold | | | (99,826 | ) | | | (113,809 | ) | Notional value of forward transactions without delivery of underlying asset | | | (1,214,988 | ) | | | (94,838 | ) | Derivatives credit-balance contra accounts | | | (2,283,548 | ) | | | (367,649 | ) | | | | | | | | | | Trust activity | | | (665,312 | ) | | | (574,302 | ) | Trust activity credit-balance contra accounts | | | (665,312 | ) | | | (574,302 | ) |
| | | (1) | | See note 4.2. to the accompanying financial statements. |
The accompanying notes 1 through 35 to the consolidated financial statements are an integral part of these statements. F - 8
BANCO MACRO S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 2006 AND 20052006 (StatedFigures stated in thousands of pesos) | | | | | | | | | | | | | | | | | | | | | | | | | | | 2007 | | 2006 (1) | | 2005 (1) | | | 2008 | | 2007 (1) | | 2006 (1) | | FINANCIAL INCOME | | | Interest on cash | | 19,917 | | 11,682 | | 4,080 | | | Interest on cash and due from banks | | | 7,010 | | 19,917 | | 11,682 | | Interest on loans to the financial sector | | 32,157 | | 16,720 | | 5,320 | | | 15,584 | | 32,157 | | 16,720 | | Interest on overdrafts | | 192,599 | | 120,040 | | 53,953 | | | 357,215 | | 177,490 | | 110,721 | | Interest on documents | | 139,102 | | 56,988 | | 32,157 | | | 184,852 | | 103,428 | | 53,173 | | Interest on mortgage loans | | 68,065 | | 48,506 | | 29,655 | | | 97,057 | | 68,065 | | 48,506 | | Interest on pledged loans | | 51,480 | | 43,038 | | 26,160 | | | 64,499 | | 51,480 | | 43,038 | | Interest on credit card loans | | 55,665 | | 30,969 | | 18,233 | | | 117,952 | | 55,665 | | 30,969 | | Interest on other loans | | 527,954 | | 259,801 | | 121,062 | | | 1,032,837 | | 578,737 | | 272,935 | | Interest on other receivables from financial intermediation | | 18,471 | | 15,050 | | 19,901 | | | 14,416 | | 18,471 | | 15,050 | | Income from government and private securities, net | | 488,757 | | 324,178 | | 156,158 | | | 641,299 | | 488,757 | | 324,178 | | Income from guaranteed loans – Presidential Decree No. 1,387/01 | | 35,043 | | 29,898 | | 28,625 | | | Income from guaranteed loans — Presidential Decree No. 1,387/01 | | | 37,043 | | 35,043 | | 29,898 | | Net income from options | | 1,604 | | — | | — | | | 261 | | 1,604 | | — | | CER (Benchmark Stabilization Coefficient) adjustment | | 78,065 | | 84,951 | | 185,421 | | | 70,477 | | 78,065 | | 84,951 | | CVS (Salary Variation Coefficient) adjustment | | 1,605 | | 1,947 | | 1,987 | | | 818 | | 1,605 | | 1,947 | | Difference in quoted prices of gold and foreign currency | | 48,823 | | 40,007 | | 31,392 | | | 143,094 | | 48,823 | | 40,007 | | Other | | 131,115 | | 71,432 | | 35,479 | | | 245,446 | | 131,115 | | 71,432 | | | | | | | | | | | | | | | | | | | 1,890,422 | | 1,155,207 | | 749,583 | | | 3,029,860 | | 1,890,422 | | 1,155,207 | | | | | | | | | | | | | | | | | | | | FINANCIAL EXPENSE | | | Interest on checking accounts | | 19,968 | | 9,475 | | 2,647 | | | 17,708 | | 19,968 | | 9,475 | | Interest on savings accounts | | 11,372 | | 6,736 | | 4,302 | | | 14,534 | | 11,372 | | 6,736 | | Interest on time deposits | | 457,395 | | 233,697 | | 106,486 | | | 933,881 | | 457,395 | | 233,697 | | Interest on interfinancing received loans (received call) | | 4,608 | | 801 | | 980 | | | 3,909 | | 4,608 | | 801 | | Interest on other financing to financial institutions | | 226 | | 252 | | 43 | | | Interest on other financing from financial institutions | | | 28 | | 226 | | 252 | | Interest on other liabilities from financial intermediation | | 70,706 | | 14,421 | | 13,796 | | | 91,083 | | 70,706 | | 14,421 | | Interest on subordinated bonds | | 49,858 | | 2,017 | | 1,806 | | | 47,523 | | 49,858 | | 2,017 | | Other interest | | 9,768 | | 12,410 | | 11,482 | | | 8,762 | | 9,768 | | 12,410 | | Net loss from options | | — | | 371 | | 1,017 | | | CER adjustment | | 43,717 | | 55,732 | | 117,048 | | | 32,946 | | 43,717 | | 55,732 | | Contribution to Deposit Guarantee Fund | | 20,182 | | 12,753 | | 9,701 | | | 25,945 | | 20,182 | | 12,753 | | Net loss from options | | | — | | — | | 371 | | Other | | 117,465 | | 46,232 | | 33,601 | | | 165,743 | | 117,465 | | 46,232 | | | | | | | | | | | | | | | | | | | 805,265 | | 394,897 | | 302,909 | | | 1,342,062 | | 805,265 | | 394,897 | | | | | | | | | | | | | | | | | | | | GROSS INTERMEDIATION MARGIN – GAIN | | 1,085,157 | | 760,310 | | 446,674 | | | GROSS INTERMEDIATION MARGIN — GAIN | | | 1,687,798 | | 1,085,157 | | 760,310 | | | | | | | | | | | | | | | | | | | | PROVISION FOR LOAN LOSSES | | 94,717 | | 59,773 | | 70,309 | | | 297,606 | | 94,717 | | 59,773 | | | | | | | | | | | | | | | | | | | | SERVICE-CHARGE INCOME | | | Related to lending transactions | | 53,995 | | 35,964 | | 19,175 | | | 63,669 | | 53,995 | | 35,964 | | Related to deposits | | 422,589 | | 273,976 | | 181,961 | | | 587,426 | | 398,569 | | 258,855 | | Other fees | | 21,687 | | 19,567 | | 12,866 | | | Other commissions | | | 23,528 | | 21,687 | | 19,567 | | Other | | 164,055 | | 122,725 | | 88,756 | | | 217,077 | | 188,075 | | 137,846 | | | | | | | | | | | | | | | | | | | 662,326 | | 452,232 | | 302,758 | | | 891,700 | | 662,326 | | 452,232 | | | | | | | | | | | | | | | | |
| | | (1) | | See note 4.2. to the accompanying financial statements. |
F - 9
(Contd.) BANCO MACRO S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 2006 AND 20052006 (StatedFigures stated in thousands of pesos) | | | | | | | | | | | | | | | | | | | | | | | | | | | 2007 | | 2006 (1) | | 2005 (1) | | | 2008 | | 2007 (1) | | 2006 (1) | | SERVICE-CHARGE EXPENSE | | | Fees | | 49,965 | | 34,499 | | 23,061 | | | Commissions | | | 57,077 | | 49,965 | | 34,499 | | Other | | 100,317 | | 58,824 | | 36,449 | | | 115,324 | | 100,317 | | 58,824 | | | | | | | | | | | | | | | | | | | 150,282 | | 93,323 | | 59,510 | | | 172,401 | | 150,282 | | 93,323 | | | | | | | | | | | | | | | | | | | | ADMINISTRATIVE EXPENSES | | | Personnel expenses | | 589,021 | | 396,338 | | 254,821 | | | 798,236 | | 589,021 | | 396,338 | | Directors’ and statutory auditors’ fees | | 37,695 | | 14,362 | | 14,142 | | | 26,941 | | 37,695 | | 14,362 | | Other professional fees | | 42,428 | | 39,670 | | 26,104 | | | 55,012 | | 42,428 | | 39,670 | | Advertising and publicity | | 50,343 | | 31,866 | | 22,668 | | | 53,178 | | 50,343 | | 31,866 | | Taxes | | 13,491 | | 9,008 | | 5,808 | | | 12,391 | | 10,345 | | 7,551 | | Depreciation of equipment | | 42,723 | | 29,231 | | 19,218 | | | 50,543 | | 42,723 | | 29,231 | | Amortization of organization costs | | 17,923 | | 13,263 | | 12,588 | | | 25,557 | | 17,923 | | 13,263 | | Other operating expenses | | 144,158 | | 101,546 | | 73,020 | | | 170,926 | | 144,158 | | 101,546 | | Other | | 19,261 | | 17,173 | | 14,657 | | | 18,615 | | 19,261 | | 17,173 | | | | | | | | | | | | | | | | | | | 957,043 | | 652,457 | | 443,026 | | | 1,211,399 | | 953,897 | | 651,000 | | | | | | | | | | | | | | | | | | | | NET INCOME FROM FINANCIAL INTERMEDIATION | | 545,441 | | 406,989 | | 176,587 | | | 898,092 | | 548,587 | | 408,446 | | | | | | | | | | | | | | | | | | | | OTHER INCOME | | | Income from long-term investments | | 890 | | 289 | | 2,724 | | | 25,847 | | 890 | | 289 | | Penalty interest | | 7,580 | | 5,553 | | 3,167 | | | 14,982 | | 7,580 | | 5,553 | | Recovered loans and allowances reversed | | 133,118 | | 192,508 | | 168,064 | | | 94,490 | | 133,118 | | 192,508 | | CER adjustment | | 194 | | 283 | | 191 | | | 95 | | 194 | | 283 | | Other | | 41,743 | | 36,174 | | 44,738 | | | 53,036 | | 41,743 | | 36,174 | | | | | | | | | | | | | | | | | | | 183,525 | | 234,807 | | 218,884 | | | 188,450 | | 183,525 | | 234,807 | | | | | | | | | | | | | | | | | | | | OTHER EXPENSE | | | Penalty interest and charges payable to the Central Bank of Argentina | | 64 | | 38 | | 33 | | | 181 | | 64 | | 38 | | Charge for other-receivables uncollectibility and other allowances | | 15,599 | | 26,713 | | 39,177 | | | 37,242 | | 15,599 | | 26,713 | | CER adjustment | | — | | — | | 3 | | | Amortization of differences from amparos | | 29,279 | | 19,477 | | 14,100 | | | Amortization of differences from deposits dollarization | | | 29,509 | | 29,279 | | 19,477 | | Depreciation and loss of other assets | | 5,303 | | 3,567 | | 3,737 | | | 2,151 | | 5,303 | | 3,567 | | Goodwill amortization | | 9,250 | | 4,766 | | 839 | | | 8,439 | | 9,250 | | 4,766 | | Other | | 79,843 | | 82,756 | | 40,794 | | | 84,409 | | 82,989 | | 84,213 | | | | | | | | | | | | | | | | | | | 139,338 | | 137,317 | | 98,683 | | | 161,931 | | 142,484 | | 138,774 | | | | | | | | | | | | | | | | | | | | MINORITY INTEREST IN SUBSIDIARIES | | | (2,083 | ) | | | (3,178 | ) | | — | | | | (3,354 | ) | | | (2,083 | ) | | | (3,178 | ) | | | | | | | | | | | | | INCOME BEFORE INCOME TAX | | 587,545 | | 501,301 | | 296,788 | | | 921,257 | | 587,545 | | 501,301 | | | | | | | | | | | | | | | | | | | | INCOME TAX | | 92,345 | | 76,961 | | 34,042 | | | 261,207 | | 92,345 | | 76,961 | | | | | | | | | | | | | | | | | | | | NET INCOME FOR THE FISCAL YEAR | | 495,200 | | 424,340 | | 262,746 | | | 660,050 | | 495,200 | | 424,340 | | | | | | | | | | | | | | | | | | | | NET INCOME PER SHARE (2) – stated in pesos | | 0.72 | | 0.64 | | 0.43 | | | NET INCOME PER SHARE (2) — stated in pesos | | | 1.00 | | 0.72 | | 0.64 | | | | | | | | | | | | | | | | |
| | | (1) | | See note 4.2. to the accompanying financial statements. | | (2) | | See note 9. to the accompanying financial statements. |
The accompanying notes 1 through 35 to the consolidated financial statements are an integral part of these statements. F - 10
