Executive summary
• In August, financial intermediation with the private sector continued to grow. The monthly increase in credit to firms and households outpaced the increase in private sector deposits, leading to a decrease in surplus systemic liquidity. The non-performing ratio of loans to the private sector remained at moderate levels in the period, with high aggregate coverage of provisions and capital for all financial institutions.
• The real balance of financing to the private sector in pesos increased 6.5% in August – with increases in all credit segments and groups of financial institutions – accumulating an expansion of 39.3% since the end of April. The balance of financing in foreign currency also grew in the month (4.3% in foreign currency). Thus, the real balance of total credit to the private sector (in domestic and foreign currency) accumulated an increase of 5.9% in August, reflected in both loans to companies (6.5% in real terms) and to households (5.4% in real terms).
• The non-performing loan to the private sector ratio stood at 1.6% in August, remaining unchanged from July (-1.5 p.p. y.o.y.). The NPL ratio for loans to companies reached 0.8% (-2.4 p.p. y.o.y.), while that corresponding to loans to households remained at 2.7% (-0.5 p.p. y.o.y.). The estimated balance of forecasts attributable to the irregular portfolio covered the entire portfolio at the aggregate level (106.1% in August).
• The balance of deposits in pesos of the private sector increased by 0.7% in real terms in the month. The balance of time deposits increased 4% in real terms compared to July, more than offsetting the 1.9% real drop in demand accounts. The balance of deposits in foreign currency of the private sector grew 4.2% (in currency of origin), mainly explained by the inflow of funds under the Asset Regularization Regime. Total private sector deposits (in domestic and foreign currency) grew 1% in real terms in the month.
• In August, the broad liquidity indicator of all financial institutions totaled 43.6% of total deposits, 2.6 p.p. less than in July. The performance of liquidity between the end of the month was explained by the segment in national currency and was mainly due to the reduction in the holding of LEFI, within the framework of the increase in financing to the private sector. Taking into account only the availabilities (in domestic and foreign currency), the liquidity ratio reached 24.3% of total deposits in the period.
• The financial system maintained high levels of solvency in August. In the month, the regulatory capital (RPC) of all entities represented 36.6% of risk-weighted assets (RWA), 1.5 p.p. more than the previous month. The excess regulatory capital of the financial system represented 359% of the regulatory requirement in August.
• In recent months, there has been a moderation in the earnings accrued by the financial system, reflected in most groups of entities. The cumulative return of the sector in the last 3 months to August was equivalent to 3.4% annualized (a) of assets (ROA) and 12.4% y. of net worth (ROE), being lower records than those verified in the previous months. These profitability levels are also lower than those obtained for the cumulative period of 12 months: 6.6% ROA and 26.5% ROE.
• In August, electronic means of payment continued to grow. Immediate transfers (TI) increased 11.7% in number of operations (106.9% YoY) and 9.1% in real amounts (50.2% YoY). The ECHEQs continued to increase their share of the total number of documents cleared, covering 49% of the amount and 75% of the amounts traded in August.
I. Financial intermediation activity
In August, the intermediation activity of the financial system with the private sector continued to grow. Taking into account the variations – in real terms – of the main items of the balance sheet in pesos of the set of financial institutions, in the month the most relevant source of resources for the sector was the reduction in liquidity1, followed by the increase in the balance of private sector deposits. For its part, in the period, the increase in the real balance of financing to the private sector was the main application of funds. In relation to the foreign currency segment, the balance of private sector deposits grew in August, offset by an increase in the balance of liquid assets and credit to the private sector.
The real balance of credit in national currency to the private sector increased by 6.5% in August, accumulating four consecutive months of growth (see Chart 1)2. The performance in the period was mainly explained by consumer loans (8% real) and, to a lesser extent, by commercial lines (6.1% real) and with real collateral (4.5% real)3.
The increase in the real balance of credit in pesos to the private sector in the last four months (accumulating 39.3% growth between the end of April and August 2024) was widespread among groups of financial institutions (see Chart 2). In particular, within the commercial lending segment, public banks were the most dynamic in this period. For their part, in the consumer loan segment, the EFNBs showed outstanding relative growth in this period, followed by public banks.
Graph 1 | Balance of credit to the private sector in pesos
Monthly changes in real terms*
Graph 2 | Graph 2 | Balance of credit to the private sector in pesos
In real terms – By credit segment*
In relation to loans with collateral, the dynamism of recent months was mainly reflected in national private banks and in the EFNBs. Within this credit segment, it should be noted that mortgages have been regaining momentum (the total balance in pesos increased 1.1% in real terms in the month – including principal and adjustment of loans in UVA – and 10.8% if only the capital component is considered)4.
