Informe Sobre Bancos

Monthly report that analyzes the situation of the Argentine financial system.

Executive summary

• In January 2019, the financial system maintained relatively high levels of solvency. Capital integration reached 15.9% of risk-weighted assets (RWA) in the first month of the year, a value similar to that of January and December 2018. The aggregate financial system maintained excess capital above the required minimum for a value equivalent to 85% of the latter.

• Liquidity in all banks continued to increase at the beginning of 2019. The broad liquidity ratio stood at 56.8% of total deposits (56.3% for the ratio in local currency), 0.4 p.p. more than at the end of 2018 (+2.7 p.p. for the segment in pesos). In the last 12 months, this liquidity indicator grew 11.3 p.p. in deposits (15.4 p.p.i.a. considering the ratio in pesos).

• Partly due to the seasonality of January, the balance of deposits in pesos in the private sector fell by 0.7% in real terms (+2.2% nominal) with a decrease in demand accounts of 8.7% in real terms and a growth in time deposits of 7.7% in real terms. Private sector foreign currency deposits rose 2% in the month. In a year-on-year comparison, time deposits in pesos increased their weighting in funding (liabilities and equity), to represent 20.1%.

• In January, the balance of credit in pesos to the private sector decreased by 3.7% in real terms compared to December (-0.9% nominal) and by 20.6% YoY; The balance of loans in foreign currency increased 2.1% compared to December and in relation to January 2018. The weighting of credit to the private sector on the balance sheet of all institutions fell to 40.6% of total assets.

• The non-performing loan ratio to the private sector increased by 0.4 p.p. in January to 3.5%. The indicator for loans to companies reached 3.1% (0.6 p.p. more than the previous month), while that corresponding to financing to families stood at 4.2% (+0.2 p.p. compared to December). Mortgage loans to households did not present significant changes in their irregularity ratio (level of 0.25% for the UVA segment). The system continued to exhibit high levels of forecasting.

• In January, the financial system recorded nominal gains equivalent to 3.9% annualized (a) of assets (ROA). In the accumulated 12 months to January, nominal profits represented 4.2% of assets and 37.6% of equity.

I. Financial intermediation activity

According to the estimated flow of funds for the financial system at the aggregate ^level,1 in January the resources derived from the reduction of the current account balance at the BCRA and the increase in private sector deposits were mainly channeled to increase the holdings of LELIQ (see Graph 1). Other sources of funds were the reduction in loans to the private sector and profits for the period, while the net cancellation of public sector deposits constituted an additional use of resources.

In January, the total assets of the financial system at the aggregate level decreased 2% in real terms compared to the previous month, presenting a year-on-year increase (YoY) of 4.1% in real terms. Both public and private banks showed a monthly reduction in their respective total assets.

The share of foreign currency assets in the total assets of the financial system fell 1.1 p.p. compared to the end of 2018, reaching 27.5% in January. The weighting of liabilities in foreign currency did not show significant changes in the period. For its part, the difference between assets and liabilities in foreign currency – incorporating net purchases at the end – of the financial system totaled 9.2% of the Computable Patrimonial Liability (CPR), resulting in the lowest level in recent years (see Graph 2). In January, this indicator fell by 3.8 p.p. in the PRC and 1.9 p.p. y.o.y.

In relation to the operations of the National Payment System, in particular, immediate transfers decreased in quantity and in real amounts in January compared to last December, partly due to the seasonality of the period. In year-on-year terms, the number of immediate transfers increased, although the amount fell 7.3% in real terms. In January, the clearing of checks decreased compared to the end of the year, accumulating a fall of 5.5% YoY in quantities and 12.7% YoY in real amounts. In the first month of 2019, the rejection of checks due to lack of funds was reduced in terms of the total compensated, both in amount and in amounts (see Graph 3).

II. Deposits and liquidity

Private sector deposits in pesos fell 0.7% in real terms compared to December (see Chart 4), partly due to the seasonality of the month, with a decrease of 8.7% in real terms and a growth in time deposits of 7.7% in real terms. Private sector foreign currency deposits grew 2% in month². Given the monthly reduction in public sector deposits, total deposits decreased by 2.4% in real terms in January.

In a year-on-year comparison, deposits in pesos in the private sector fell 2.1% in real terms: time placements increased 16.1% YoY in real terms, while demand accounts decreased 16.3% YoY in real terms. Deposits in foreign currency from the private sector grew 16.3% y.o.y. (in currency of origin). The balance of total deposits grew 6.2% in real terms in the last 12 months.

In January, the relative share of private sector deposits in the total funding – liabilities plus net worth – of the financial system increased slightly (to 57.7%), while the weighting of public sector deposits decreased (to 14.8%). In particular, the private sector’s time deposits in pesos increased their weighting in total funding by 1.8 p.p. in the month (to 20.1%). Since March 2019, the coverage of the Deposit Guarantee Insurance System has increased, from $450 thousand to $1 million per depositor in each financial institution³.

The average nominal interest rate for private sector time deposits in pesos fell in January, in line with the decline in the reference interest rate of the LELIQs.