BANCO MACRO S.A. AND SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 2006 AND 20052006 (StatedFigures stated in thousands of pesos) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Adjustments | | | Earnings reserved | | | | | | | | | | Capital | | | Stock | | | to | | | | | | | Special | | | | | | | | | | | | | | stock | | | issuance | | | shareholders’ | | | | | | | Corporate | | | | | | | Unappropriated | | | | | Changes | | (1) | | | premium | | | equity | | | Legal | | | Bonds | | | Voluntary | | | earnings | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balances as of December 31, 2004 | | | 608,943 | | | | — | | | | 4,511 | | | | 222,109 | | | | — | | | | 211 | | | | 421,528 | | | | 1,257,302 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Merger of Nuevo Banco Suquía S.A.: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | - Balance of Nuevo Banco Suquía S.A. at the beginning of the fiscal year | | | 303,750 | | | | | | | | (23 | ) | | | 13,264 | | | | | | | | | | | | (9,693 | ) | | | 307,298 | | - Merger effects (2) | | | (303,714 | ) | | | 84 | | | | 23 | | | | (13,264 | ) | | | | | | | | | | | 9,624 | | | | (307,247 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Distribution of unappropriated retained earnings approved by the Shareholders’ Meeting held on April, 28 2005: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | - Legal reserve | | | | | | | | | | | | | | | 23,193 | | | | | | | | | | | | (23,193 | ) | | | | | - Cash dividends (3) | | | | | | | | | | | | | | | | | | | | | | | | | | | (30,447 | ) | | | (30,447 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income for the year | | | | | | | | | | | | | | | | | | | | | | | | | | | 262,746 | | | | 262,746 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balances as of December 31, 2005 | | | 608,979 | | | | 84 | | | | 4,511 | | | | 245,302 | | | | — | | | | 211 | | | | 630,565 | | | | 1,489,652 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Distribution of unappropriated retained earnings approved by the Shareholders’ Meeting held on April, 28, 2006: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | - Legal reserve | | | | | | | | | | | | | | | 52,543 | | | | | | | | | | | | (52,543 | ) | | | | | - Cash dividends (3) | | | | | | | | | | | | | | | | | | | | | | | | | | | (68,395 | ) | | | (68,395 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share subscription approved by Shareholder’s Meeting held on September 26, 2005 (1) | | | 75,000 | | | | 394,500 | | | | | | | | | | | | | | | | | | | | | | | | 469,500 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income for the year | | | | | | | | | | | | | | | | | | | | | | | | | | | 424,340 | | | | 424,340 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balances as of December 31, 2006 | | | 683,979 | | | | 394,584 | | | | 4,511 | | | | 297,845 | | | | — | | | | 211 | | | | 933,967 | | | | 2,315,097 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Adjustments | | | Earnings reserved | | | | | | | | | | Capital | | | Stock | | | to | | | | | | | Special | | | | | | | | | | | | | | stock | | | issuance | | | shareholders’ | | | | | | | Corporate | | | | | | | Unappropriated | | | | | Changes | | (1) | | | premium | | | equity | | | Legal | | | Bonds | | | Voluntary | | | earnings (1) | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balances as of December 31, 2005 | | | 608,979 | | | | 84 | | | | 4,511 | | | | 245,302 | | | | — | | | | 211 | | | | 630,565 | | | | 1,489,652 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Distribution of unappropriated retained earnings approved by the Shareholders’ Meeting held on April, 28, 2006: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | - Legal reserve | | | | | | | | | | | | | | | 52,543 | | | | | | | | | | | | (52,543 | ) | | | | | - Cash dividends (2) | | | | | | | | | | | | | | | | | | | | | | | | | | | (68,395 | ) | | | (68,395 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share subscription approved by Shareholder’s Meeting held on September 26, 2005 (1) | | | 75,000 | | | | 394,500 | | | | | | | | | | | | | | | | | | | | | | | | 469,500 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income for the fiscal year | | | | | | | | | | | | | | | | | | | | | | | | | | | 424,340 | | | | 424,340 | | | | | | | | | | | | | | | | | | | | | | | | | | | Balances as of December 31, 2006 | | | 683,979 | | | | 394,584 | | | | 4,511 | | | | 297,845 | | | | — | | | | 211 | | | | 933,967 | | | | 2,315,097 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Distribution of unappropriated earnings, as approved by the Shareholders’ Meeting held on April, 26, 2007: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | - Legal reserve | | | | | | | | | | | | | | | 84,860 | | | | | | | | | | | | (84,860 | ) | | | | | - Cash dividends (2) | | | | | | | | | | | | | | | | | | | | | | | | | | | (102,591 | ) | | | (102,591 | ) | - Special reserve — Corporate Bonds (3) | | | | | | | | | | | | | | | | | | | 45,515 | | | | | | | | (45,515 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Reversal of Special Reserve — Corporate Bonds (3) | | | | | | | | | | | | | | | | | | | (45,515 | ) | | | | | | | 45,515 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income for the fiscal year | | | | | | | | | | | | | | | | | | | | | | | | | | | 495,200 | | | | 495,200 | | | | | | | | | | | | | | | | | | | | | | | | | | | Balances as of December 31, 2007 | | | 683,979 | | | | 394,584 | | | | 4,511 | | | | 382,705 | | | | — | | | | 211 | | | | 1,241,716 | | | | 2,707,706 | | | | | | | | | | | | | | | | | | | | | | | | | | |
F - 11
(Contd.) BANCO MACRO S.A. AND SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 2006 AND 20052006 (StatedFigures stated in thousands of pesos) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Adjustments | | Earnings reserved | | | | | | | Adjustments | | Earnings reserved | | | | | | | | Capital | | Stock | | to | | Special | | | | | | | Capital | | to | | Special | | | | | | | | stock | | issuance | | shareholders’ | | Corporate | | Unappropriated | | | | | stock | | Stock | | shareholders ’ | | Corporate | | Unappropriated | | | | Changes | | (1) | | premium | | equity | | Legal | | Bonds | | Voluntary | | earnings | | Total | | | (1) | | issuance premium | | equity | | Legal | | Bonds | | Voluntary | | earnings (1) | | Total | | | | | Distribution of unappropriated earnings, as approved by the Shareholders’ Meeting held on April, 26, 2007 and April, 28, 2006, respectively: | | | Distribution of unappropriated earnings, as approved by the Shareholders’ Meeting held on April, 29,2008: | | | | | | - Legal reserve | | 84,860 | | | (84,860 | ) | | — | | | 99,038 | | | (99,038 | ) | | - Cash dividends (3)(2) | | | (102,591 | ) | | | (102,591 | ) | | �� | | | (170,995 | ) | | | (170,995 | ) | - Special reserve — Corporate Bonds(3) | | 45,515 | | | (45,515 | ) | | | 46,083 | | | (46,083 | ) | | - Reversal of Special Reserve — Corporate Bonds | | | (45,515 | ) | | 45,515 | | | | | Net income for the year | | 495,200 | | 495,200 | | | Reversal of Special Reserve | | | - Corporate Bonds (3) | | | | (46,083 | ) | | 46,083 | | | | | | | | | | | | | | | | | | | | | Own shares reacquired (1) | | | | (380,164 | ) | | | (380,164 | ) | | | | Balances as of December 31, 2007 | | 683,979 | | 394,584 | | 4,511 | | 382,705 | | — | | 211 | | 1,241,716 | | 2,707,706 | | | Net income for the fiscal year | | | 660,050 | | 660,050 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balances as of December 31, 2008 | | | 683,979 | | 394,584 | | 4,511 | | 481,743 | | — | | 211 | | 1,251,569 | | 2,816,597 | | | | | | | | | | | | | | | | | | | | |
| | | (1) | | As of December 31, 2008 and 2007, the outstanding capital stock is 608,437 and 683,943, respectively. See note 9. to the accompanying financial statements. | | (2) | | See notes 3.5. and 4.2. | | (3) | | Through resolutions of April 18, 2005, April 21, 2006, and April 16, 2007 and April 11, 2008, respectively, the Central Bank authorized the above mentioned cash dividends distribution. | | (3) | | See note 10. to the accompanying financial statements. |
The accompanying notes 1 through 35 to the consolidated financial statements are an integral part of these statements. F - 12
