Informe Sobre Bancos

Executive summary

• In the month, the solvency indicators of the financial system at the aggregate level increased slightly. The integration of regulatory capital reached 16.6% of risk-weighted assets (RWA), 0.5 p.p. more than in January. The excess capital integration – capital position – increased 7 p.p. in terms of regulatory requirements compared to last month, to a level of 89% in February. Both indicators were higher than those evidenced in February 2018.

• The liquidity ratios of the financial system continued to increase in February. The broad liquidity indicator reached 57.6% of total deposits (58.2% in pesos), 0.8 p.p. higher than the level of January. In a year-on-year comparison, ample liquidity grew 12.2 p.p. from deposits.

• The balance of deposits in pesos of the private sector expressed in real terms fell slightly compared to January and accumulated a fall of 2.2% y.o.y. characterized by increases in time deposits and reduction in demand accounts. Deposits in pesos from the private sector accounted for 38.4% of the system’s total funding in February. In particular, the weighting of private sector time deposits in pesos in total funding increased by 2.7 p.p. y.o.y. to 20.2%.

• In February, credit in pesos to the private sector fell in real terms, accumulating a reduction of 23.5% y.o.y. in real terms. In relation to the composition of the total assets of the financial system, the share of credit to the private sector stood at 40.4%, without significant changes with respect to January.

• The non-performing loan ratio of the total private sector loan portfolio reached 3.8% in February, 0.3 p.p. more than last month (+1.9 p.p. y.o.y.). The indicator of irregularity of financing to companies stood at 3.5% in February (monthly increase of 0.4 p.p. and year-on-year of 2.5 p.p.), while that of households stood at 4.4% (increase of 0.2 p.p. in the month and 1.4 p.p. y.o.y.). Mortgage delinquencies to households remained at the same levels as in January: 0.25% for the UVA segment and 0.6% for the rest. Coverage of the irregular portfolio with forecasts continued at high levels.

• In the month, the financial system recorded nominal gains of 4.1% of assets (ROA) and 37.1% of net worth (ROE). This monthly result includes the accounting profit from the sale of a stake in a group of entities in Prisma Medios de Pago S.A. In the last 12 months, the financial system accumulated an ROA of 4.3% (ROE of 38.7%).

• Regarding the latest measures adopted by the BCRA, in order to provide more options to savers and encourage competition among entities, the possibility was recently enabled for users to make online fixed terms in entities where they do not have demand accounts.

I. Financial intermediation activity

Based on the estimated flow of funds for month¹, among the items in national currency, the increase in private sector deposits was the main source of resources for the aggregate of the financial system in February (see Chart 1). To a lesser extent, other sources of bank funding in pesos in the period were the reduction of financing and the placement of negotiable obligations. Among the applications of funds in pesos, the increase in liquid assets – mainly current accounts at the BCRA – and the reduction in public sector deposits stood out. In relation to foreign currency items, the use of liquidity was the main source of funds for banks, followed by the capture of deposits from the private sector. According to the variation in balance sheet balances, these resources were used to a greater extent to reduce credit lines from abroad.

Within the framework of the aforementioned movements, in February the balance sheet of the financial system at the aggregate level registered a reduction: total assets decreased 2.1% in real terms compared to January (+0.9% YoY), with monthly falls in all groups of banks.

The share of foreign currency assets in the total assets of the financial system increased slightly in February to 28% (+7.1 p.p. y.o.y.). The relative importance of foreign currency liabilities in total funding – liabilities and equity – also increased slightly in the month to 27.6% (+7.9 p.p. y.o.y.). These monthly increases were mainly explained by the rise in the nominal peso-dollar exchange rate between the end of the month (+5.3%). The spread between assets and liabilities in foreign currency – including net purchases of foreign currency at the term – stood at 10.7% of the Computable Patrimonial Liability (CPR) in February, slightly above the January figure (see Chart 2).

