Report on Banks

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

Summary

• The BCRA ordered, effective as of March, a reduction of 2 percentage points (p.p.) in the
minimum cash requirements for deposits in pesos. This measure takes into account the effect – an increase in the
average level of cash in bank treasuries – derived from the BCRA’s decision to stop taking good-use banknotes from
banks in order to encourage the exchange of cash between entities, which allows operating costs to be reduced by
almost half. In addition, the reduction of reserve requirements would contribute to deepening the
financial system, given its potential effect on interest rates. In order to continue improving the operation of electronic means of payment, it was established that banks must include in their electronic channels (when consulting account movements) data of the originator of the transfers of funds received
by their customers. In March 2017, the National Government provided that the Reference Stabilization Coefficient (CER) can be applied to negotiable securities for terms of no less than two years. This type of
instrument could boost the growth of credit in UVA, especially mortgages. By having the possibility
of having anchorage in the same denomination and in a longer term, the mechanisms for managing
exposure (mismatches) in UVA are improved. In order to continue promoting the protection of users of financial services
, the use of electronic mechanisms to revoke the acceptance of certain contractual relationships was admitted.
• In January, the balance of total financing (in domestic and foreign currency) to the private sector increased by 1.9%
compared to December or 0.3% in real terms1 (34.1% YoY or 0.2% YoY adjusted for inflation), influenced by seasonal factors characteristic of the summer recess. Since mid-2016, there has been a growth in the
real balance of total financing to the private sector in all groups of entities, reaching a cumulative increase
of 10.7% adjusted for inflation between July and January. The monthly and year-on-year performance of
loans to the private sector was mainly boosted by the segment destined for households.
• In January,
the ratio of irregularity of financing to the private sector remained limited (1.9%), slightly above the level at the end of 2016 and that evidenced twelve months ago. The non-performing loan
indicator corresponding to loans to households reached 2.8%, registering a slight monthly and year-on-year increase. For its part,
the irregularity ratio of companies remained at 1.2%. The accounting forecasts of all financial institutions represented a balance equivalent to 134% of financing in an irregular situation.
• The balance of total deposits in the financial system increased by 5.1% at the beginning of the year, driven
mainly by foreign currency deposits by the public sector in the framework of the placement of debt
by the National Government. For its part, as usual at the beginning of the year, the performance of private sector deposits
in pesos – mainly on demand – was influenced by seasonal factors. Thus, the balance of
private sector deposits in pesos did not show any changes in magnitude with respect to December, with increases
in time placements and a reduction in demand accounts. In year-on-year terms, the balance of total deposits
expanded 48.6% (11.1% real YoY). Private sector deposits increased 41.2% YoY.
(5.6% real YoY), with a greater relative increase in the balance of placements in foreign currency.
• In the month, the liquidity ratio for the aggregate financial system (in national currency, without LEBAC holdings
) grew by 3 p.p. of deposits in pesos to 25.6%. As of January, the monetary policy rate became
that of the pass corridor, showing an increase in the volume of active passes for entities (liabilities
for the BCRA). Including LEBAC holdings, the broad liquidity indicator (in domestic and
foreign currency) accounted for more than half of total deposits (50.3%) at the beginning of the year, growing compared
to last month. Liquidity levels (with and without LEBAC) in terms of deposits were higher than at
the beginning of 2016.
• In January, the integration of normative capital in the aggregate financial system represented 16.5% of risk-weighted assets
(RWA) and Tier 1 capital reached 15.1% of RWA; these indicators were slightly reduced compared to December, but remain higher in the year-on-year comparison. At the beginning of the year
, the excess of capital integration in relation to the regulatory requirement was 91% for the banks as a whole.
• In January, the results recorded by the financial system in terms of its assets (ROA) stood
at 2.8%y/y, 0.4 p.p. less than the December level. In the twelve months to January 2017, the profits of the banks as a whole reached $73,957 million, increasing 19.7% YoY in nominal terms. These profits were equivalent to 3.5% of assets. Both ROA and ROE for the accumulated twelve months fell in a year-on-year comparison in all groups of financial institutions.