BANCO MACRO S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARYEARS ENDED DECEMBER 31, 2008 AND 2007 (see note 4.4.s)) (StatedFigures stated in thousands of pesos) | | | | | | | | | | | 2008 | | | 2007 (1) | | Changes in cash and cash equivalents | | | | | | | | | Cash and cash equivalents at beginning of fiscal year | | | 3,117,426 | | | | 2,626,908 | | Cash and cash equivalents at end of fiscal year | | | 3,523,897 | | | | 3,117,426 | | | | | | | | | Net increase in cash and cash equivalents | | | 406,471 | | | | 490,518 | | | | | | | | | | | | | | | | | | Causes of changes in cash and cash equivalents | | | | | | | | | | | | | | | | | | Operating activities | | | | | | | | | | | | | | | | | | Net collections / (payments): | | | | | | | | | - Government and private securities | | | 80,038 | | | | (68,837 | ) | - Loans | | | | | | | | | - to the financial sector | | | 95,190 | | | | 310,024 | | - to the non-financial government sector | | | 66,026 | | | | 36,674 | | - to the non-financial private sector and foreign residents | | | 236,273 | | | | (2,687,238 | ) | - Other receivables from financial intermediation | | | (53,947 | ) | | | (509,249 | ) | - Assets subject to financial leases | | | 85,202 | | | | (31,295 | ) | - Deposits | | | | | | | | | - from the financial sector | | | 10,705 | | | | 8,232 | | - from the non-financial government sector | | | 1,981,008 | | | | 473,453 | | - from the non-financial private sector and foreign residents | | | (668,310 | ) | | | 2,614,398 | | - Other liabilities from financial intermediation | | | | | | | | | - financing facilities from the financial sector (received calls) | | | (866 | ) | | | (3,320 | ) | - others (except liabilities included under financing activities) | | | (91,712 | ) | | | 278,226 | | Collections related to service-change income | | | 882,354 | | | | 658,863 | | Payments related to service-charge expenses | | | (168,091 | ) | | | (146,606 | ) | Administrative expenses paid | | | (1,120,663 | ) | | | (873,034 | ) | Payments of organization and development expenses | | | (45,258 | ) | | | (57,438 | ) | Net collections from penalty interest | | | 14,801 | | | | 7,569 | | Differences from payments related to court orders | | | (16,733 | ) | | | (34,445 | ) | Collections of dividends from other companies | | | 26,939 | | | | 636 | | Other (payments)/collections related to other income and losses | | | (12,831 | ) | | | 15,679 | | Net collections/(payments) from other operating activities | | | 6,636 | | | | (14,711 | ) | Payment of income tax / minimum presumed income tax | | | (81,967 | ) | | | (80,183 | ) | | | | | | | | Net cash flows generated in/(used in) operating activities | | | 1,224,794 | | | | (102,602 | ) | | | | | | | | | | | | | | | | | Investing activities | | | | | | | | | Net payments for bank premises and equipment | | | (72,819 | ) | | | (77,661 | ) | Net collections/(payments) for other assets | | | 23,731 | | | | (1,559 | ) | Payments from purchases of investments in other companies | | | (635 | ) | | | — | | Collections from sales of investments in other companies | | | 922 | | | | 33 | | Other payments for investing activities | | | 5,032 | | | | (1,678 | ) | | | | | | | | Net cash flows used in investing activities | | | (43,769 | ) | | | (80,865 | ) | | | | | | | | | | | | | | | | | Financing activities | | | | | | | | | Net collections / (payments): | | | | | | | | | - Non-subordinated corporate bonds | | | (133,211 | ) | | | 749,464 | | - Central Bank of Argentina | | | | | | | | | - Other | | | (79,206 | ) | | | (53,681 | ) | - Banks and International Institutions | | | 47,204 | | | | (15,844 | ) | - Subordinated corporate bonds | | | (18,397 | ) | | | (13,240 | ) | - Financing received from Argentine financial institutions | | | (63,489 | ) | | | 82,885 | | Irrevocable capital | | | — | | | | 182 | | Payment of dividends | | | (171,004 | ) | | | (102,591 | ) | Other payments from financing activities | | | | | | | | | - Own shares reacquired | | | (380,164 | ) | | | — | | - Other collections | | | — | | | | (3,230 | ) | | | | | | | | Net cash flows (used in)/generated in financing activities | | | (798,267 | ) | | | 643,945 | | | | | | | | | Financial income and holding gains on cash and cash equivalents | | | 23,713 | | | | 30,040 | | Net increase in cash and cash equivalents | | | 406,471 | | | | 490,518 | | | | | | | | |
| | | | | Changes in cash and cash equivalents (1) | | | | | CashSee notes 4.2. and cash equivalents at beginning of fiscal year | | | 2,626,908 | | Cash and cash equivalents at end of fiscal year | | | 3,117,426 | | | | | | Net increase in cash and cash equivalents
| | | 490,518 | | | | | | | | | | | Causes of changes in cash and cash equivalents
| | | | | | | | | | Operating activities
| | | | | Net collections / (payments): | | | | | - Government and private securities | | | (68,837 | ) | - Loans | | | | | -4.4.s) to the accompanying financial sector | | | 310,024 | | - to the non-finacial government sector | | | 36,674 | | - to the non-finacial private sector and foreign residents | | | (2,687,238 | ) | - Other receivables from financial intermediation | | | (509,249 | ) | - Assets under financial lease | | | (31,295 | ) | - Deposits | | | | | - to the financial sector | | | 8,232 | | - to the non-finacial government sector | | | 473,453 | | - to the non-finacial private sector and foreign residents | | | 2,614,398 | | - Other liabilities from financial intermediation | | | | | - financing facilities from the financial sector | | | (3,320 | ) | - others (except liabilities included under financing activities) | | | 278,226 | | Collections related to service-change income | | | 658,863 | | Payments related to service-charge expenses | | | (146,606 | ) | Administrative expenses paid | | | (873,034 | ) | Payments of organization and development expenses | | | (57,438 | ) | Net collections from punitive interest | | | 7,569 | | Differences from payments related to court orders | | | (34,445 | ) | Collections of dividends from other companies | | | 636 | | Other collections related to other income and losses | | | 15,679 | | Net payments from other operating activities | | | (14,711 | ) | Payment of income tax / minimum presumed income tax | | | (80,183 | ) | | | | | Net cash flows used in operating activities
| | | (102,602 | ) | | | | | | | | | | Investing activities
| | | | | Net payments for bank premises and equipment | | | (77,661 | ) | Net payments for other assets | | | (1,559 | ) | Collections from sales of investments in other companies | | | 33 | | Other payments for investing activities | | | (1,678 | ) | | | | | Net cash flows used in investing activities
| | | (80,865 | ) | | | | | | | | | | Financing activities
| | | | | Net collections / (payments): | | | | | - Non-subordinated corporate bonds | | | 749,464 | | - Central Bank of Argentina | | | | | - Other | | | (53,681 | ) | - Banks and International Organizations | | | (15,844 | ) | - Subordinated corporate bonds | | | (13,240 | ) | - Financing received from financial institutions in Argentina | | | 82,885 | | Irrevocable capital | | | 182 | | Payment of dividends | | | (102,591 | ) | Other collections from financing activities | | | (3,230 | ) | | | | | Net cash flows provided by financing activities
| | | 643,945 | | | | | | | | | | | Financial income and holding gains on cash and cash equivalents
| | | 30,040 | | | | | | | | | | | Net increase in cash and cash equivalents
| | | 490,518 | | | | | statements. |
F - 13
(Contd.) BANCO MACRO S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARSYEAR ENDED DECEMBER 31, 2006 AND 2005 (see note 4.4.s)) (StatedFigures stated in thousands of pesos) | | | | | | | | | | | 2006 (1) | | | 2005 (1) | | Cash provided by (used in) operating activities | | | | | | | | | Financial income collected | | | 1,181,118 | | | | 792,872 | | Service-charge income collected | | | 452,627 | | | | 302,738 | | Other sources of cash (2) | | | 560,562 | | | | 44,298 | | Less: | | | | | | | | | Financial expenses paid | | | (410,354 | ) | | | (284,936 | ) | Services-charge expenses paid | | | (92,069 | ) | | | (59,193 | ) | Administrative expenses paid | | | (599,435 | ) | | | (406,821 | ) | Other uses of cash | | | (158,906 | ) | | | (27,998 | ) | | | | | | | | Net cash provided by operating activities | | | 933,543 | | | | 360,960 | | | | | | | | | Plus: | | | | | | | | | Cash provided by (used in) investing activities | | | | | | | | | Decrease / (increase) in government and private securities | | | 628,496 | | | | (706,893 | ) | Increase in loans | | | (2,052,258 | ) | | | (573,255 | ) | Decrease in other receivables from financial intermediation | | | 646,052 | | | | 529,526 | | Increase in other assets | | | (394,844 | ) | | | (238,629 | ) | | | | | | | | Net cash used in investing activities | | | (1,172,554 | ) | | | (989,251 | ) | | | | | | | | Plus: | | | | | | | | | Cash provided by (used in) financing activities | | | | | | | | | Increase in deposits | | | 1,541,983 | | | | 1,252,599 | | Increase / (decrease) in other liabilities (3) | | | 520,492 | | | | (1,667 | ) | Decrease in other liabilities from financial intermediation | | | (786,790 | ) | | | (775,326 | ) | Capital increase | | | 469,500 | | | | — | | Cash dividends paid | | | (68,395 | ) | | | (30,447 | ) | | | | | | | | Net cash provided by financing activities | | | 1,676,790 | | | | 445,159 | | | | | | | | | | | | | | | | | | Increase / (Decrease) in cash and cash equivalents | | | 1,437,779 | | | | (183,132 | ) | | | | | | | | | | | | | | | | | Cash and cash equivalents at the beginning of fiscal year | | | 1,189,129 | | | | 1,372,261 | | | | | | | | | | | | | | | | | | Cash and cash equivalents at the end of the fiscal year | | | 2,626,908 | | | | 1,189,129 | | | | | | | | |
| | | | | | | 2006 (1) | | Cash provided by (used in) operating activities | | | | | Financial income collected | | | 1,181,118 | | Service-charge income collected | | | 452,627 | | Other sources of cash (2) | | | 560,562 | | Less: | | | | | Financial expenses paid | | | (410,354 | ) | Services-charge expenses paid | | | (92,069 | ) | Administrative expenses paid | | | (599,435 | ) | Other uses of cash | | | (158,906 | ) | | | | | Net cash provided by operating activities | | | 933,543 | | | | | | Plus: | | | | | Cash provided by (used in) investing activities | | | | | Decrease in government and private securities | | | 628,496 | | Increase in loans | | | (2,052,258 | ) | Decrease in other receivables from financial intermediation | | | 646,052 | | Increase in other assets | | | (394,844 | ) | | | | | Net cash used in investing activities | | | (1,172,554 | ) | | | | | Plus: | | | | | Cash provided by (used in) financing activities | | | | | Increase in deposits | | | 1,541,983 | | Increase in other liabilities (3) | | | 520,492 | | Decrease in other liabilities from financial intermediation | | | (786,790 | ) | Capital increase | | | 469,500 | | Cash dividends paid | | | (68,395 | ) | | | | | Net cash provided by financing activities | | | 1,676,790 | | | | | | | | | | | Increase in cash and cash equivalents | | | 1,437,779 | | | | | | | | | | | Cash and cash equivalents at the beginning of fiscal year | | | 1,189,129 | | | | | | | | | | | Cash and cash equivalents at the end of the fiscal year | | | 2,626,908 | | | | | |