Considering the operations of the National Payment System, in the month immediate transfers of funds increased in quantity and were reduced in real values. Compared to February 2018, immediate transfers increased, both in the number of operations (+76% YoY) and in the amounts processed (+8.9% YoY in real terms). On the other hand, cleared checks continued to fall in February both in quantity and in amounts – in real terms. The value and number of checks rejected due to lack of funds in terms of the total compensated fell in the month (see Chart 3), thus returning to levels similar to those of the first quarter of 2018.

II. Deposits and liquidity

The balance of deposits in pesos in the private sector fell 0.9% in real terms compared to January (+2.8% nominal), partly due to the seasonality of the period. The fall between the peaks of the month was explained by the decrease of 1.3% in real terms in time deposits (+2.4% nominal), and 0.8% in real terms in demand accounts (+3% nominal). Private sector foreign currency deposits grew 0.4% in the month in source currency. With public sector contributions also falling in the month, the balance of total deposits decreased by 2.1% in real terms in February.

In the last 12 months, deposits in pesos in the private sector fell 2.2% in real terms, with an increase in the balance of time placements (+16.3% y.o.y. in real terms) and a reduction in demand accounts (-16.6% y.o.y. in real terms). Foreign currency deposits of the private sector expanded 15.7% compared to February 2018 in the currency of origin. The balance of total deposits grew 2.3% in real terms in a year-on-year comparison.

In February, the share of all types of private sector deposits in the total funding (liabilities plus net worth) of the financial system increased slightly (to 58.9%, see Chart 4), while the weighting of public sector deposits decreased (to 13.6%).

In line with the decline in the reference interest rate of the LELIQ during the first part of the month, the average nominal interest rate for private sector time deposits in pesos fell in February.

In order to provide more options to savers and encourage competition between entities, the BCRA recently allowed users to make online fixed terms in entities where they do not have a demand account. ² The measure will apply to digital channels on placements in pesos. These fixed terms will be non-transferable and, once the stipulated period for placement has expired, the principal and interest will return to the original demand account. The operations will not imply a cost for users. The operation will begin at banks that offer rates for non-customers and will end at the home banking of the bank where the user has their account at sight.

The liquidity indicators of all financial institutions increased in February. The broad liquidity ratio³ stood at 57.6% of total deposits in the month (58.2% considering items in pesos), 0.8 p.p. above the level recorded in January (+1.8 p.p. for the segment in national currency, see Chart 5). The monthly increase in liquidity was explained by the higher balance of LELIQ and the current accounts that banks have at the BCRA. In a year-on-year comparison, ample liquidity grew 12.2 p.p. of deposits (+14.8 p.p. for the ratio in pesos). Liquidity in foreign currency totaled 56.4% of deposits in the same denomination in the period, 1.5 p.p. less than last month and 3.8 p.p. more than in February 2018.

III. Credit and Portfolio Quality

In February, the balance of credit in pesos to the private sector fell 3.9% in real terms compared to January (-0.3% nominal). ⁴ The balance of all credit lines in national currency contracted in real terms compared to last month. The balance of foreign currency financing to the private sector remained unchanged in February (+0.1% in home currency, see Chart 6).

In year-on-year terms, loans in national currency to the private sector decreased by 23.5% in real terms, while financing in foreign currency did not show any variations in magnitude compared to a year ago (-0.3% y.o.y. in source currency).

The total balance of financing (in domestic and foreign currency) to companies fell 1.5% in real terms compared to January (+2.2% in nominal terms). In a year-on-year comparison, the balance of credit to companies decreased 15% in real terms, with a fall in the real balance of financing to all productive sectors, with the exception of primary production (+5.9% y.o.y.). Meanwhile, the balance of financing to families fell by 3.3% in real terms in February (+0.3% nominal). In year-on-year terms, loans to households contracted 13.4% in real terms. ⁵

In February, the share of credit to the private sector in total banking assets remained at around 40.4%, unchanged from the previous month (-0.1 p.p.). Compared to February 2018, this ratio accumulated a fall of 6.9 p.p.

