Report on Banks, February 2023

• In February, financial intermediation with the private sector decreased, partly driven by seasonal factors. The liquidity and solvency indicators of the aggregate financial system grew slightly during the period, remaining at historically high levels compared to the average recorded in the last ten years.

• Electronic means of payment exhibited a particularly dynamic year-on-year (y.o.y.) performance in the beginning of 2023. In February, instant transfers increased 60.2% y.o.y. in volume and 7.2% y.o.y. in value in real terms. Payments by transfer initiated through an interoperable QR code also increased almost fivefold in y.o.y. terms. ECHEQs continued gaining share in cleared checks in February—35.1% in volume and 60% in value.

• The stock of financing in pesos to the private sector decreased 1.7% in real terms in February, in part due to the seasonal effects of the beginning of the year (-12.8% y.o.y. in real terms). The estimated stock of loans granted through the Credit Line for Productive Investment (Línea de Financiamiento para la Inversión Productiva, LFIP) reached ARS1.3 trillion as of February, explaining 13.8% of the total stock of loans to the private sector (+1.9 p.p. y.o.y.).

• In February, the non-performance ratio of loans to the private sector stood at 3.2% (-1 p.p. in y.o.y. terms). The delinquency rate of loans to households stood at 3.1% in the period, while the rate for loans to companies totaled 3.3%. The loan loss provisions of the financial system remained particularly high, amounting to 4.1% of total credit to the private sector and 127.2% of the non-performing loan portfolio.

• The stock of private-sector deposits in pesos decreased 1.1% during the month in real terms (+1.9% y.o.y. in real terms). In February, sight accounts increased 2.2% in real terms, while the stock of time deposits fell 4% in real terms. This was partly explained by the migration of time deposits to interest-bearing sight deposits carried out by certain institutional investors. The situation reversed in March after the rise of the benchmark interest rates and rates on time deposits implemented by the BCRA.

• In February, liquid assets in a broad sense in the financial system reached 76.3% of total deposits, up 0.7 p.p. against January, and 8.5 p.p. y.o.y.

• The solvency indicators of the sector posted a monthly increase. Financial institutions' regulatory capital (responsabilidad patrimonial computable, RPC) compliance stood at 31.1% of risk-weighted assets (RWAs), up 1.1 p.p. against January (+4.4 p.p. y.o.y.). The capital position (RPC minus the minimum regulatory requirement) totaled 289.3% of the regulatory requirement at systemic level (+56.4 p.p. y.o.y.), and 46.4% of the stock of loans to the private sector net of provisions.

• In the past 12 months to February, the total comprehensive income in constant currency was equal to 2.1% of assets (return on assets (ROA)) and 11.9% of the net worth (return on equity (ROE)). The increase of these indicators in y.o.y. terms was mainly explained by a higher financial margin, despite the increase of losses due to exposure to monetary items and tax burden.

Report (full text) - in Spanish -

April 19, 2023