| | | (1) | | See notenotes 4.2. and 4.4.s) to the accompanying financial statements. | | (2) | | As of December 31, 2006, includesIncludes 150,190 related to Banco del Tucumán S.A. (see note 3.6.) and 261,787 related to Nuevo Banco Bisel S.A. (see note 3.7.). As of December 31, 2005, includes 40,838 related to the acquisition of certain assets and liabilities of Banco Empresario de Tucumán Cooperativo Limitado. | | (3) | | Including the effect deriving from the issuance of Subordinated Corporate Bonds mentioned in note 10.c.1). |
The accompanying notes 1 through 35 to the consolidated financial statements are an integral part of these statements F - 14
BANCO MACRO S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 20072008 AND 20062007 (StatedFigures stated in thousands of pesos, except otherwise indicated) Macro Compañía Financiera S.A. 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 S.A. Subsequently, as a result of the merger process with other entities, it adopts other names (among them, Banco Macro Bansud S.A.) and since August 2006, Banco Macro S.A. (hereinafter, the Bank). The Bank’s shares have been publicly listed on the BCBA (Buenos Aires stock exchange) since November 1994, and since March 24, 2006, it began listing its shares on the New York Stock Exchange (see also note 9). As from 1994, Banco Macro S.A.’s market was mainly focused on the regional areas outside the City of Buenos Aires. Following this strategy, in 1996, Banco Macro S.A. started the process to acquire entities and assets and liabilities during the privatization of provincial banks and other banks. On December 2001, and 2004, the Bank acquired the control of Banco Bansud S.A. and Nuevo Banco Suquía S.A. (see note 3.5.), respectively. Such entities merged with and into Banco Macro S.A. on December 2003 and it was incorporated as Banco Macro S.A. | | | | Banco Macro S.A.’s shares have been publicly listed on the Buenos Aires Stock Exchange since November 1994 (see also note 9). | | | | As from 1994, Banco Macro S.A.’s market was mainly focused on the regional areas outside the City of Buenos Aires. Following this strategy, in 1996, Banco Macro S.A. began the process of acquiring entities and assets and liabilities during the privatization of provincial banks and other banks. | | | | On December 19, 2001, Banco Macro S.A. entered into an agreement to acquire 59.58% of the capital stock and 76.17% of the voting rights in Banco Bansud S.A. The acquisition was effective January 4, 2002, once it was approved by the Central Bank of Argentina. | | | | During 2003, the shareholders decided to merge both entities with the strategic purpose of creating a financial institution based throughout Argentina. In December 2003, the Central Bank authorized the merger between Banco Macro S.A. and Banco Bansud S.A., and the Bank name changed to Banco Macro Bansud S.A. | | | | On December 22, 2004, Banco Macro Bansud S.A. received 100% of the shares in Nuevo Banco Suquía S.A. awarded in the “Second Public Call for Bids for the Sale of Shares in Nuevo Banco Suquía S.A. owned by BNA (Banco de la Nación Argentina) and Fundación BNA”. | | | | Since March 24, 2006, Banco Macro Bansud S.A.’s stock has been listed on the New York Stock Exchange (see additionally note 9.). | | | | On April 28, 2006, Banco Macro Bansud S.A.’s General Regular and Special Shareholders’ Meeting approved the amendment to the Bank’s business name to Banco Macro S.A., the registration of which with the IGJ (Argentine business associations’ regulatory agency) occurred in August 2006. Therefore, we will refer to it as “Banco Macro S.A.” or “the Bank”. | | | | Additionally, in 2006, Banco Macro S.A. acquired: (i) 79.84% of the capital stock of Banco del Tucumán S.A., totaling 89.93% of this capital stock during fiscal year 2007 (see note 3.6); (ii) 100% of the common shares of Nuevo Banco Bisel S.A. (see note 3.7); and (iii) 51% of the capital stock of Red Innova Administradora de Fondos de Inversión S.A. (see note 3.9). Furthermore, on May 28, 2007, the Bank acquired 100% of the preferred shares of Nuevo Banco Bisel S.A. (see note 3.7). | | | | In 2007, the shareholders of Banco Macro S.A. and Nuevo Banco Suquía S.A. decided to merge both entities to integrate their structure given the similarities in their activities and business, so as to achieve greater efficiency. In August 2007, the Central Bank authorized this merger, which took place on October 16, 2007 (see note 3.5). | | | | The Bank currently offers traditional bank products and services to companies, including those operating in regional economies, as well as to medium- and low-income individuals. | | | | In addition, the Bank performs certain transactions through its subsidiaries, including mainly Banco del Tucumán S.A., Nuevo Banco Bisel S.A., Macro Bank Limited (an entity organized under the laws of Bahamas, former Sud Bank & Trust Company Limited), Macro Securities S.A. Sociedad de Bolsa, Sud Inversiones & Análisis S.A. and Macro Fondos S.G.F.C.I. S.A. | | | | The chart showing the organizational structure as of December 31, 2007, respectively.Additionally, during the fiscal year ended 2006, Banco Macro S.A. acquired: (i) 79.84% of the capital stock of Banco del Tucumán S.A., totaling 89.93% of this capital stock during fiscal year 2007 (see note 3.6.); (ii) 100% of the common shares of Nuevo Banco Bisel S.A. (see note 3.7.) and (iii) 51% of the capital stock of Red Innova Administradora de Fondos de Inversión S.A. (liquidated in December 2008). Furthermore, on May 28, 2007, the Bank and Nuevo Banco Suquía S.A. acquired 100% of the preferred shares of Nuevo Banco Bisel S.A. The Bank currently offers traditional bank products and services to companies, including those operating in regional economies, as well as to medium- and low-income individuals. In addition, the Bank performs certain transactions through its subsidiaries, including mainly Banco del Tucumán S.A., Nuevo Banco Bisel S.A., Macro Bank Limited (an entity organized under the laws of Bahamas), Macro Securities S.A. Sociedad de Bolsa, Sud Inversiones & Análisis S.A. and Macro Fondos S.G.F.C.I. S.A. The chart showing the organizational structure as of December 31, 2008 is disclosed in note 4.1 with the percentages indicating the ownership in each subsidiary. |
F - 15
BANCO MACRO S.A. AND SUBSIDIARIES
2. | | CHANGES IN THE ARGENTINE MACROECONOMIC ENVIRONMENT AND THE SITUATIONS OF THE FINANCIAL SYSTEM AND THE BANK | | | | The Argentine economic and financial situation worsened in late 2001, when the Argentine government suspended payments on the sovereign debt and imposed severe restrictions on cash withdrawals from financial institutions. | | | | In early 2002, the Argentine Congress enacted Public Emergency and Foreign Exchange System Reform Law No. 25,561 (the effective term of which was extended through December 31, 2008). This law introduced significant changes to the economic model implemented until that date and amended Convertibility Law (the currency board that pegged the Argentine peso at parity with the US dollar) effective since March 1991. After a period of an official foreign exchange market, a single foreign exchange market was established, subject to Central Bank requirements and rules. Such law and subsequent presidential decrees established, among others, measures that affected the financial system, primarily related to the conversion into pesos of its assets and liabilities in foreign currency at different exchange rates and the related compensatory measures. | | | | Also, the current administration outlined a program that included important measures such as the exchange of federal and provincial government debt, compensation provided to Financial Institutions for the effects of the devaluation and the conversion into pesos of balances denominated in foreign currency, the restructuring of Federal Government debt, deposits rescheduling and the lifting of restrictions thereto, relaxation of foreign-exchange controls and monetary reunification with the redemption of quasi-currencies. In addition, during 2005, the government debt restructuring process was completed and the Argentine Government settled its payable to the International Monetary Fund. Also, the economic and financial variables showed evolution and the financial system is undergoing a financial consolidation process. | | | | The accompanying consolidated financial statements should be read considering the circumstances previously mentioned. | | | | Legal actions
| | | | The measures adopted by the Federal Executive with respect to the public emergency in political, economic, financial and foreign exchange matters triggered a number of legal actions (known asrecursos de amparo —constitutional rights protection actions), brought by individuals and companies against the Federal Government, the Central Bank and the financial institutions for considering that the Public Emergency Law and its supplementary regulations are unconstitutional.
