Report on Banks

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

Summary

• The BCRA continues to adopt measures to deepen the financial system and promote the
banking penetration of transactions. In order to generate incentives to favor competition
and for a greater number of businesses to accept the use of credit and debit cards, at the end of
March a maximum cap was set on the main component of the bank commissions that businesses face
for each transaction made (the interchange fee). To disseminate the use of
Immediate Debit (DEBIN), it was established that financial institutions make this payment instrument available to their customers within 30 calendar days after the Electronic Clearing House of Low Value implements the applications that allow processing and validating payment information. For
its part, in order to speed up transfers to make online payments, the BCRA established that from
June all bank accounts must have an “alias”. Finally, in order to boost
credit and savings in the medium and long term, the BCRA regulated the possibility for financial institutions
to issue securities denominated in UVA or UVI.
• The balance of total deposits in the financial system increased 1.8% in February, mainly
due to the performance of public sector placements. The balance of private sector deposits increased 1% in the month, with a greater relative contribution from deposits in pesos. In a year-on-year comparison, total deposits expanded 50.2% (13.8% YoY in real terms), while private sector deposits increased 38.5% YoY (4.9% YoY in real terms), mainly reflecting
the increase in the foreign currency segment.
• The broad liquidity ratio (items in domestic and foreign currency, with LEBAC) increased
slightly in the month and 4.1 p.p. in a year-on-year comparison, totaling 51% of deposits.
The increase in February was mainly explained by greater passes with the BCRA. These operations have become more dynamic since the pass corridor was adopted as a monetary policy rate. For its part, the liquidity indicator, which considers only the balance of the banks’
current accounts at the BCRA and the availability of each entity, fell monthly by 1.7 p.p. of
deposits, to 32.8%.
• Including seasonal effects, in February the nominal balance of total financing (in domestic and foreign currency
) to the private sector moderated its performance (increasing 1.3% nominal, -0.8% real).
Foreign currency lines grew 2.6% (in source currency) in the month (159% YoY), while
loans in pesos increased 1.5% (23.9% YoY, -6.2% YoY adjusted for inflation). Despite
the monthly performance, between the middle of last year and February 2017, the total credit balance to
companies and households increased 9.8% in real terms, exceeding the variation observed in the same
period of the previous five years. This evolution was mainly driven by loans to households.
• In February, the irregularity of credit to the private sector remained without significant changes, at
1.9% of total financing. The NPL ratio for loans to households remained
at 2.9%, while that for firms stood at 1.1%. The accounting forecasts of all
entities represented 134% of the portfolio in an irregular situation.
• The capital integration of the financial system was equivalent to 16.8% of risk-weighted
assets (RWA) in the month. Tier 1 capital reaches more than 90% of the total regulatory integration.
The banks as a whole continued to register an excess of capital integration, which represented 95% of the
minimum regulatory requirement.
• In February, the gains accrued by the financial system in terms of its assets (ROA)
reached 2.1%y, falling 0.7 p.p. compared to the previous month, mainly due to the decrease
in the financial margin (-3.7 p.p. compared to the same month in 2016). The cumulative results in twelve
months to February 2017 totaled 3.2% of the aggregate assets, falling 1 p.p. in a year-on-year comparison.