In January, the financial system increased liquidity levels. Broad liquidity indicator⁴ stood at 56.8% of total deposits (similar to the record for the ratio in national currency), 0.4 p.p. more than at the end of 2018 (+2.7 p.p. for the segment in pesos, see Chart 5). The monthly increase in liquidity was mainly explained by private banks that allocated funds to pass operations with the BCRA using LELIQ. In year-on-year terms, liquidity grew by 11.3 p.p. in deposits (+15.4 p.p. for the ratio in pesos). Liquidity in foreign currency totaled 57.9% of deposits in the same denomination in January, 4.5 p.p. and 1 p.p. less than last month and the beginning of 2018, respectively.

III. Credit and Portfolio Quality

In January, loans in national currency to the private sector decreased 3.7% in real terms compared to the previous month (-0.9% nominal). ⁵ This fall was widespread across all credit lines. Loans to the private sector in foreign currency increased 2.1% in January (currency of origin, see Chart 6), driven mainly by credit cards.

In a year-on-year comparison, in January loans in pesos to the private sector fell by 20.6% y.o.y. in real terms (see Chart 6), mainly explained by the behavior of private banks. ⁶ Loans in foreign currency accumulated a growth of 2.1% YoY (in currency of origin).

Disaggregated by segment, in the first month of 2019, financing – including domestic and foreign currency – to companies decreased 5.3% in real terms compared to December (-2.5% nominal), accumulating a fall of 13.2% YoY in real terms. ⁷ Loans to the trade and construction sectors showed the largest relative year-on-year declines. On the other hand, financing to families fell in real terms by 1% in the month and 10.6% ^y.o.y.8 Mortgage loans were the only line of financing with a real year-on-year increase.

The weighting of credit to the private sector in the assets of the financial system fell in January to 40.6% (-0.6 p.p. compared to December and -7.1 p.p. compared to the level of a year ago).

In January, the average interest rates operated in pesos for relatively shorter-term lines, such as advances and discounted documents, were reduced, reflecting to a greater extent the changes in the LELIQ rate. Mortgage interest rates also registered a slight drop in the month. For its part, the rate agreed on pledges increased slightly compared to December, while the rates operated on cards and personal did not change significantly. In the period, the average interest rates operated in UVA increased in collateral, personal and document loans, while they decreased in mortgage lines.

The irregularity ratio of bank lending to the private sector reached 3.5% in the first month of 2019, 0.4 p.p. and 1.6 p.p. above last December and the level observed 12 months ago (see Graph 7). The indicator of irregularity of credit to companies stood at 3.1% in January, increasing 0.6 p.p. compared to the value of the previous month, mainly due to the performance of loans to commerce and industry. The NPL ratio for loans to households reached 4.2% of the portfolio, 0.2 p.p. higher than the December figure. In particular, mortgage loans to households did not observe significant changes in their irregularity ratio (level of 0.25% in the case of UVAs and 0.57% in the rest).

In the month, the estimated balance of forecasts attributable to the non-performing portfolio represented 83% of said portfolio, remaining without significant changes with respect to the level of a year ago (Graph 8). Considering the total accounting forecasts – both those awarded to the regular and irregular portfolios – this ratio stood at 112%.

IV. Solvency

At the beginning of the year, solvency ratios in the financial system remained high (see Chart 9). Capital integration reached 15.9% of risk-weighted assets (RWA) in January, similar to January and December 2018. ⁹ The aggregate excess capital remained at 85% of the minimum regulatory requirement.

In January, the system obtained nominal monthly gains equivalent to 3.9% of assets (ROA) (see Graph 10), lower than in December. In the cumulative 12 months to January 2019, banks accrued nominal profits of 4.2% of assets and 37.6% of equity (+1.4 p.p. and +13.8 p.p. compared to the levels observed 12 months ago).

Banks’ financial margin totaled 11.4% y/y of assets in January, 2.1 p.p. less than in December. The monthly decline was largely due to lower equity gains. Considering the accumulated 12 months to January, the financial margin represented 10.8% of assets, 0.6 p.p. above the level of 12 months ago.

In the month, the results for services of the system stood at 2.2% y. of assets, without significant changes with respect to December. In the 12-month cumulative period, these net income represented 2.2% of assets, 0.6 p.p. less year-on-year.

Bad debt charges increased slightly in January, to 1.7% y/y of assets. In the accumulated 12 months, these charges represented 1.4% of assets (+0.3 p.p. compared to the same period to January 2018). Administrative expenses totaled 6.2% y/y of assets, similar to the cumulative level in the last 12 months (0.9 p.p. less year-on-year).

References

¹ Considering differences in balance sheet balance.

² In currency of origin.

³ See Communication A6654.

⁴ Availability, integration of minimum cash and BCRA instruments, in national and foreign currency.

⁵ Includes principal adjustments and accrued interest. Even taking into account the seasonal factors of the summer recess, the balance of loans in pesos to the private sector verified a real reduction in January.

⁶ Includes principal adjustments and accrued interest.

⁷ Information extracted from the Central Debtors (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.

⁸ Idem, previous note.

⁹ 89% of the integration is made up of the capital of the highest relative quality (level 1).