| | | | In the specific case of deposits denominated in foreign currency, in some cases, the courts ordered the reimbursement of such deposits, either in foreign currency or at the free foreign exchange rate at the time of reimbursement until a final judgment is issued with respect to the constitutionality of the conversion into pesos. | | | | Some of these claims were treated by the Argentine Supreme Court, which issued resolutions on lower-court decisions for each particular case and in different manners. | | | | On December 27, 2006, in the case in re. “Massa Juan Agustín v. the Federal Government et al for constitutional rights protection actions” and in other later pronouncements, the Argentine Supreme Court revoked prior instance judgments that ordered the reimbursement of deposits in US dollars and resolved that depositors are entitled to the reimbursement of their deposits converted |
The financial and capital markets As from the second half of 2008 the financial markets of the world’s leading countries have been rocked by volatility, lack of liquidity and credit. Consequently, there was a significant drop in stock indices on international markets and an economic deceleration on a worldwide scale. In spite of the actions taken by the developed countries, the future development of international markets remains uncertain. In Argentina, stock markets had marked decreases in the prices of government and private securities, as well as increases in interest rates, the country risk and in foreign exchange rates, and the effects of the abovementioned economic deceleration began to show. Additionally, Law No. 26,425 was passed, which put an end to the private management of pensions (A.F.J.P. — private pension fund managers). The only system remaining in place is the government-managed pension system. As from December 2008, the A.N.Se.S.(national social security administration) began issuing auction programs of certificates of deposit for the F.G.S. (state-managed pension fund) to promote production and create employment. F - 15
BANCO MACRO S.A. AND SUBSIDIARIES On February 2, 2009, Joint Resolutions 08/2009 and 05/2009 issued by the Treasury and Finance Departments, established a debt exchange transaction of certain guaranteed loans with banks and other companies of a new bond or promissory note referred to as “Argentine Bond or Promissory Note in Argentine pesos at the Badlar interest rate + 275 basis points maturing in 2014”, issued on January 30, 2009, and full amortization by its maturity date of January 30, 2014, which allowed the original maturity date of the abovementioned guaranteed loans to be extended through such year. The interest rate paid on a quarterly basis shall be 15.4% for the first year and for the rest of the period, the Badlar rate plus 275 basis points will apply. In this regard, on January 29 and February 10, 2009, the Bank subscribed an exchange agreement whereby it exchanged the guaranteed loans for a face value amount of 109,331 (book value: 277,832) and received Argentina bonds (Bonar) at the Badlar interest rate + 275 basis points, in Argentine pesos maturing in 2014 for a face value amount of 340,162 (book value: 277,832), which were recorded in Unlisted government securities and Listed government securities — Holdings in investment accounts for a face value amount of 93,327 and 246,835, respectively. Under Central Bank rules, the accounting of the exchange did not have impact on the consolidated financial statements of the Bank (see note 4.4.c)). Additionally, during January and February 2009, as set forth by Central Bank Resolution No. 06/2009 the Bank and its subsidiary Nuevo Banco Bisel S.A. have decided to prepay the payable amounts resulting from loans received to acquire Argentine Government bonds intended for the depositors of former Nuevo Banco Suquía S.A and Nuevo Banco Bisel S.A. (see note 7.2.b)). The Bank’s Management monitors the change of the abovementioned situations, to determine the possible actions to adopt and to identify the possible impacts on its financial situation that may need to be reflected in the financial statements for future periods. The accompanying consolidated financial statements should be read considering the circumstances previously mentioned. Legal actions The Argentine economic and financial situation worsened in late 2001, when the Argentine government suspended payments on the sovereign debt and imposed severe restrictions on cash withdrawals from financial institutions. The measures adopted by the Federal Executive with respect to the public emergency in political, economic, financial and foreign exchange matters triggered a number of legal actions (known as recursos de amparo — constitutional rights protection actions), brought by individuals and companies against the Federal Government, the Central Bank and the financial institutions for considering that Public Emergency Law and its supplementary regulations are unconstitutional. In the specific case of deposits denominated in foreign currency, in some cases, the courts ordered the reimbursement of such deposits, either in foreign currency or at free foreign exchange rate at the time of reimbursement until a final judgment is issued with respect to the constitutionality of the conversion into pesos. Some of these claims were treated by the Argentine Supreme Court, which issued resolutions on lower-court decisions for each particular case and in different manners. On December 27, 2006, the case in re “Massa Juan Agustín v. the Federal Government et al for constitutional rights protection actions” and in other later pronouncements, the Argentine Supreme Court revoked prior instance judgments that ordered the reimbursement of deposits in US dollars and resolved that depositors are entitled to the reimbursement of their deposits switched into pesos at the Ps. 1.40-to-USD 1 exchange rate, adjusted by the CER through the payment date, and interest should be applied to such amount at a 4% rate p.a., which may not be compounded through the payment date. In addition, the judgment established that the amounts paid by financial institutions in the course of the lawsuit should be computed as payments towards the total resulting amount, which, ultimately, may not be higher than the US dollars the client deposited with each bank, as decided at prior court instances, provided that such judgment had not been appealed by the plaintiff. Also, each party would bear its own legal costs, and the legal costs ruled at the first and second instances were confirmed. |
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BANCO MACRO S.A. AND SUBSIDIARIES Subsequently, on August 28, 2007, within the framework of another case filed by a depositor against the Argentine Government, the Argentine Supreme Court of Justice clarified the treatment to be applied to the payments that had already been made by the banks to the depositors under lower court orders. In this regard, the amounts paid that should be charged as payment on account of the amount owed to the depositors should be considered according to the proportion that such amounts represent in relation to the original amount deposited, thus computing the values in US dollars, in regard to both the deposit as well as the payment on account. AsWith regards to courts deposit in US dollars, on March 20, 2007, the Argentine Supreme Court ruled in the case “EMM S.R.L. v.TIA S.A. on ordinary proceedings on precautionary measures” ruling onholding the inapplicability of section 2 of Presidential Decree 214/2002 and stating that principal should, therefore, be reimbursed with no deterioriationdeterioration in value whatsoever, and that the sums should be kept in their original currency and that the substance of the assets entrusted to the Bank in its capacity as court bailor cannot be validly changed.
As mentioned in note 4.4.l.2.notes 4.4.l.2) and 4.4.l.3), under Central Bank Communiqués “A” 3,916 and “A” 4,686, as of December 31, 2008 and 2007, the Bank continued capitalizing in “Intangible Assets” as of December 31, 2007 and 2006,assets” the amounts of 116,46440,657 and 74,745 in the consolidated financial statements, respectively,53,450, net of related amortizations, amounting to 209,162 and 179,883, respectively, with respect to the differences resulting from the compliance withpayments of deposit-related court orders and the estimates of the additional effects of the abovementioned Supreme Court decisionsdecision dated March 20, 2007, and the provisions of Presidential Decree No. 214/02, as supplemented. As Additionally, as of December 31, 20072008, and 2006,2007, the Bank bookedrecorded the additional payables related to such regulationsregulation under the “Provisions” account in the amount of 84,16018,233 and 27,132,21,146, respectively. The Considering what has been mentioned in note 4.4.l.2),the Bank’s Management believes that there would be no significant effects, other than those recognized in accounts, that could derive from the final outcome of such actions on the amount due of the related liabilities.actions.
| 3.1. | | 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 term of five years as from January 1, 1996, as the Provincial Government’s exclusive financial agent, as well as revenue collection and obligation payment agent. | | | | | In addition, on November 25, 1999, and on December 28, 2006, extensions to such agreement were agreed upon, making it currently effective through December 31, 2019. | | | | | As of December 31, 2007, and 2006, the deposits of the Misiones Provincial Government amounted to 163,711 and 279,507 (including 35,248 and 29,516 related to court deposits), respectively. | |
The Bank and the Misiones Provincial Government entered into a special-relationship agreement whereby the Bank was appointed, for a term of five years as from January 1, 1996, as the Provincial Government’s exclusive financial agent, as well as revenue collection and obligation payment agent. In addition, on November 25, 1999, and on December 28, 2006, extensions to such agreement were agreed upon, making it currently effective through December 31, 2019. As of December 31, 2008, and 2007, the deposits of the Misiones Provincial Government amounted to 389,076 and 163,711 (including 52,889 and 35,248 related to court deposits), respectively. | 3.2. | | 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 term of ten years as from March 1, 1996, as the Provincial Government’s exclusive financial agent, as well as revenue collection and obligation payment agent. In addition, on February 22, 2005, such agreement was extended through March 1, 2016. As of December 31, 2008, and 2007, the deposits of the Salta Provincial Government amounted to 453,723 and 492,265 (including 89,835 and 53,681 related to court deposits), respectively. | 3.3. | | The Bank andAgreement with the SaltaJujuy Provincial Government entered into a special-relationship agreement whereby the Bank was appointed, for a term of ten years as from March 1, 1996, as the Provincial Government’s exclusive financial agent, as well as revenue collection and obligation payment agent. | | | | | In addition, on February 22, 2005, that agreement was extended through March 1, 2016. | | | | | As of December 31, 2007, and 2006, the deposits of the Salta Provincial Government amounted to 492,265 and 288,432 (including 53,681 and 53,876 related to court deposits), respectively. |
The Bank and the Jujuy Provincial Government entered into a special-relationship agreement whereby the Bank was appointed, for a ten-year term as from January 12, 1998, as the Provincial Government’s exclusive financial agent, as well as revenue collection and obligation payment agent. Additionally, on April 29, 2005, such agreement was extended through November 4, 2014. F - 17
BANCO MACRO S.A. AND SUBSIDIARIES As of December 31, 2008, and 2007, the deposits of the Jujuy Provincial Government amounted to 384,868 and 378,662 (including 49,201 and 32,206 related to court deposits), respectively. | 3.3. | | 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 as from January 12, 1998, as the Provincial Government’s exclusive financial agent, as well as revenue collection and obligation payment agent. | | | | | Additionally, on April 29, 2005, such agreement was extended through November 4, 2014. | | | | | As of December 31, 2007, and 2006, the deposits of the Jujuy Provincial Government amounted to 378,662 and 284,064 (including 32,206 and 32,179 related to court deposits), respectively. | | | 3.4. | | Uniones Transitorias de Empresas (Joint(joint ventures) |
