Report on Banks

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

Summary

• Despite the seasonal factors at the beginning of the year, credit maintained its expansionary bias in January. The banking sector’s risk map remained unchanged, with favourable liquidity and solvency indicators. In this context, there continued to be a gradual expansion of the sector’s operational infrastructure, with increases in the number of personnel employed (3.1% in the last 12 months) and in productivity levels.
• The balance sheet of total deposits (domestic and foreign currency) increased by 2.5% in January, mainly due to public sector taxes. Private sector deposits expanded 0.9% in the month, reflecting a 4.4% increase in time deposits – the highest relative increase since the beginning of 2009 – and a 1.7% decrease in demand accounts. In year-on-year terms, the growth in total deposits was driven by private sector placements (especially time deposits in national currency) that accounted for 70% of total deposits, almost 2 p.p. more than 12 months ago.
• In January, the broad liquidity indicator of the financial system (considering items in pesos and foreign currency) increased for the second consecutive month, mainly due to an increase in passes with the BCRA and greater holdings of Lebac and Nobac. The level of this indicator stood at 39.9% of total deposits in January, increasing 2.3 p.p. compared to last month (-5.6 p.p. compared to January 2011). The narrower indicator of liquid assets denominated in local currency (excludes the position of Lebac and Nobac) also grew in the month, 0.9 p.p. of deposits to 21.1%.
• Bank credit to the private sector grew 1.2% in January (44.5% YoY), mainly driven by public financial institutions, with a widespread expansion among financing lines. Due to seasonal issues, this monthly performance was more moderate than in previous periods, with an increase in credit to households of 2.4%, while financing to companies grew 0.4%. At the beginning of the year, the main active interest rates traded were reduced, a movement common to all groups of banks.
• The irregularity ratio of financing to the private sector remained at low levels in January (1.5%). This indicator accumulated a fall of 0.5 p.p. in the last 12 months. The financial system maintained a historically high level of forecasts in terms of credit to the private sector in an irregular situation (163%).
• The net worth of the consolidated financial system grew 2.2% in the first month of the year (21.9% YoY), driven mainly by accounting gains and, to a lesser extent, by capital contributions. Both the monthly and year-on-year increases were driven mainly by public banks. The capital integration ratio of the banks as a whole increased by 0.3 p.p. of risk-weighted assets (RWA) on a monthly basis to 15.8% in January. At the beginning of the year, all bank groups maintained an over-capital position relative to regulatory requirements.
• The financial system began 2012 with accounting profits equivalent to 2.6% of assets, down from the previous month’s level and from January 2011, mainly due to lower equity results. All groups of financial institutions earned profits in January. The relationship between relatively more stable net income and administrative expenses increased in year-on-year terms in the financial system, reflecting a similar behavior of all homogeneous groups of entities.