Report on Banks

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

Summary of the month

• In December, the total balance of credit to the private sector (in domestic and foreign currency) expanded 4.8%, being one of the most important monthly growths in the last 2 years. Loans in pesos increased 5.3% in the period, while loans in foreign currency continued to decline. The dynamics of financing to the private sector at the end of 2012 was mainly driven by loans to companies, expanding in the period by 6.4% (the highest monthly increase in the last 8 years). On the other hand, loans to families increased 3%, showing improvements in all lines.
• Total deposits (in domestic and foreign currency) in the financial system grew 3.3% in the month, with a strong expansion of private sector deposits that increased 6.4%. The increase in private sector placements in pesos was mainly driven by demand accounts (8.7%) and, to a lesser extent, by term accounts (3.6%).
• The liquidity indicator (in domestic and foreign currency) stood at 26.9% of deposits, with a slight reduction of 0.4 p.p. in December. Liquidity in its broad definition (which includes the holding of LEBAC and NOBAC) also decreased (-1.1 percentage points -p.p.)) to 38.7% of deposits, in a context of sustained credit dynamism.
• The net worth of the financial system grew 2.2% in December and ended 2012 with a capital integration level of 17.1% of credit risk-weighted assets (RWA). The excess of capital integration above the regulatory requirement reached 59% of the requirement, reducing 3 p.p. in the month as a result of the progress in the implementation scheme of the capital requirement for the coverage of operational risk. The accounting profits of the financial system increased 0.4 p.p. of total net assets in December to 3.2% annualized (y), driven by higher results for interest and securities.

Summary of the year

• In 2012, financing to the private sector (in domestic and foreign currency) accumulated a growth of 31%, mainly supported by the granting of loans in pesos (41.4% YoY). Lending to companies expanded by 30.8% YoY, with a significant increase in the contribution of public banks to this variation (it contributed 42.1% of the total year-on-year expansion of this credit segment). In particular, in the second half of 2012 there was an acceleration in the growth of financing to companies, mainly as a result of the Credit Line for Productive Investment, reaching an expansion of 43.4% (higher than that registered for lines to families in the order of 36%).
• The Credit Line for Productive Investment exceeded the goal set for 2012 with respect to the total amount of loans to be placed (which amounted to $14,930 million), obtaining a total disbursement of $16,763 million as of December. When the placement of the loans agreed in tranches is completed, the total will amount to $17,993 million, exceeding the originally established target by 20%. It is estimated that the loans granted through this line, during the second half of 2012 and the first half of 2013, will represent approximately 1.5% of GDP. For its part, within the framework of the Bicentennial Productive Financing Program, the BCRA has held 20 auctions of funds for a total of $6,184 million; 68% of this amount has already been credited.
• Throughout 2012, the use of tools to expand the population’s access to financial services, such as the Universal Free Account (CGU) and transactions carried out through electronic means of payment, increased. In the second half of the year, the cumulative value of transfers with immediate crediting of funds expanded 120% YoY (72% YoY in terms of amounts), reaching 7.2% of GDP, almost double the number of transfers made a year ago.
• The irregularity ratio of financing to the private sector stood at 1.7% in December 2012, slightly above that observed 12 months ago. This indicator remains at a relatively low level in terms of both historical and international comparison. The financial system closed the year with high levels of forecasting.
• Private sector deposits in pesos increased 40.7% in the year, mainly due to the expansion of time accounts (49% YoY). The latter accounted for 38.9% of the total balance of private sector loans in December 2012 (with a year-on-year growth of 4.9 p.p.). During the last year, the broad liquidity indicator of the financial system (which includes the holding of LEBAC and NOBAC) showed an increase of 1.1 p.p.
• The net worth of banks closed 2012 with an annual increase of 29.7%, as a result of accounting profits and, to a lesser extent, capital contributions. In 2012, capital integration grew by 1.5 p.p. of RWA, unlike in 2011, when this indicator fell by 2.1 p.p. Since February 2012, the schedule to integrate the capital requirement to cover operational risk began to be implemented, leading to a reduction in the excess of capital integration of the financial system over and above this requirement, in a framework where all groups of banks continued to present a surplus capital position.
• Between January and December 2012, the financial system earned 2.9% of assets, 0.2 p.p. more than the previous year. All bank groups increased annual profitability ratios. In 2012 the i