Report on Banks

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

Summary

• In order to continue promoting the protection of users of financial services, the BCRA recently implemented a new methodology that defines technical and economic criteria to resolve requests for increases in commissions for financial services and products. This methodology includes basic and non-basic services.
• Total financing (in domestic and foreign currency) to the private sector grew nominally by 2.1% in February (20.2% year-on-year), driven mainly by advances in pesos and foreign currency lines. Although the evolution of credit in the month was influenced by the summer recess, growth exceeded that of last January and that of the same period in 2014. Loans to companies increased 2.2% in the period, with a positive variation in financing to all productive branches. For their part, loans to families grew 1.4% in February.
• In this part of the year, the first tranche of the 2015 quota corresponding to the Credit Line for Productive Investment (LCIP) is developed. Financial institutions met the target goal for the first quarter of the year, equivalent to 30% of this tranche. Taking into account the first five stages of the LCIP, credits were granted for a gross amount that exceeded $110,000 million, with this financing having been channeled mainly to MSMEs.
• The level of non-performing loans to the private sector remained unchanged during February, in the order of 2%. In the month, the irregularity of financing to companies represented only 1.3% of this portfolio, while the NPL ratio of loans to families stood at 2.9%. The financial system continued to have a high coverage of loans in an irregular situation with accounting forecasts in the second month of the year (138.8%).
• Private sector deposits in pesos nominally increased 2.5% in February, growth driven by time placements (4.7%) and, to a lesser extent, by demand accounts (0.5%). In year-on-year terms, deposits in pesos by companies and families increased 32.8%, a variation explained by demand (36.3%) and time deposits (29.8%). Deposits agreed in foreign currency also increased in the last twelve months. In turn, as public sector placements increased 26.6% YoY, total deposits in the financial system registered a growth of 30.4% in the last twelve months.
• It should be noted that as of this month, and in order for savings in dollars to be channeled through the financial system, the incentives to attract time deposits were improved. In particular, in February, the new margins that can be obtained by banks that subscribe to BCRA bills in dollars came into force, as long as the funds come from private sector time deposits in the same denomination. This measure helped to mitigate the reduction in fixed-term deposits in foreign currency that normally occurs in this part of the year.
• Liquid assets (in domestic and foreign currency) stood at 24.6% of total deposits in the month, slightly above January’s record. Incorporating the holding of monetary regulation instruments, in the month the broad liquidity indicator reached 46.9% of total deposits, increasing compared to January and accumulating a year-on-year increase of 6.5 p.p.
• The net worth of the consolidated financial system grew 2.7% (31.3% YoY) in the period, mainly driven by accrued earnings. Regulatory capital integration reached 14.7% of total risk-weighted assets (RWAs), while Tier 1 capital integration accounted for 13.8% of RWAs. In the second month of the year, the capital position (excess of integration with respect to the requirement) represented 91% of the regulatory requirement.
• In February 2015, the profits of the financial system were equivalent to 3.9% of assets, presenting a decrease with respect to the level corresponding to last January. Despite this reduction, the monthly ROA exceeded that corresponding to the same period in 2014 and that accumulated in the last 12 months (3.6%).