Report on Banks

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

Summary of the month

• By the end of 2011, financial intermediation continued to grow. In the month, banks slightly increased their liquidity indicators and earned accounting profits.
• Credit to the private sector grew 2.4% in December, driven mainly by cards, documents and mortgages. The non-performing ratio of credit to the private sector remained at low levels in the month, at around 1.4%.
• Total deposits in the financial system increased 2.9% in December. This growth was mainly due to private sector deposits (5.1%), mainly in the form of demand accounts (6.8%) – in line with certain seasonal behavior – and term deposits (3.7%). The broad indicator of liquidity of the financial system (considering items in pesos and foreign currency, as well as BCRA bills and notes) increased slightly in December, to 37.6% of deposits.
• In the month, the net worth of the consolidated financial system expanded 2.5% and the year closed with a level of capital integration in the order of 15.5% of risk-weighted assets (RWA). In an international comparison, this indicator was in line with the average for the region and above the average for developed countries. All bank groups had a surplus capital position. In December, the financial system accrued profits equivalent to 4.1% of assets, which were higher than in November, mainly due to increases in results from securities and interest income.

Summary of the year

• Throughout the year, the expansion of bank credit to the different productive sectors was significant, while time deposits from the private sector gained relevance in the total funding of the financial system. For their part, the measures to promote bank transfers explained their positive performance. The financial institutions as a whole closed the year with accounting profits and presenting high liquidity and solvency indicators. In 2011, the risks inherent in banking activity remained at limited levels.
• Throughout the year, financing to the private sector expanded 46.2%, 9.1 p.p. more than in 2010. Thus, the balance of credit balance to the private sector reached almost 14.5% of GDP at the end of the year, 2 p.p. more than at the end of 2010. Financing to companies accumulated the largest year-on-year increase, being mostly boosted by public banks. In 2011, loans to industry, commerce and construction were the most dynamic, with increases in the rate of credit expansion compared to 2010 in most productive segments.
• The non-performing ratio of lending to the private sector fell by 0.7 p.p. in 2011, a performance that was reflected in all groups of institutions. The financial system maintained a high level of coverage, with a level of forecasting equivalent to 171% of the irregular portfolio to the private sector in the month, 28 p.p. above the end of 2010.
• Private sector deposits grew 27.5% in 2011, mainly due to the behavior of term loans (29.4%), which increased their participation in the total funding of the financial system. In a context of significant expansion of credit to the private sector, the broad liquidity indicator fell by 6.8 p.p. in 2011. From high levels, all bank groups reduced this indicator throughout the year.
• In order to increase the population’s access to financial services, since the end of 2010 the costs of transfers have been reduced and since April 2011 the immediate accreditation of transactions carried out by electronic means has been implemented. From this momentum, bank transfers presented a positive performance. The annualized amount of minor and immediate transfers made came to represent 15.5% of GDP, about 6 p.p. more than at the end of 2010.
• The net worth of the consolidated financial system accumulated an increase of 21.8% in 2011 that was mainly fed by accounting profits. Capitalizations made in 2011 totaled almost $1,000 million, thus surpassing the record of the last 3 years. Considering the international situation, recently and effective as of February 2012, the BCRA established new measures aimed at further strengthening the solvency standards of banks. In particular, a capital requirement was established for operational risk coverage and the capital conservation limit (buffer) prior to the distribution of profits was extended.
• Throughout the year, the banks as a whole obtained accounting profits of 2.7% of assets, thus closing the seventh consecutive year with positive results. All bank groups posted profits in 2011.