Report on Banks

Monthly report that analyzes the situation of the Argentine financial system.

Summary

• In April, the financial system continued to deepen the growth of its intermediation activity with companies and families. In this context, the operational structure of the financial system continued to expand. The number of ATMs grew 3.8% in the first quarter of the year, accumulating an expansion of 16% year-on-year (y.o.y.). For its part, in this same period the Central Bank approved the opening of 18 branches in localities with a lower level of banking penetration (tripling compared to the same period in 2010), while another 20 applications for openings are close to being approved. Likewise, in the first three months of the year, the number of personnel employed in the sector continued to increase: 0.6% compared to December 2010 and 3% YoY. These relative increases exceed those evidenced in the total employment of the economy.
• With the aim of promoting greater access to financial services for the population, the Central Bank has designed and is promoting the use of new instruments. At the beginning of June, the number of Universal Free Accounts (UGCs) exceeded 63,600 units. In addition, the BCRA reintroduced the Cancelling Cheque. As of May, operations with canceling checks were accumulated for almost $600 million. In addition, in March 2011, this institution approved regulations that allow for the immediate accreditation of bank transfers, a provision that was added to the measure aimed at reducing the costs of this type of operation taken in 2010. Thus, in May 2011, 823 thousand ($1,900 million) immediate transfers were made through the networks, while those made by the low-value camera amounted to 1.45 million (increasing 28% y.o.y.), totaling $17,200 million.
• The balance sheet of credit to the private sector grew 3.4% in April, 43% YoY, reaching almost 43% of the net assets of the financial system. While all groups of entities saw a monthly expansion in lending to the private sector, public banks were the most dynamic. Loans to companies increased 4% in April, accumulating 45.1% YoY (almost 7 p.p. more than loans to households). Industry stood out as the activity with the largest participation in the year-on-year expansion of the total balance of financing to companies. For its part, in April there was a slight decrease in the exposure of the financial system to the public sector, to a level of 10.7% of assets. Considering the funding obtained by banks through public sector placement, this sector continued to present a net credit position vis-à-vis financial institutions (equivalent to 11.8% of total assets).
• The expansion of financing to companies and households continued to develop in a context of limited credit risk. Thus, the irregularity ratio of financing to the private sector set a new all-time low of 1.8% in April, a monthly performance mainly driven by public banks.
• Total deposits expanded 2.8% in April (33.2% YoY), driven mainly by private sector placements, which increased 3.6% (34.1% YoY). In the month, private sector demand accounts grew 4.5% (36.7% YoY) and time deposits in this sector 2.2% (30.8% YoY). For their part, public sector deposits increased 0.9% in April (33.4% YoY). In this way, total deposits continued to increase their weighting in the total funding of the financial system. For its part, the funding cost for deposits in national currency of the financial system, estimated from the interest rates operated (weighted by the volume of transactions), remained stable in April compared to last month. The effect of the monthly increase in the cost of time deposits was offset by the higher volume traded in demand accounts. The cost of funding for total deposits in pesos decreased in the last 12 months.
• The liquidity indicator (national and foreign currency) stood at 27.1% of deposits in April, down 0.3 p.p. in the month (5.9 p.p. y.o.y.), in a context of significant credit expansion. The decrease in the indicator was mainly explained by private banks. The broad liquidity indicator (with Lebac and Nobac not linked to passes with the BCRA) also fell slightly in the month, reaching a level of 45.1%.
• The net worth of the consolidated financial system grew slightly in April, mainly due to accounting gains, which were largely offset by the distribution of dividends made by a group of entities. The year-on-year growth rate of net worth reached 17.8%. In the month, capitalizations were also made for around $50 million, totaling $450 million in the accumulated of 2011. The capital integration ratio of the financial system saw a slight increase in April to 16.8% of risk-weighted assets (RWA), mainly due to the performance of public banks. For their part, the banks as a whole maintained an excess of regulatory capital integration equivalent to 77% of the regulatory requirement.
• The accounting gains of the financial system stood at 2.6% of assets in April, down 0.4 p.p. compared to last month, mainly due to the lower financial margin. Thus, in the first 4 months of the year, the profits accrued by banks amounted to 2.6% of assets, slightly higher than those of the same period in 2010, with a notable improvement in public banks.