Report on Banks

Executive summary

• In April, the financial system provided the intermediation service for funds, maintaining ample liquidity, forecasts and capital coverage. The total balance of bank credit provided to the private sector did not show significant changes with respect to the previous month when expressed in real terms, maintaining a heterogeneous performance between currencies: while the segment in pesos fell, although at a slower pace than in previous months, the increase in the balance of financing denominated in foreign currency was maintained.

• In April, the real balance of credit to the private sector in pesos decreased by 0.9% (+8.5% YoY), with an increase in the segment with real collateral and a decrease in commercial and consumer goods. The monthly reduction in the credit balance in pesos was relatively smaller than that verified on average during the first three months of the year. In April, the balance of credit to the private sector in foreign currency increased by 5% (+59.9% YoY). The real balance of total financing to the private sector (in domestic and foreign currency) remained unchanged compared to March (-0.2% and +14.7% YoY).

• The non-performing loan ratio to the private sector stood at 7.3% in April, 0.3 p.p. more than in March. The NPL indicator for financing to households totaled 12.1% in the month, slowing down its monthly rate of increase largely due to the decrease in the growth rate of the real balance in an irregular situation (numerator of the indicator). The ratio of non-performing loans to companies reached 3.3% in April. The estimated probability of default (EDP) – approximated based on the dynamics of the transition of debtors from regular to irregular – for the private sector fell for the third consecutive month in April, to 2.6%. This behavior of the EDP was observed both in credit to households and to companies. In terms of coverage, the total forecast balance of all financial institutions stood at 87.6% of the portfolio in an irregular situation and 6.4% of the total credit balance to the private sector.

• The real balance of deposits in pesos increased 1.7% in April (+0.6% YoY). Demand deposits presented a mixed performance in the month: increase in non-interest-bearing accounts and fall in interest-bearing accounts; while time deposits increased in the period. In April, the balance of deposits in foreign currency of the private sector grew 1% – in source currency – (+28.2% YoY).

• Systemic liquidity in national currency, considering only availabilities, remained at around 12.8% of deposits in this denomination in April. When incorporating the public securities used for the integration of minimum cash and short-term net active operations in pesos remunerated with the BCRA, this indicator reached 31.5% of deposits in national currency (-3 p.p. compared to March). On the other hand, aggregate liquidity in foreign currency decreased by 5.7 p.p. of deposits in this denomination in the month, reaching a level of 51.8%.

• The financial system registered high and increasing levels for its solvency indicators. In April, the capital integration (RPC) of the financial system increased 0.7 p.p. of risk-weighted assets (RWA) to 31.1%. Excess capital integration (above what is required by regulations) totalled 286.1% of the requirement (+9.3 p.p. monthly) and 37.2% of credit to the private sector net of forecasts (+0.3 p.p. monthly).

• Considering the accumulated of three months to April, the profitability of the financial system was equivalent to 1.3% annualized (a.) of assets (ROA), increasing compared to previous months.