Report on Banks

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

Summary of the month

• The activity of the financial system grew at moderate rates during February 2010, sustaining the recovery evidenced in the second part of 2009, within the framework of the influence of certain seasonal factors. With respect to the provision of means of payment, the amount and quantity of cleared documents continues to improve with respect to a year ago, while the downward trend in the percentage of documents rejected due to lack of funds continues. Liquidity remains high and solvency indicators continue to improve.
• Although the operational infrastructure of the financial system has expanded slightly in recent months, there is still a lower relative availability of ATMs and subsidiaries in terms of an international comparison, while a high degree of regional concentration persists. The number of inhabitants per branch remains particularly high in some geographical areas, regardless of the size of the population of the localities covered.
• Deposits increased 0.5% in February (14.5% YoY), mainly due to public sector placements. Household and business deposits fell slightly in the month, due to the decrease in demand deposits partly associated with seasonal factors, partially offset by the increase in time accounts. In the year-on-year comparison, private sector deposits expanded 16% YoY, being channeled mainly to public banks (21.1% YoY) and private financial institutions with foreign capital (18.7% YoY).
• Liquidity remains high, although it declined in February, returning to the level of a year ago. The liquidity ratio (considering items denominated in domestic and foreign currency) stood at 29.8% of total deposits in the month, down 1.3 p.p. compared to January. The broad liquidity indicator (which includes the holding of Lebac and Nobac) stood at 43.2% of deposits, slightly less than in January, but above the value of February 2009.
• Credit to the private sector expanded 1.3% in February (8.6% YoY), mainly driven by private financial institutions. The monthly increase was generalized among the different credit lines. Bank financing to companies continued to grow (8.8% YoY), mainly for the construction, services and agricultural sectors, being mostly instrumented through documents and advances. On the other hand, financing to families has been growing 7.5% YoY with a significant contribution from consumer lines (personal and credit cards). There are significant relative differences in terms of the regional distribution of credit granted to households. The disparity persists considering these loans in relation to the estimated formal wage bill by region.
• The non-performing ratio of credit to the private sector fell to 3.4% in February. In recent months, the decline in the indicator was driven by loans for household consumption, while the irregularity of financing to companies remains stable. The NPL coverage ratio with forecasts reached 131%, 9 p.p. more than in February 2009.
• Solvency indicators continued to improve. Consolidated net worth expanded 1% in February, accumulating a 20.4% YoY increase. Relative growth in net worth continued to outpace that of assets, leading to a reduction in leverage levels. Capital integration at the systemic level stood at 19% of risk-weighted assets, representing an excess of capital integration equivalent to 102% of the regulatory requirement. The accounting results of the financial institutions as a whole reached 1.7% of assets in February, below the January figure as a reflection of lower profits in both private and public banks. In the first two months of the year, the accumulated profits of the financial system reached 2% of assets, slightly higher than in the same period of 2009.