Report on Banks

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

Summary

• In August, the balance of credit to the private sector increased by 2.6% (30.7% YoY), driven by financing in national currency (3.7% or 40.8% YoY). All credit lines in pesos grew, with commercial and cards being the most dynamic. Total financing to the private sector continues to gain depth in the economy, with a ratio of credit to GDP close to 16% – 3.3 p.p. higher than at the end of 2010 – and with 91% of loans denominated in pesos. Loans to households and companies expanded by 3.1% (37.4% YoY) and 2.1% (25.9% YoY) in the period, respectively.
• Within the framework of the Bicentennial Productive Financing Program, aimed at promoting the supply of credit for productive investment, the BCRA has awarded $5,128 million, of which the participating entities credited $3,513 million to companies. In addition, the BCRA implemented a new line of credit for productive investment in early July. Banks with the largest participation in the system must allocate at least an amount equivalent to 5% of their private sector deposits in pesos to investment loans, and must grant at least half of that amount to MSMEs.
• The non-performing ratio of total credit to the private sector remained stable for the fourth consecutive month at around 1.7%, being a low level both in historical and international comparison. In August, non-performing loans to companies represented only 1% of total loans to this sector, while it reached 2.7% in loans to households. The system continues to maintain a high coverage with forecasts for loans to the private sector in an irregular situation (150%).
• The balance sheet of total deposits (domestic and foreign currency) of the banks as a whole expanded 3.1% in August. In the last 12 months, the increase in total deposits was 20.7%, explained by the increase in placements in pesos by the private sector (36.2% YoY), especially those that are term, which showed an increase of 48.8% YoY.
• Recently, the Central Bank ordered the readjustment of the Minimum Cash regulations in accordance with the different objectives established in the new Organic Charter. In particular, the changes in reserve requirements are aimed at stimulating credit and establishing differential policies for micro, small and medium-sized enterprises and for regional economies, promoting greater geographical coverage and covering areas with less relative development. In order to deepen the incentives to expand the geographical coverage of the system, the BCRA introduced modifications to the mechanism for authorizing the installation of branches and decided to adjust the basic capital requirement for entities according to the area of establishment of the parent company. In addition, the zoning scheme of the Argentine territory was reformulated to use a better characterization of the localities in terms of economic development.
• The broad liquidity indicator for the aggregate of the financial system (in domestic and foreign currency, including holdings of LEBAC and NOBAC) remained at levels similar to those of July, reaching 39.3%. The liquidity ratio that excludes the holdings of bills and notes of this Institution remained constant at 25.3% of deposits in August.
• Electronic means of payment have been evolving positively. The amount and amount of immediate transfers grew 68% YoY and 134% YoY, respectively. For its part, the amount of direct debits for the payment of services – electricity, natural gas, healthcare fees, credit cards, etc. – increased 49% YoY (7% YoY in amounts).
• The net worth of the consolidated financial system expanded 2% in August (31.2% YoY), mainly due to accounting profits. In the last 12 months, the relative growth of net worth exceeded the expansion of assets at the aggregate level. As a result, leverage was reduced at the aggregate level and across all bank groups. Given the significant dynamism of credit to the private sector, capital integration in the financial system decreased slightly in August to reach 16.6% of credit risk-weighted assets (RWA). For its part, the excess capital integration of all financial institutions stood at 61% of the regulatory requirement.
• In August, the system accrued gains equivalent to 2.9% of assets, in line with the annual average. Throughout 2012, ROA increased by 0.4 p.p. compared to the level of the first 8 months of 2011.