Report on Banks

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

Summary

• During February, the intermediation activity of financial institutions with the private sector maintained its upward trajectory. In particular, both the balance of loans to the private sector and that of deposits in this sector registered the highest year-on-year expansion rates in the last 4 years in the month.
• In February, financing to the private sector increased 2.4%. All credit lines increased in the month, with an outstanding performance of the advances, pledges, leasing and export financing segments. Thus, in the last 12 months, credit to the private sector increased 44% and came to represent almost 43% of the assets of the financial system. This increase was mainly driven by financing to companies, which verified a year-on-year expansion rate of 48%.
• The favorable evolution of financing to the private sector occurred in a context of low levels of credit risk. As a sign of this, the ratio of irregularity of financing to the private sector remained at an all-time low of 2% in February, verifying a fall of 1.4 p.p. in the last 12 months. The irregular portfolio of the financial system continued to show a high level of coverage with forecasts (174%).
• Total deposits in the financial system increased 2% in February. Private sector placements registered a monthly expansion of 1.7%, driven mainly by term deposits and, to a lesser extent, by demand accounts. For their part, public sector deposits increased 2.6% in the month, a movement explained by the growth of those with time deposits. In the last 12 months, total deposits in the financial system accumulated an expansion of 40.3%.
• Based on the lower integration of minimum cash, given the quarterly calculation (December-February) of the regulatory requirement, in February the liquidity indicator of the financial system, which includes items denominated in domestic and foreign currency, decreased by 1.3 p.p. of deposits to 27.3%. The broad liquidity indicator of the group of entities (which includes bills and notes of this Institution not linked to passes with the BCRA) decreased 0.9 p.p. of deposits in the month to reach a level of 44.6%, with decreases registered in all groups of financial institutions.
• The foreign currency mismatch (which includes forward purchases and sales of foreign currency) of the financial system increased slightly in terms of net worth in February to 29.4%. However, in year-on-year terms, this mismatch was reduced by 19 p.p. of net worth.
• The net worth of the consolidated financial system increased 0.8% in February, accumulating a 19.3% YoY increase. In the month, the expansion of net worth was mainly explained by accounting gains and, to a lesser extent, by new capital contributions. These changes were partially offset by an entity’s allocation of profit or loss to be distributed to shareholders. On the other hand, earnings accrued in February stood at 1.9% annualized (y) of assets, being lower than those of January. In the first two months of the year, the banks as a whole verified positive results equivalent to 2.4% of assets, 0.4 p.p. above those evidenced in the same period of 2010.
• The capital integration of the financial system stood at 17.4% of risk-weighted assets (RWA) in February and exceeded the regulatory requirement by 87%.