Report on Banks

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

Summary

• In February, credit and means of payment continued to expand, although at a slightly more moderate pace, typical of the summer recess. The financial system maintained high levels of liquidity and accounting gains drove improvements in solvency ratios.
• At the beginning of 2012, banking penetration continued to expand in areas of the country with less availability of financial services. In particular, in the first quarter of the year, the opening of 5 new bank branches was approved in areas with a lower relative level of banking infrastructure, in addition to the 67 approved throughout 2011 in these regions (68% of the net opening of subsidiaries last year). This boost was due to the criterion adopted since 2011 by the BCRA by which the opening of subsidiaries in towns with greater availability of financial infrastructure is authorized if the request is accompanied by an identical proposal by the entity for areas with a lower level of banking penetration.
• The increase in private sector deposits was the most prominent source of resources in the month, with these funds being applied mainly to the increase in credit to the private sector. In February, the rise in private sector time deposits (2.3% month-on-month or 31.7% year-on-year) explained most of the growth in private sector deposits (2% in the month or 27.6% y.o.y.).
• The broad liquidity indicator of the banks as a whole (including items in domestic and foreign currency and covering the holdings of LEBAC and NOBAC) increased for the third consecutive month (0.2 p.p. in February), to 40.1% of total deposits. This increase was mainly explained by greater passes with the BCRA and by the increase in the bills and notes of this Institution in the bank portfolio, in a month in which the integration of minimum cash was reduced within the framework of the closing of the quarterly calculation period (December-February) of the reserve requirements. In a year-on-year comparison, the level of the broad liquidity indicator fell by 4.6 p.p. of deposits.
• Credit to the private sector expanded 1.6% in the month (43.3% YoY), driven by advances. The positive monthly performance was mainly driven by public and national private banks. Financing to companies rose 1.7% in February (42.5% YoY), with increases in loans to all productive branches. Credit to companies accounted for almost 56% of the year-on-year growth in loans to the private sector and reached a similar share in the total balance. Most of this expansion in lending to firms was explained by private banks, although public banks increased their contribution to the growth of financing to this sector. On the other hand, credit to households grew 1.5% in the month (44.5% YoY).
• In the first months of the year, lending rates operated in pesos fell at a more marked rate than the cost of funding deposits in the same currency, generating a decrease in spreads in all groups of financial institutions.
• The non-performing ratio of financing to the private sector remained stable in February, at around 1.5%. In the month, this indicator increased slightly in private banks and in EFNBs, while it remained the same in public banks. In the last 12 months, this indicator accumulated a decrease of 0.5 p.p. The coverage ratio of the portfolio to the private sector in an irregular situation with accounting forecasts stood at 159% in February, above the value evidenced a year ago. All groups of institutions maintained a high level for the coverage indicator.
• The net worth of the consolidated financial system increased 2.2% in the month (23.6% YoY), mainly due to accounting profits. In February, two banks received capital contributions totaling $60 million. The capital integration of the banks as a whole grew in the month by 0.2 p.p. of risk-weighted assets (RWA) to 16%. The excess of capital integration in relation to the regulatory requirement remained unchanged compared to January, at around 67%.
• The financial system accrued gains of 2.7% of assets in February, showing an increase compared to the previous month due to higher positive results for securities and lower administrative expenses and charges for uncollectibility. In the first two months of the year, banks recorded an ROA of 2.7%y, 0.3 p.p. more than 12 months ago, mainly due to an increase in interest and services earnings. In year-on-year terms, all banking groups improved their accounting results.