Average lending rates operated in pesos were reduced in February in all credit lines, with the exception of cards. The interest rates agreed for commercial loans (documents and advances) exhibited the largest falls in the month. On the other hand, the average interest rates operated on UVA loans increased slightly in mortgage and personal loans, and decreased in documents and pledges.

In February, the irregularity ratio of credit to the private sector stood at 3.8%, increasing 0.3 p.p. compared to January (+1.9 p.p. y.o.y.; see Graph 7). In the month, the NPL ratio of financing to companies increased 0.4 p.p. to 3.5% (+2.5 p.p. y.o.y.). Meanwhile, the irregularity of loans to households stood at 4.4% in February, 0.2 p.p. above the value of the previous month (+1.4 p.p. y.o.y.). The default rate on mortgage loans to households remained at low levels, similar to those of last month: 0.25% for those denominated in UVA and 0.6% for the rest.

The estimated balance of forecasts attributable to the portfolio in an irregular situation stood at 71% of said portfolio in February (see Chart 8). Considering the balance of total accounting forecasts (i.e., those awarded to both the regular and irregular portfolios), in February the forecast of the aggregate financial system represented 98% of the irregular portfolio to the private sector.

IV. Solvency

In February, the solvency indicators of the financial system increased slightly (see Chart 9). Capital integration reached 16.6% of risk-weighted assets (RWA) in the month (90% explained by Tier 1 capital), 0.5 p.p. more than in January and 0.3 p.p. y.o.y. Excess capital also increased in February, reaching 89% of the minimum regulatory requirement.

In the month, the banks as a whole accrued nominal gains equivalent to 4.1% of assets (ROA) (see Chart 10), similar to those of January (+0.1 p.p.). Considering the accumulated in 12 months to February 2019, nominal profits totaled 4.3% of assets (+1.5 p.p. y.o.y.) and 38.7% of equity (+15.2 p.p. y.o.y.). ⁶

The financial margin of the entities as a whole stood at 8.9% y/y of assets in February, 2.6 p.p. less than in January. The monthly decline was mainly due to lower equity gains. In the accumulated 12 months to February, the financial margin reached 10.7% of assets, 0.4 p.p. more in a year-on-year comparison.

The results for services of the system represented 2% of the assets in February, falling 0.2 p.p. compared to the previous month. In the 12-month cumulative period, net income from services totaled 2.2% of assets, 0.5 p.p. less year-on-year.

In February, bad debt charges remained at 1.7% y/y of assets (1.4% of assets in the cumulative 12 months, +0.4 p.p. y.o.y.). Administrative expenses represented 6% y/y of assets in the month, falling 0.2 p.p. compared to January (6.2% of assets in the last 12 months, -0.8 p.p. y.o.y.).

Finally, in February miscellaneous results increased by 2.6 p.p. of assets to 3.2%y, mainly due to the effect of the sale of Prisma Medios de Pago S.A. on the balance sheets of some private banks. On the other hand, at the aggregate level, other comprehensive income (ORI) reached 1.4% of assets in the month, increasing 1.3 p.p. compared to last month, mainly explained by public banks.

References

¹ Considering differences in balance sheet balance.

² Communication A6667. Banks must adapt to the measure before April 30.

³ Availability, integration of minimum cash and BCRA instruments, in national and foreign currency.

⁴ Includes principal adjustments and accrued interest. Even taking into account the seasonal factors of the month, the balance of loans in pesos to the private sector verified a real reduction in February.

⁵ Information extracted from the Debtors’ Central (national and foreign currency). Loans to residents abroad are not included. Adjustments in principal and accrued interest are considered. Business financing is defined here as that granted to legal entities and commercial financing granted to individuals. On the other hand, loans to families are considered to be those granted to individuals, unless they are for commercial purposes.

⁶ Outcomes are considered including Other Comprehensive Outcomes (ORI).