| a) | | Banco Macro S.A. — Siemens Itron Business Services S.A. | | | | | The Bank participates in the “Banco Macro S.A: — Siemens Itron — Unión Transitoria de Empresas” (a joint venture jointly controlled having an interest of 50%), under the agreement entered into by the former Banco Macro S.A. and Siemens Itron Business Services S.A. on April 7, 1998. The current subject-matter of the Unión Transitoria de Empresas (joint venture) agreement is to provide a provincial data processing center to manage tax-related assets, to modernize tax collection systems and procedures in the province of Salta, and to manage and recover the tax and municipal assessment debt. | | | | | As of December 31, 20072008 and 2006,2007, the net assets amounted to 2,9224,153 and 3,515,2,922, respectively, and net income of the joint venture amounted to 8,3117,217 and 7,713,8,311, respectively. Under Central Bank rules, this interest is consolidated through the proportionate consolidation method (both net assets and income). | | | b) | | Banco Macro Bansud S.A. — Montamat & Asociados S.R.L. | | | | | On October 22, 2004, the Bank entered into a joint venture agreement named “BMB M&A -— Unión Transitoria de Empresas” (jointly controlled having an interest of 50%) with Montamat & Asociados S.R.L. The subject-matter of such agreement will be to render audit services related to oil & gas royalties and tax easements in the province of Salta to optimize the collection thereof. | | | | | As of December 31, 2007,2008, and 2006,2007, the net assets amounted to 4 and 5,313, and 1,150, respectively, respectively. | | | | | Also, as of December 31, 2007,2008, the income bookednet loss recorded for the Bank’s interest in such joint venture amounted to 4,276, whereas78, while as of December 31, 2006, it carried a loss in2007, the amountBank recorded net income of 9.4,276. Under Central Bank rules, this interest is consolidated through the proportionalproportionate consolidation method (both net assets and loss)net income). |
| 3.5. | | Legal Merger of Nuevo Banco Suquía S.A. | | | | | On March 14, 2007, the Boards of Directors of Banco Macro S.A. and Nuevo Banco Suquía S.A. entered into a “Preliminary merger agreement”, whereby Nuevo Banco Suquía S.A. will merge with and into Banco Macro S.A. retroactively effective as from January 1, 2007, on the basis of the financial statements of such banks as of December 31, 2006. | | | | | On June 4 and 5, 2007, the General Regular and Special Shareholders’ Meetings of Banco Macro S.A. and Nuevo Banco Suquía S.A., respectively, approved such preliminary merger agreement, as well as the consolidated balance sheet for merger purposes as of December 31, 2006, and the shares exchange relationship. | | | | | Furthermore, Banco Macro S.A.’s Shareholders’ Meeting |
On March 14, 2007, the Boards of Directors of Banco Macro S.A. and Nuevo Banco Suquía S.A. entered into a “Preliminary merger agreement”, whereby Nuevo Banco Suquía S.A. would merge with and into Banco Macro S.A. retroactively effective as from January 1, 2007, on the basis of the financial statements of such banks as of December 31, 2006. On June 4 and 5, 2007, the General Regular and Special Shareholders’ Meetings of Banco Macro S.A. and Nuevo Banco Suquía S.A., respectively, approved such preliminary merger agreement, as well as the consolidated balance sheet for merger purposes as of December 31, 2006, and the shares exchange relationship. Furthermore, Banco Macro S.A.’s shareholders’ meeting mentioned above approved the capital stock increase of Ps. 683,943,437 to Ps. 683,978,973 through the issuance of 35,536 common registered Class B shares with a face value of Ps. 1, each entitled to one vote, to be delivered to the minority shareholders of the absorbed bank. |
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BANCO MACRO S.A. AND SUBSIDIARIES
During the year,2007, the Central BankBank’s Board of Directors and the ArgentineCNV (Argentine Securities Comission (CNV)Commission) authorized the abovementionedsuch merger. Additionally, the CNV and the Buenos Aires Stock ExchangeBCBA authorized the public offering of shares to be delivered to the minority shareholders of Nuevo Banco Suquía S.A. Finally, on October 16, 2007, Banco Macro S.A. carried out the merger of Nuevo Banco Suquía S.A. with and into the former. On February 12, 2008, the shares issued were credited to the minority shareholders of the absorbed bank. F - 18
BANCO MACRO S.A. AND SUBSIDIARIES Under Central Bank rules, the accounting of the merger did not have a significant impact on the consolidated financial statements of the Bank. | 3.6. | | Banco del Tucumán S.A. | | | | | In line with its strategy to increase its market position in the interior of Argentina, on November 24, 2005, the Bank signed a stock purchase agreement with Banco Comafi S.A. for 75% of the capital stock and voting rights of Banco del Tucumán S.A. Such event was approved by the Central Bank on March 6, 2006, through Board of Governors’ Resolution No. 50, as well as by the Technical Coordination Department of the Economy and Production Ministry on April 7, 2006. | | | | | In this regard, on May 5, 2006, the Bank acquired 164,850 class “A” shares in Banco del Tucumán S.A., representing 75% of its capital stock, and on the same date took control over such institution. | | | | | The Bank paid 45,961 in cash for the acquisition. In addition, the Bank shall pay over to Banco Comafi S.A. 75% of the amounts to be recovered in the ten years following the date of the abovementioned agreement related to consumer loan portfolio currently fully provisioned. As of the date of acquisition, such liabilities amounted to about 1,662 (as of December 31, 2007, it amounted to 145). Consequently, the total acquisition price amounted to 47,623. | | | | | |
In line with its strategy to increase its market position in Argentina’s provinces, on November 24, 2005, the Bank signed a stock purchase agreement with Banco Comafi S.A. for 75% of the capital stock and voting rights of Banco del Tucumán S.A. Such event was approved by the Central Bank on March 6, 2006, through Board of Governors’ Resolution No. 50, as well as by the Technical Coordination Department of the Economy and Production Ministry on April 7, 2006. In this regard, on May 5, 2006, the Bank acquired 164,850 class “A” shares in Banco del Tucumán S.A., representing 75% of its capital stock, and on the same date took control over such institution. The Bank paid 45,961 in cash for the acquisition. In addition, the Bank shall pay over to Banco Comafi S.A. 75% of the amounts to be recovered over the ten years following the date of the abovementioned agreement related to consumer loan portfolio, for which an allowance was fully recorded as of the purchase date. As of the date of acquisition, such liabilities amounted to about 1,662 (as of December 31, 2008, it amounted to 68). Consequently, the total acquisition price amounted to 47,623. Under Central Bank rules, Banco del Tucumán S.A.’s assets and liabilities as of May 5, 2006 amounted to: |
| | | | | Cash | | | 150,190 | | Government and private securities | | | 198,411 | | Loans | | | 205,614 | | Other receivables from financial intermediation | | | 93,227 | | Assets subject to financial leases | | | 3,174 | | Investments in other companies | | | 708 | | Other receivables | | | 8,061 | | Bank premises and equipment, net | | | 26,131 | | Other assets | | | 820 | | Intangible assets | | | 14,261 | | Items pending allocation | | | 15 | | | | | | Total assets | | | 700,612 | | | | | | | | | | | Deposits | | | 594,530 | | Other liabilities from financial intermediation | | | 53,573 | | Other liabilities | | | 11,364 | | Provisions | | | 994 | | Items pending allocation | | | 86 | | | | | | Total liabilities | | | 660,547 | | | | | | Total shareholders’ equity | | | 40,065 | | | | | | Total liabilities and shareholders’ equity | | | 700,612 | | | | | |
Therefore, pursuant Central Bank rules, the Bank bookedrecorded a positive goodwill amounting to 17,574, which arises from the difference between the total acquisition price (47,623) and 75% of Banco del Tucumán S.A.’s shareholders’ equity as of such date (30,049). The goodwill is amortized using the straight line method over ten years pursuant to Central Bank rules. Additionally, from September through December 2006, Banco Macro S.A. acquired Class “C” shares in Banco del Tucumán S.A., representing 4.84% of the capital stock, which gave rise to an additional positive goodwill of 668. As of December 31, 2008, and 2007, the positive goodwill resulting from such acquisitions was recorded under “Intangible assets” in the amount of 13,395 and 15,222, respectively (net of amortizations for 4,849 and 3,021, respectively). F - 19
BANCO MACRO S.A. AND SUBSIDIARIES Additionally, on November 28, 2006, the General Regular and Special Shareholders’ Meeting of Banco del Tucumán S.A. approved a capital increase of 21,980, establishing an additional paid-in capital of 26,171. During January 2007, Banco Macro S.A. subscribed the total increase, thus increasing its overall interest in Banco del Tucumán S.A. to 89.93% (9,709 was paid by the Bank in excess of its original equity interest). Also, according to the service agreement signed on August 15, 2001, Banco del Tucumán S.A. will act as the exclusive financial agent of the Provincial Government until 2011. It also acts as the exclusive financial agent of the Municipality of San Miguel del Tucumán. As of December 31, 2008, and 2007, the deposits held by the Tucumán Provincial Government and the Municipality of San Miguel del Tucumán in Banco del Tucumán S.A. amounted to 405,577 and 536,875 (including 218,026 and 178,087 related to court deposits), respectively. See also note 3.8. for pro forma information. | | | Additionally, from September through December 2006, Banco Macro S.A. acquired Class “C” shares in Banco del Tucumán S.A., representing 4.84% of the capital stock, which gave rise to an additional positive goodwill of 668. Thus, the total equity interest as of December 31, 2006, amounted to 79.84%. | | | | | As of December 31, 2007, and 2006, the positive goodwill resulting from such acquisition was booked under “Intangible assets” in the amount of 15,222 and 17,048, respectively (net of amortizations for 3,021 and 1,194, respectively). | | | | | Additionally, on November 28, 2006, the general regular and special Shareholders’ Meeting of Banco del Tucumán S.A. approved a capital increase of 21,980, establishing an additional paid-in capital of 26,171. During January 2007, Banco Macro S.A. subscribed and paid in the total increase, thus increasing its overall interest in Banco del Tucumán S.A. to 89.93% (9,709 was paid by the Bank in excess of its original equity interest). | | | | | Additionally, according to the service agreement signed on August 15, 2001, Banco del Tucumán S.A. will act as the exclusive financial agent of the Provincial Government until 2011. It also acts as the exclusive financial agent of the Municipality of San Miguel de Tucumán. | | | | | See additionally note 3.8. for pro forma information. | | | 3.7. | | Nuevo Banco Bisel S.A. | | | | | On May 9, 2006, Banco de la Nacion Argentina (BNA) and Fundación Banco de la Nación Argentina (sellers) and the Bank (buyer) signed a stock purchase agreement, whereby the buyers acquired 100% of the voting common shares in Nuevo Banco Bisel S.A. representing the same percentages of voting rights. | | | | | In Addition, Nuevo Banco Bisel S.A. holds 66,240,000 preferred shares, with face value and book value of Ps. 1 each, without voting rights, with an equity preference consisting of the right to an mandatory annual cumulative fixed dividend of 1% of the face value of preferred shares, which belonged to Seguro de Depósitos S.A. (SEDESA) as of the date of acquisition. | | | | | On August 3, 2006, the Central Bank’s Board of Governors issued Resolution No. 175, whereby it decided, among other matters, not to make any objections to: (i) the transfer of 100% of the common shares in Nuevo Banco Bisel S.A. to the buyers; and (ii) the payment by the two of them of a capital increase in the amount of 830,000, under the terms of the agreement signed on May 9, 2006. | | | | | On September 4, 2006, the Domestic Trade Department of the Ministry of Economy and Production, following the same terms of the opinion issued by the Federal Anti-Trust Board on August 11, 2006, authorized the buyers to acquire the total shares of common stock (92.73% of the total capital stock) of Nuevo Banco Bisel S.A. | | | | | On August 11, 2006, the Bank paid up in cash the abovementioned capital increase in Nuevo Banco Bisel S.A., thus taking controls of such bank as from such date. |
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BANCO MACROOn May 9, 2006, Banco de la Nación Argentina (BNA) and Fundación BNA (sellers), and the Bank (buyer), signed a stock purchase agreement, whereby the buyers acquired 100% of the common shares in Nuevo Banco Bisel S.A. AND SUBSIDIARIES(92.73% of the total capital stock), representing the same percentage of voting rights.