The balance of financing in foreign currency grew 4.3% between the peak of the month (see Graph 3) – in the currency of origin. The monthly performance was mainly explained by documents (about two-thirds of the increase in the period) and reflected mainly in private banks5.
Graph 3 | Financial intermediation with the private sector in foreign
currency In source currency
In this context, the real balance of total loans (in domestic and foreign currency) to companies and households increased by 5.9% on August6. Distinguishing by debtor, the real balance of total credit to companies increased 6.5% between peak times at the aggregate level. Monthly growth was widespread among economic sectors, with loans to primary production and trade (12.5% and 8.1% in real terms, respectively; see Figure 4). On the household side, the balance of total financing grew 5.4% in real terms in the period, mainly explained by personal loans (15.4% in real terms in the month). Based on the positive performances verified in recent months, in August the real balance of total credit (national and foreign currency) to the private sector practically reached the level verified 12 months ago (-0.3% y.o.y.).
Figure 4 | Real balance of total credit to the private sector*
By credit segment – Financial system
With respect to funding in the financial system, in August the balance of deposits in pesos in the private sector increased by 0.7% in real terms (see Graph 5). The balance of time deposits increased by 4% in real terms, more than offsetting the 1.9% real fall in demand accounts7. Within the time deposit segment, time investments were the most dynamic in period8.
Graph 5 | Balance of private sector deposits in pesos
Changes in real terms*
In August, the balance of deposits in foreign currency of the private sector increased 4.2% compared to the previous month – in currency of origin – a performance mainly explained by the entry of funds into the financial system within the framework of the Asset Regularization Regime established by Law 27,743 and its regulations. The increase in the real balance of total private sector deposits was almost offset by a fall in public sector deposits, causing the total real balance of deposits (all sectors and currency) to remain significantly unchanged in the month (0.2% in real terms)9.
II. Evolution and aggregate composition of the balance sheet
In August, the total assets of the financial system in real terms did not show significant changes compared to July, accumulating a year-on-year decrease of 14.6%.
With regard to the components of assets, in August the share of credit in pesos to the private sector in the total increased again, in line with the dynamism of financial intermediation recently observed (see Section I and Graph 6). On the other hand, the month saw a reduction in the relevance of LEFI holdings, the balance of availabilities and current accounts at the BCRA in national currency, as well as financing to the public sector (excluding LEFI). With respect to the items that make up the total funding of the sector, in the month the weighting of term placements in pesos of the private sector increased mainly, while the demand accounts in pesos of the same sector reduced their relative importance.
Graph 6 | Composition of assets and funding Financial
system – Participation %
In August, the estimated positive spread between assets and liabilities in foreign currency10 of the financial system was equivalent to 11.4% of the PRC, reducing by 2.7 p.p. in the month (-28 p.p. y.o.y., see Chart 7). The monthly fall in the indicator was explained by the decrease in the relative weight of availabilities and public securities in foreign currency, in a context in which the reduction in the weighting of private sector deposits was relatively smaller. On the other hand, it is estimated that the spread between the items of assets and liabilities in pesos with capital adjustment by CER (or that are agreed in UVA) totaled 101.4% of the regulatory capital of the financial institutions as a whole, 5.9 p.p. below the July figure (+38.9 p.p. y.o.y.). The lower weighting of government securities adjustable by CER explained the monthly performance of this indicator.
Figure 7 | Spread between assets and liabilities
In % of PRC
III. Portfolio quality
In August, the total credit balance (in domestic and foreign currency) to the private sector represented 30.8% of assets, 1.7 p.p. above last month’s value (+4.4 p.p. y.o.y., see Chart 8). The monthly performance of the indicator occurred in a framework in which the real balance of credit to the private sector grew in the period (see Section I) and total assets remained without significant variations in homogeneous currency (see Section II). The level of this indicator is still moderate when compared to the record of other economies in the region (see Chart 8).
Figure 8 | Credit balance to the private sector in terms of assets
When differentiating by currency, the financial system’s exposure in pesos to the private sector reached 26.5% in August, 1.6 p.p. more than in July (+2.7 p.p. y.o.y.). For its part, the share of credit in foreign currency stood at 4.3% of assets, remaining unchanged in magnitude compared to last month (+0.1 p.p. monthly and +1.7 p.p. y.a.) When deducting the balance of forecasts, in August financing to the private sector totaled 29.9% of assets (+1.7 p.p. in the month p.p. and +4.6 p.p. y.o.y.).
