Report on Banks

Thisreport analyzes the situation of the Argentine financial system on a monthly basis.

Summary

• The total balance of credit (in domestic and foreign currency) to the private sector grew 0.6% in April,
driven mainly by loans in foreign currency. In year-on-year terms (y.o.y
.), the increase in financing to firms (29.6% y.o.y.) exceeded that verified by credit to
households (24.8% y.o.y.) and accounted for more than 60% of the variation in total loans to the private
sector (27.6% y.o.y.). Financing to firms accounted for 56.8% of the total balance of loans to
the private sector, increasing their share by 1 percentage point (p.p.) in the last year.
• With respect to the fourth tranche of the Credit Line for Productive Investment (LCIP) –
corresponding to the first half of 2014 – preliminary information as of April indicates that loans have already been agreed for the equivalent of 45% of the aggregate target for this stage. It should be remembered that in
the first three tranches of the LCIP, loans for $56,773 million were disbursed.
• At the beginning of June 2014, the BCRA established a set of measures aimed at promoting the
bank financing for families under more favorable conditions and to promote the protection
of customers of financial services: (i) limits were set on the interest rates agreed on
personal and pledge loans to individuals; (ii) it was established the need to request authorization
from the BCRA to increase commissions and/or charges for basic financial products and services charged to bank customers; (iii) the way to express the Total Financial Cost of the loans was clarified and
(iv) the registration and provision of information on legal entities that access bank financing and that offer credit to individuals was required.
• The irregularity of credit to the private sector stood at 1.9% of total financing during
April, with no changes in magnitude compared to the previous month, and in line with the level recorded in the same
period last year. In the month,
the default on credit to households increased slightly to 3%, a movement mainly explained by consumer loans. On the other hand, loans to the productive sector
maintained their irregularity ratio at around 1.1%. The financial system maintained
comfortable levels of forecasting, with irregular portfolio coverage reaching 142.7% of it
.
• In year-on-year terms, the balance of deposits in pesos in the private sector expanded 30.1%,
mainly due to the performance of time placements, which grew 38% YoY. The balance of
private sector deposits in pesos grew 4.2% in April, with a similar relative monthly increase in time placements and demand accounts. Private sector placements in
foreign currency declined in the period, as did public sector deposits.
• The broad liquidity ratio – including LEBAC and NOBAC – increased slightly in the month, reaching a level of 42.3% of total deposits.
• The profitability of the financial system stood at 2.7% annualized (y) of assets in April, down from the previous month mainly due to the higher administrative expenses accrued
by the entry into force of the salary agreement for the sector. Accumulated accounting profits in the
last twelve months represented 4.2% of assets (year-on-year increase of 1.3 p.p.).
• The net worth of financial institutions as a whole increased 1.3% in April (41.6% YoY),
mainly due to accounting gains. On the other hand, the integration of regulatory capital in the financial system
totaled 13.8% of total risk-weighted assets (RWA) in April (12.8% in the case
of Tier 1). The excess of capital integration for all entities stood at 80% of the
regulatory requirement in April, increasing 6 p.p. compared to the previous month.