| | | In addition, Nuevo Banco Bisel S.A. holds 66,240,000 preferred shares, with face value and book value of Ps. 1 each, without voting rights, with an equity preference consisting of the right to an mandatory annual cumulative fixed dividend of 1% of the face value of preferred shares, which belonged to Seguro de Depósitos S.A. (SEDESA) as of the date of acquisition. On August 3, 2006, the Central Bank’s Board of Governors issued Resolution No. 175, whereby it decided, among other matters, not to make any objections to: (i) the transfer of 100% of the common shares in Nuevo Banco Bisel S.A. to the buyer; and (ii) the payment by the two of them of a capital increase in the amount of 830,000, under the terms of the agreement signed on May 9, 2006. In addition, on September 4, 2006, the Domestic Trade Department of the Ministry of Economy and Production, approved that transaction. On August 11, 2006, the Bank paid up in cash the abovementioned capital increase in Nuevo Banco Bisel S.A., thus taking controls of such bank as from such date. Under Central Bank rules, Nuevo Banco Bisel S.A.’s assets and liabilities as of August 10, 2006 amounted to: |
| | | | | Cash | | | 261,787 | | Government and private securities | | | 503,720 | | Loans | | | 874,128 | | Other receivables from financial intermediation | | | 40,730 | | Assets subject to financial leases | | | 30,925 | | Investments in other companies | | | 1,338 | | Other receivables | | | 19,869 | | Bank premises and equipment, net | | | 59,885 | | Other assets | | | 27,377 | | Intangible assets | | | 4,743 | | Items pending allocation | | | 142 | | | | | | Total assets | | | 1,824,644 | | | | | | | | | | | Deposits | | | 1,392,676 | | Other liabilities from financial intermediation | | | 379,201 | | Other liabilities | | | 19,929 | | Provisions | | | 11,790 | | Items pending allocation | | | 938 | | | | | | Total liabilities | | | 1,804,534 | | | | | | Total shareholders’ equity | | | 20,110 | | | | | | Total liabilities and shareholders’ equity | | | 1,824,644 | | | | | |
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| | | As a result of the acquisition, pursuant Central Bank rules, the “Intangible assets” account includes a positive goodwill of 66,042, resulting from the difference between the total price paid (19,509) for the total shares of common stock and the negative shareholders’ equity of Nuevo Banco Bisel S.A. as of the acquisition date (-46,533), after deducting the preferred shares held by SEDESA and the preferred dividend accrued as of such date (66,643). Such positive goodwill is amortized in ten years pursuant to Central Bank rules. As of December 31, 2007, and 2006, the abovementioned goodwill totaled 56,686, and 63,290, respectively, net of amortizations of 9,356, and 2,752, respectively. |
BANCO MACRO S.A. AND SUBSIDIARIES | | | On May 28, 2007, the Bank acquired the preferred shares mentioned above by the Bank by exercising a call option in relation to them. The price payable was fixed at 66,240 plus an annual nominal 4% interest to be capitallized annually until payment thereof. Such price will be paid 15 years after taking possession of Nuevo Banco Bisel S.A. (August 11, 2021). | As a result of the acquisition, pursuant Central Bank rules, the “Intangible assets” account includes a positive goodwill of 66,042, resulting from the difference between the total price paid (19,509) for the total shares of common stock and the negative shareholders’ equity of Nuevo Banco Bisel S.A. as of the acquisition date (-46,533), after deducting the preferred shares held by SEDESA and the preferred dividend accrued as of such date (66,643). Such positive goodwill is amortized in ten years pursuant to Central Bank rules. As of December 31, 2008, and 2007, the abovementioned goodwill totaled 50,082, and 56,686, respectively, net of amortizations of 15,960, and 9,356, respectively. | | | See additionally note 3.8. for pro forma information. | On May 28, 2007, the Bank acquired the preferred shares mentioned above by the Bank by exercising a call option in relation to them. The price payable was fixed at 66,240 plus an annual nominal 4% interest to be capitalized annually until payment thereof. Such price will be paid 15 years after taking possession of Nuevo Banco Bisel S.A. (August 11, 2021).See also note 3.8. for pro forma information. Legal merger of Nuevo Banco Bisel S.A. On March 19, 2009, the Boards of Directors of Banco Macro S.A. and Nuevo Banco Bisel S.A entered into a “Preliminary merger agreement”, whereby Nuevo Banco Bisel S.A. will merge with and into Banco Macro S.A. retroactively effective since January 1, 2009, on the basis of the financial statements of such banks as of December 31, 2008 (see also note 7.4.b)). On April 24, 2009, such preliminary merger agreement was amended to include the resolution to reduce the capital stock approved by the Regular and Special Shareholders’ Meeting of April 21, 2009 (see also note 9). On May 27, 2009, such preliminary merger agreement, as well as the consolidated balance sheet for merger purposes as of December 31, 2008 and the shares exchange relationship was approved by the Shareholders’ Meetings of both banks. On June 5, 2009, the BCBA authorized the merger process. Additionally, as of the date of issuance of these financial statements, the authorization of the merger process is still pending by the other regulatory agencies. The exchange relationship has been agreed in 0.337614 common shares of Banco Macro S.A. per common share of Nuevo Banco Bisel S.A. So, the minority shareholders of Nuevo Banco Bisel S.A. will be entitled to receive 0.337614 shares of the Bank for each share they hold in Nuevo Banco Bisel S.A.’s capital stock. Consequently, Banco Macro S.A. will issue 1,147,887 common shares. | 3.8. | | Pro forma information |
| | | The following pro forma information is presented to show the results of operations for the years ended December 31, 2006 and 2005, if Banco Macro S.A., Banco del Tucumán S.A. and Nuevo Banco Bisel S.A. had operated on a consolidated basis as from January 1, 2005. The balances for the years ended December 31, 2006 and 2005 were considered and intercompany transactions that were eliminated. The results of operations for Banco del Tucumán S.A. and Nuevo Banco Bisel S.A. were included in the 2006 income statement as from January 1, 2006 to May 5, 2006 and August 10, 2006, respectively. These pro forma results are not necessarily indicative of the results of the consolidated entity may have in the future or would have had if merged as from January 1, 2005. | The following pro forma information is presented to show the results of operations for the year ended December 31, 2006, if Banco Macro S.A., Banco del Tucumán S.A. and Nuevo Banco Bisel S.A. had operated on a consolidated basis as from January 1, 2006. The balances for the year ended December 31, 2006 were considered and intercompany transactions that were eliminated. The results of operations for Banco del Tucumán S.A. and Nuevo Banco Bisel S.A. were included in the 2006 income statement as from January 1, 2006 to May 5, 2006 and August 10, 2006, respectively. These pro forma results are not necessarily indicative of the results of the consolidated entity may have in the future or would have had if merged as from January 1, 2006. F - 21
BANCO MACRO S.A. AND SUBSIDIARIES
| | | | | | | | | | | Pro Forma Central Bank Rules | | | | Year ended December 31, | | | | 2006 (1) | | | 2005 (1) | | | | (unaudited) | | | (unaudited) | | | | | | | | | | | Financial income | | | 1,297,708 | | | | 1,013,939 | | Financial expense | | | (461,725 | ) | | | (427,036 | ) | | | | | | | | Gross intermediation margin — Gain | | | 835,983 | | | | 586,903 | | | | | | | | | | | Provision for loan losses | | | (72,400 | ) | | | (95,410 | ) | Service charge income | | | 516,159 | | | | 396,351 | | Service charge expense | | | (102,689 | ) | | | (76,225 | ) | Administrative expenses | | | (787,312 | ) | | | (640,235 | ) | | | | | | | | Net income from financial intermediation | | | 389,741 | | | | 171,384 | | Other income | | | 270,441 | | | | 287,230 | | Other expenses | | | (203,168 | ) | | | (134,214 | ) | Minority interest | | | (1,747 | ) | | | (1,574 | ) | | | | | | | | Net income before income tax | | | 455,225 | | | | 322,806 | | Income Tax | | | (76,961 | ) | | | (34,042 | ) | | | | | | | | | | | | | | | | | Net income for the year | | | 378,306 | | | | 288,764 | | | | | | | | | | | | | | | | | | Basic Net Earning Per Share — stated in pesos | | | 0.57 | | | | 0.47 | | | | | | | | |
| | | (1) See additionally nota 4.2. | | | 3.9. | | Red Innova Administradora de Fondos de Inversión S.A.
| | | | | On September 13, 2006, the Bank acquired 51% of the capital stock and voting rights of a company based in Uruguay called Red Innova Administradora de Fondos de Inversión S.A. (Red Innova), paying 229. | | | | | On March 31, 2008, the Regular and Special General Shareholder’s Meeting of Red Innova Administradora de Fondos de Inversión S.A. resolved its dissolution and liquidation from such date. |
4. | | SIGNIFICANT ACCOUNTING POLICIES
| | | | The preparation of the Bank’s consolidated financial statements requires Management to make, in certain cases, estimates and assumptions to determine the book amounts of assets and liabilities, as well as the disclosure of contingent assets or liabilities as of each of the dates of presentation of the accounting information included in these consolidated financial statements. | | | | Management records entries based on the best estimates according to the likelihood of occurrence of different future events and the final amounts may differ from such estimates, which may have a positive or negative impact on future periods. |
| 4.1. | | Consolidation and basis of presentation
| | | | | The Consolidated Financial Statements have been prepared taking into account accounting principles issued by the Central Bank (Central Bank rules). | | | | | For the purpose of these consolidated financial statements, certain disclosures related to formal legal requirements for reporting in Argentina have been omitted since they are not required for SEC (Securities and Exchange Commission) reporting purposes. |
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BANCO MACRO S.A. AND SUBSIDIARIES | | | Under | | | | Pro Forma Central Bank’sBank rules and FACPCE (Federación Argentina de Consejos Profesionales de Ciencias Económicas | | | | Year ended December 31, | | | | 2006 (1) (unaudited) | | | | | | | Financial income | | | 1,297,708 | | Financial expenses | | | (461,725 | ) | | | | | Gross intermediation margin — Argentine Federation of Professional CouncilGain | | | 835,983 | | | | | | | Provision for loan losses | | | (72,400 | ) | Service charge income | | | 516,159 | | Service charge expenses | | | (102,689 | ) | Administrative expenses | | | (787,312 | ) | | | | | Net income from financial intermediation | | | 389,741 | | Other income | | | 270,441 | | Other expenses | | | (203,168 | ) | Minority interest | | | (1,747 | ) | | | | | Net income before income tax | | | 455,267 | | Income Tax | | | (76,961 | ) | | | | | | | | | | Net income for the year | | | 378,306 | | | | | | | | | | | Basic Net Earning Per Share — stated in Economic Sciences) Technical Resolutions, Banco Macro S.A. has consolidated the following subsidiaries:pesos | | | 0.57 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equity | | | | | | | | | | | | | | | | | | | | Investment | | | | | | | | | | | | Percentage held of | | | amounts as of | | | | Shares | | | Capital | | | | | | | December 31, | | Company | | Class | | | Number | | | stock | | | Votes | | | 2007 | | | Nuevo Banco Bisel S.A. (a) | | Common | | | 845,048,263 | | | | | | | | | | | | | | | | Preferred | | | 66,604,774 | | | | 99.996 | % | | | 99.996 | % | | | 1,109,160 | | | | | | | | | | | | | | | | | | | | | | | Banco del Tucumán S.A. (a) | | Common | | | 395,341 | | | | 89.932 | % | | | 89.932 | % | | | 108,095 | | | | | | | | | | | | | | | | | | | | | | | Macro Bank Limited (ex — Sud Bank & Trust) (b) | | Common | | | 9,816,899 | | | | 99.999 | % | | | 99.999 | % | | | 118,320 | | | | | | | | | | | | | | | | | | | | | | | Macro Securities S.A. Sociedad de Bolsa (c) | | Common | | | 9,498,100 | | | | 99.980 | % | | | 99.980 | % | | | 16,636 | | | | | | | | | | | | | | | | | | | | | | | Sud Inversiones & Análisis S.A.(c) y (d) | | Common | | | 2,297,263 | | | | 98.000 | % | | | 98.000 | % | | | 11,361 | | | | | | | | | | | | | | | | | | | | | | | Macro Fondos S.G.F.C.I. S.A. | | Common | | | 1,685,284 | | | | 98.382 | % | | | 98.382 | % | | | 1,501 | | | | | | | | | | | | | | | | | | | | | | | Macro Valores S.A. (e) | | Common | | | 18,920 | | | | 99.947 | % | | | 99.947 | % | | | 166 | | | | | | | | | | | | | | | | | | | | | | | Red Innova Administradora de Fondos de Inversión S.A. (a) | | Common | | | 4,156 | | | | 51.000 | % | | | 51.000 | % | | | 362 | |