In August, the non-performing ratio of credit to the private sector stood at 1.6%, remaining unchanged from July (-0.1 p.p. monthly and -1.5 p.p. y.o.y.). The indicator of non-performing loans to companies did not change in magnitude in the month either, standing at 0.8% (-0.1 p.p. in the month and -2.4 p.p. y.o.y.), in a scenario of an increase in the denominator and a fall in the numerator in real terms (see Graph 9). Meanwhile, the NPL ratio of loans to households remained at around 2.7% (no change in magnitude in the month and -0.5 p.p. y.o.y.; see Graph 10), in a context of real increase in both the numerator and denominator11.
Figure 9 | Irregularity of credit to companies
In real terms — Financial system
Figure 10 | Irregularity of credit to households
In real terms — Financial system
In August, the financial system continued to show high levels of forecasting. The balance of accounting forecasts reached 170.2% of financing in an irregular situation, increasing 7.2 p.p. in the month (+46.9 p.p. y.o.y.). The estimated balance of forecasts attributable to the portfolio in an irregular situation covered the entire portfolio at the aggregate level (106.1% in August)12.
IV. Liquidity and solvency
From high levels, ample liquidity13 of the financial system continued to decline in August in the context of the dynamism of credit to the private sector. In the month, the broad liquidity ratio fell in all groups of financial institutions, reaching 43.6% of deposits at the systemic level (see Chart 11)14. The reduction in liquidity between peak months was driven by the segment in local currency and was mainly due to a lower holding of LEFI. When considering exclusively the availabilities, in August the liquidity indicator totaled 24.3% of deposits at the systemic level, 0.4 p.p. less than in July and 4.9 p.p. higher than the level observed a year ago.
Figure 11 | Liquidity
indicators As % of deposits
During the month, the financial system maintained comfortable levels of solvency. In August, capital integration (RPC) of the aggregate group of entities represented 36.6% of risk-weighted assets (RWA), 1.5 p.p. more than last month (see Chart 12). This performance reflected the effect of a monthly increase of 6.2% in real terms in regulatory capital, relatively higher than the monthly increase in RWAs (2% in real terms). The monthly increase in the PRC was mainly due to the incorporation into capital of the totality of the profits accrued in the last months15. In this context, in August the excess capital of the financial system totaled 359% of the regulatory requirement and 62.8% of the balance of credit to the private sector net of forecasts. The leverage of the group of entities did not change in magnitude in the month, standing at historically low levels: currently the total assets of the sector represent only 3.6 times the net worth (1.5 times less than a year ago and practically half of the average of the last 10 years).
Figure 12 | Regulatory Capital and Leverage
Financial System
With regard to the profitability of the financial system, in recent months there has been a moderation in earnings earnings, reflected in most groups of entities (see Chart 13). This performance was mainly reflected in the effect of a lower nominal financial margin (reflected in a decrease in the result of securities, CER adjustment and premiums for passes; partially offset by lower interest expenses), tempered by a reduction in monetary losses (lower inflation levels) and tax expenditures. Thus, in the accumulated 12 months to August, the results – comprehensive and measured in homogeneous currency – accumulated by the aggregate of entities were equivalent to 6.6% of assets (ROA) and 26.5% of equity (ROE), indicators that have also been reducing in recent months16.
Figure 13 | Cumulative ROA (3 and 12 months)
By group of financial institutions
V. Payment system
In August, immediate transfers (TI) showed significant growth compared to the previous month: 11.7% in the number of operations and 9.1% in real amounts (see Chart 14). In year-on-year terms, the amount of IT more than doubled (106.9%) and the amounts operated expanded 50.2% in real terms. Year-on-year dynamics were driven by transactions between bank accounts (from CBU to CBU) and between accounts in payment service providers (from CVU to CVU)17, 18, 19. In the last 12 months, IT almost doubled its weight in the economy, representing approximately 105.3% of GDP.
Figure 14 | Instant Transfers (TI)
In the month, Payment with Transfer (PCT) operations through QR codes were reduced, both in amounts and in real amounts. Notwithstanding the monthly performance, these operations accumulated a year-on-year increase of 185% in quantities and 142.1% in real amounts20. Although it starts from limited levels, it is estimated that PCTs with QR grew 1 p.p. of GDP in the last year to total 1.4%.
