Macroeconomic and Monetary Policy Report

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

Summary

• Banking activity performed moderately at the beginning of 2014, in line with the seasonal factors that characterize the summer period. Despite this, in the first month of the year the balance
of deposits and loans to the private sector increased in a framework in which the aggregate levels
of liquidity and solvency were consolidated.
• In January, financing in pesos to the private sector expanded 1.8% (35.2% YoY), boosted
mainly by advances. Total loans (in domestic and foreign currency) grew in the
period, with increases of 2.4% (33.6% YoY) in financing to the productive sector and 2.2% (31.4%
YoY) in those destined for households.
• The dynamism of financing to companies is partly explained by the Credit
Line for Productive Investment (LCIP). Taking into account the first three stages of application of this
tool, from the time of its implementation in the second half of 2012 to the present,
loans have been agreed for some $57,500 million, almost all of which has been credited ($55,206
million). 57% of the resources allocated corresponded to MSMEs, being channeled mostly to industry, followed by service providers and primary production. In addition, within the framework of the Bicentennial Productive Financing Program (PFPB),
from its launch until the end of February 2014, the BCRA awarded $7,780 million through 26
auctions, disbursing a total of $6,093 million to companies.
• At the beginning of 2014, the irregularity of credit to the private sector remained at historically low values. In this regard, although in January there was a slight increase in the loan NPL
ratio, this indicator stood at 1.8%. The NPL ratio for loans to companies stood at
1.1% in the month, while the irregularity of financing to households remained at 2.6%
of the total portfolio to this sector. The coverage of the irregular portfolio with accounting forecasts reached
144% at the aggregate level, slightly above the value observed last month and the record of a year
ago.
• The balance of total deposits (in domestic and foreign currency) increased by 3.9% in the month (29.2%
YoY), with an increase in public sector and private sector deposits. The segment of private sector placements in national currency grew 0.9% in January, driven by an improvement in term deposits (4.9%) that was partially offset by a decrease in demand accounts
(-1.7%).
• The liquidity (pesos and dollars) of the financial system increased slightly in the month, to 28.5% of
total deposits. In the same sense, the broad liquidity indicator (which includes the holdings of LEBAC and NOBAC) increased 2.5 p.p. of deposits in the month to reach a level of 41.1%.
• The net worth of the consolidated financial system grew 8.7% in the first month of the year, accumulating an increase of 43.3% YoY, a variation driven by accounting profits. In the month, the
regulatory capital integration ratio of the banks as a whole increased slightly in terms of
total risk-weighted assets (RWA), reaching 14%. At the beginning of
the year, all bank groups maintained an over-capital position relative to regulatory requirements.
• In January 2014, the financial system recorded accounting profits. In the last
twelve months, the ROA of all financial institutions stood at 4.2%, increasing 1.3 p.p. compared
to the same period to January 2013.