4. | | SIGNIFICANT ACCOUNTING POLICIES |
The preparation of the Bank’s consolidated financial statements requires Management to make, in certain cases, estimates and assumptions to determine the book amounts of assets and liabilities, income, expenses and contingencies, as well as the disclosure of thereof, as of each of the dates of accounting information filing. Management records entries based on the best estimates regarding the probability of occurrence of different future events and, therefore, the final amounts may differ from such estimates, which may have a positive or negative impact on future periods. | 4.1. | | Consolidation and basis of presentation |
The Consolidated Financial Statements have been prepared taking into account accounting principles issued by the Central Bank (Central Bank rules). For the purpose of these consolidated financial statements, certain disclosures related to formal legal requirements for reporting in Argentina have been omitted since they are not required for SEC (Securities and Exchange Commission) reporting purposes. F - 22
BANCO MACRO S.A. AND SUBSIDIARIES Under Central Bank’s rules and FACPCE (Federación Argentina de Consejos Profesionales de Ciencias Económicas — Argentine Federation of Professional Council in Economic Sciences) Technical Resolutions, Banco Macro S.A. has consolidated the following subsidiaries: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equity | | | | | | | | | | | | | | | | | | Investment | | | | | | | | | | Percentage held of | | | amounts as of | | | | Shares | | | Capital | | | | | | | December 31, | | Company | | Class | | Number | | | Stock | | | Votes | | | 2008 | | Nuevo Banco Bisel S.A. (a) | | Common | | | 841,682,603 | | | | | | | | | | | | | | | | Preferred | | | 66,604,774 | | | | 99.997 | % | | | 99.997 | % | | | 1,384,059 | | | | | | | | | | | | | | | | | | | | | Banco del Tucumán S.A. (a) | | Common | | | 395,341 | | | | 89.932 | % | | | 89.932 | % | | | 137,741 | | | | | | | | | | | | | | | | | | | | | Macro Bank Limited (b) | | Common | | | 9,816,899 | | | | 99.999 | % | | | 99.999 | % | | | 99,973 | | | | | | | | | | | | | | | | | | | | | Macro Securities S.A. Sociedad de Bolsa (c) | | Common | | | 12,776,680 | | | | 99.921 | % | | | 99.921 | % | | | 17,477 | | | | | | | | | | | | | | | | | | | | | Sud Inversiones & Análisis S.A. (c) | | Common | | | 6,475,143 | | | | 98.605 | % | | | 98.605 | % | | | 12,376 | | | | | | | | | | | | | | | | | | | | | Macro Fondos S.G.F.C.I. S.A. (c) | | Common | | | 327,183 | | | | 99.936 | % | | | 99.936 | % | | | 1,180 | |
(a) | | Nuevo Banco Bisel S.A. has been consolidated since August 11, 2006 and Banco del Tucumán S.A. since May 5, 2006 and Red Innova Administradora de Fondos de Inversión S.A. since September 13, 2006 (see notes 3.6., 3.7. and 3.9.)3.7). | | (b) | | Consolidates with Sud Asesores (ROU) S.A. (voting rights: 100%, equity interest: 150)671). | | (c) | | On December 18, 2007, the Bank made irrevocable contributions of 1,985 in bothUntil March 31, 2008, Macro Fondos S.G.F.C.I. S.A. was consolidated into Sud Inversiones & Análisis S.A. As from such date it is consolidated into Macro Securities S.A. Sociedad de Bolsa and Sud Inversiones & Análisis S.A., which were accepted by the Board of Directors of the abovementioned companies. The irrevocable nature of such contributions shall last 180 days, as from the date on which such contributions are accepted. During the abovementioned term, Macro Securities S.A. Sociedad de Bolsa and Sud Inversiones & Análisis S.A. should hold a shareholders’ meeting with a view to deciding whether the irrevocable contributions shall be activated or reimbursed. | | (d) | | Consolidates with Macro Fondos S.G.F.C.I. S.A. (percentage of capital stock and votes 80.90%). | | (e) | | On March 19, 2008, the Bank sold its interest in Macro Valores S.A.Bolsa. |
| | | The intercompany transactions have been eliminated. | | | | | The receivables/payables and transactions between the companies were eliminated in the consolidation process. In addition, the Bank consolidated its balance sheets and statements of income and cash flows as of December 31, 2007 and 2006, with Macro Valores S.A. and with Red Innova Administradora de Fondos de Inversión S.A. On March 19, 2008, Banco Macro S.A. sold its full stockholding in Macro Valores S.A. As of December 31, 2008, Red Innova Administradora de Fondos de Inversión settled the full amount of its liabilities and subsequently, in accordance with the decision approved by the Shareholders’ Meeting held December 19, 2008, it distributed all of its assets proportionately among its shareholders. Furthermore, the financial statements of Macro Bank Limited (former Sud Bank & Trust Company Limited) (consolidated with Sud Asesores (ROU) S.A.) and Red Innova Administradora de Fondos de Inversión S.A. were conformed to the Central Bank rules. Also, as they are originally stated in US dollars and Uruguayan pesos, respectively, they were translated into pesos following the procedures indicated below: |
| (a) | | Assets and liabilities were convertedtranslated at the reference exchange rate or the exchange rate reported by the Central Bank trading room and effective for the foreign currency at the closing of transactions on the last business day of the years ended December 31, 2007,2008, and 2006.2007. |
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BANCO MACRO S.A. AND SUBSIDIARIES
| (b) | | Figures related to the owners’ contributions (capital stock, additional paid-in capital and irrevocable capital contributions) were translated applying the effective exchange rates as of the date on which such contributions were paid in. | |
| (c) | | Retained earnings were estimated by the difference between assets, liabilities and owners’ contributions, translated into pesos, as indicated above. | |
| (d) | | The amounts of results were translated into pesos, as described in (a) above. The difference between the addition of the amounts and lump-sum income (loss) for each year (difference between retained earnings at beginning of year and retained earnings at year-end) was recorded in “Financial income — Difference in quoted prices of gold and foreign currency’’ or “Financial expense — Difference in quoted prices of gold and foreign currency” accounts, as the case may be. |
| 4.2. | | Comparative information
| | | | | The consolidated financial statements as of December 31, 2007, are presented comparatively with those of December 31, 2006 and 2005. | | | | | Through Communiqué “A” 4,667 issued on May 14, 2007, as supplemented, the Central Bank introduced changes to the regulations related to the presentation and disclosure of the financial statements of financial institutions as regards the regulations effective during the prior year. Consequently, the consolidated financial statements as of December 31, 2006 and 2005, were reclassified, by application of such Communiqués, for the sole purpose of comparing them with the current consolidated financial statements. | | | | | See additionally notes 3.5) and 4.4.s). | | | 4.3. | | Restatement into constant pesos
| | | | | Professional accounting standards establish that the financial statements should be stated in constant pesos. Within a monetary stability context, the nominal currency is used as constant currency; however, during inflationary or deflationary periods, financial statements are required to be stated in constant currency as of the related date, recognizing the variations in the domestic wholesale price index (domestic WPI) published by the INDEC (Argentine Institute of Statistics and Censuses), in conformity with the restatement method under FACPCE Technical Resolution No. 6. | | | | | The Bank’s consolidated financial statements recognize the changes in the peso purchasing power until February 28, 2003, under Presidential Decree No. 664/03, IGJ (Argentine business associations regulatory agency) General Resolution No. 4/2003, CNV (Argentine Securities Commission) General Resolution No. 441, and Central Bank Communiqué “A” 3,921. Professional accounting standards provide that the restatement method established by Technical Resolution No. 6 should have been discontinued as from October 1, 2003. | | | | | Before February 28, 2003, the accounting information was restated in constant currency on a monthly basis, using INDEC’s domestic WPI measurements. | | | | | The restatement coefficient for a given month resulted from dividing the index value at the end of the month by the value at the beginning. |
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BANCO MACRO S.A. AND SUBSIDIARIES | 4.2. | | Comparative information |
The consolidated financial statements as of December 31, 2008, are presented comparatively with those of December 31, 2007 and 2006. Furthermore, the Bank made certain reclassifications in the consolidated financial statements as of December 31, 2007 and 2006, mainly by virtue of what was mentioned in note 4.4.l.2), so as to compare them with the current consolidated financial statements. Additionally, through Communiqué “A” 4,667 issued on May 14, 2007, as supplemented, the Central Bank introduced changes to the regulations related to the presentation and disclosure of the financial statements of financial institutions as regards the regulations effective during the prior year. Consequently, the consolidated financial statements as of December 31, 2006, were reclassified, by application of such Communiqué, for the sole purpose of comparing them with the current consolidated financial statements. See also notes 3.5) and 4.4.s). | 4.3. | | Restatement into constant pesos |
Professional accounting standards establish that the financial statements should be stated in constant pesos. Within a monetary stability context, the nominal currency is used as constant currency; however, during inflationary or deflationary periods, financial statements are required to be stated in constant currency as of the related date, recognizing the variations in the domestic wholesale price index (domestic WPI) published by the INDEC (Argentine Institute of Statistics and Censuses), in conformity with the restatement method under FACPCE Technical Resolution No. 6. The Bank’s consolidated financial statements recognize the changes in the peso purchasing power until February 28, 2003, under Presidential Decree No. 664/03, IGJ General Resolution No. 4/2003, CNV (Argentine Securities Commission) General Resolution No. 441, and Central Bank Communiqué “A” 3,921. Professional accounting standards provide that the restatement method established by Technical Resolution No. 6 should have been discontinued as from October 1, 2003. Before February 28, 2003, the accounting information was restated in constant currency on a monthly basis, using INDEC’s domestic WPI measurements. The restatement coefficient for a given month resulted from dividing the index value at the end of the month by the value at the beginning. The procedure is as follows: |