In August, the clearing of checks decreased compared to July (-8.6% in amounts and -7.9% in real amounts)21. In this context, ECHEQs continued to gain share, covering 49% of the number of operations and 75% of the actual amounts (see Graph 15). For its part, in the month, the rejection of checks due to lack of funds in terms of the total compensated presented a mixed performance: it fell to 0.4% in terms of amounts (below the annual average) and increased slightly to 0.65% in the number of operations (above the average for 2024).
Figure 15 | Check clearing
References
1 This is mainly explained by the decrease in the real balance of the holdings of Fiscal Liquidity Bills (LEFI) and, to a lesser extent, by the fall in the real balance of current accounts at the BCRA.
2 Includes principal adjustments and accrued interest
3 The balance of financing in pesos to the private sector decreased by 5% YoY in real terms at the systemic level.
4 In particular, it is estimated that in August, 834 new mortgage debtors (“registrations” of individuals) were incorporated into the financial system (exceeding the monthly average of the last 4 years), almost all of them through instruments denominated in UVA.
5 The balance of financing in foreign currency to the private sector increased by 77.8% YoY (in currency of origin).
6 Financing to companies is defined here as that granted to legal entities and commercial financing granted to natural persons. On the other hand, loans to families are considered to be those granted to individuals, unless they are for commercial purposes.
7 The monthly decrease in the real balance of demand deposits was explained by the performance of the non-interest-bearing segment.
8 The real balance of private sector deposits in pesos fell by 31.8% YoY in the month, with decreases in the term and demand segments.
9 In August, the balance of total deposits (all currencies and sectors) accumulated a fall of 23.9% YoY in real terms.
10 Includes off-balance sheet foreign currency purchase and sale transactions. Liabilities include deposits that have variable remuneration depending on the evolution of the exchange rate – associated with the Export Increase Programme – and LEDIV are included in assets.
11 Irregular financing of loans to households in UVA totaled 1.2% of the total portfolio in August, in line with last month’s level (-0.2 p.p. y.a.). The NPL ratio of UVA mortgage loans to families remained at 1% in the month.
12 Corresponds to the balance of total net forecasts of the minimum regulatory forecasts for debtors in situations 1 and 2, following the criteria of the minimum regulatory forecasts for risk of uncollectibility.
13 Considers availabilities (cash and current account at the BCRA), Fiscal Liquidity Bills (LEFI), pass operations against the BCRA (until June 2024), holding of BCRA instruments, and the balance of the types of public securities that the entities compute for the integration of Minimum Cash.
14 When additionally considering the holding of LECAP with a residual term of less than 3 months, the broad indicator of systemic liquidity would reach 54.7% of total deposits.
15 It should be remembered that until positive results are audited, only 50% are recognized. For more details see TO Minimum capitals.
16 However, in a year-on-year comparison, the ROA accumulated in 12 months increased by 2.9 p.p. This year-on-year performance was mainly due to an increase in the financial margin (items linked to the result of securities and pass operations), an effect partially offset by higher losses due to exposure to monetary items and tax expenses, among other items.
17 In year-on-year terms as of August, the number of transfers between CVUs increased 110.5% (96.0% in real amounts), while those between CBUs grew 175.3% (53.8% in real amounts). On the other hand, CBU-to-CVU operations registered an increase of 104.5% YoY (60.8% YoY in real amounts), while CVU-to-CBU operations grew more moderately, 15.3% YoY (25.1% YoY in real amounts).
18 Of the total amount of IT carried out in August, 46.1% (+11.5 p.p. y.a.) corresponded to the universe of bank accounts (CBU to CBU), 30.3% (-0.4 p.p. y.o.y.) to CBU to CVU operations, 9.5% (+0.2 p.p. y.o.y.) between CVU accounts and 14.2% (-11.3 p.p. y.o.y.) in CVU to CBU transactions.
19 In August, the average value of immediate transfers (TI) was $83,150. Inter-bank IT (CBU to CBU) averaged $123,864, followed by CVU-to-CBU with an average of $92,227, CBU-to-CVU with $33,743, and finally, inter-CVU IT reached an average of $29,235.
20 In August, interoperable QR transactions averaged $13,100.
21 In August, the average amount of cleared checks was $2.4 million ($1.2 million in the physical format and $3.8 million in ECHEQs).
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