Report on Banks

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

Summary

• Financial intermediation activity and the provision of means of payment expanded in February. During this period, the aggregate financial system maintained limited exposures to the main risks associated with its activity, while maintaining ample coverage of them.
• In February, financing to the private sector (in domestic and foreign currency) expanded 0.8% (30% YoY). Loans in pesos continued to boost financing to the private sector, increasing 1.1% (40.5% YoY) in the period. Financing to households increased by 1.4% (31.6% YoY) in the month, while loans to companies increased by 0.3% (29.3% YoY considering balances in national and foreign currency – if the balance of the lines in pesos via document and advances is taken into account, the increase reached 51.7% YoY). In the last 3 years, the share of loans to the private sector in the asset portfolio increased substantially in most financial institutions, reaching 47.9% of the total assets of the aggregate financial system in February, 2.6 p.p. higher than that recorded 12 months ago and 11 p.p. above the record for the same month in 2010. On the other hand, loans to the productive sector accounted for 56% of the total balance of loans to the private sector, increasing their participation in recent years mainly as a result of the favorable performance of public banks, within the framework of the implementation of the Credit Line for Productive Investment and the Bicentennial Productive Financing Program.
• In the first quarter of 2013, lending rates operated in national currency fell in almost all groups of financial institutions. As the funding cost for local currency trades remained stable, spreads were seen to have narrowed in the period.
• During February, the irregularity of credit to the private sector reached 1.9% of financing to the private sector. Non-performing loans to companies remained stable in the month (1% of total financing to this sector). The coverage ratio, defined as the ratio of forecasts to the portfolio to the private sector in an irregular situation, remained at high levels (136%).
• In February, the balance of total deposits (in domestic and foreign currency) in the financial system increased by 0.9% (26.6% YoY), with a 3.9% increase (23.3%) in public sector deposits, an expansion of 0.9% (46.6% YoY) in the private sector’s time deposits in pesos, and a slight temporary reduction in the balance of total placements in the sector (although they observed a year-on-year growth of 28.4%). It should be noted that time deposits increased their share by 5 p.p. in the total balance of private sector placements in the last year and by more than 7 p.p. since February 2010.
• The liquidity indicator (pesos and dollars) stood at 25% of total deposits in February, after a slight decrease in the month. Meanwhile, the broad liquidity ratio (which includes the holdings of LEBAC and NOBAC) registered an increase of 0.3 p.p. and stood at 38.9% of total deposits in the period.
• The net worth of the consolidated financial system grew 2.3% in February, due to accounting gains and capital contributions. In the month, a foreign private bank received a capitalization of approximately US$100 million. At the end of 2012, amendments were made to the minimum capital rule in order to strengthen the solvency of the financial system, encourage the granting of credit in order to sustain the growth of the economy, and adapt Argentine regulations to international standards. Within the framework of the entry into force of this new regulation, the integration of capital for the financial system – as well as for all groups of entities – continued to comfortably cover the regulatory requirements.
• The monthly profitability of the banks as a whole stood at 2.3% y/y. of assets, 1 p.p. less than in January, mainly due to a reduction in the financial margin. All groups of banks verified a monthly drop in ROA. However, in the first 2 months of 2013 the financial system recorded gains equivalent to 2.8% of assets, slightly higher than those of the same period in 2012.