Report on Banks

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

Summary

• In July 2012, deposits and loans to the private sector continued to increase, driven by segments in local currency. The growing levels of banking activity were verified in a context of moderate risks for the financial system. Between January and August 2012, the provision of alternative payment services to cash improved. In particular, there was a good performance of immediate electronic transfers, which accumulated a year-on-year increase (y.o.y.) of 81.1% in terms of amounts (175% y.o.y. for amounts).
• The balance sheet of total deposits in the banks as a whole (domestic and foreign currency) expanded 2.2% in July, with increases in public and private sector placements. For its part, in the last 12 months, total deposits grew 19.7% driven by deposits in pesos from the private sector (33.8% y.o.y.). In particular, private sector term deposits in pesos increased by 43.9% YoY, constituting the largest annual nominal variation since 2004.
• In July, the balance of credit to the private sector increased by 1.9% (32.3% YoY), reflecting the effect of a monthly increase in financing in national currency of 3.4% (40.8% YoY). During the period, the performance of public banks was highlighted. Financing to households expanded 2.5% in the period (39.6% YoY) while loans to companies increased 1.3% (27.1% YoY). So far this year, active interest rates operated in pesos have been reduced in all groups of banks.
• The irregularity ratio of credit to the private sector remained low and stable in the month, at around 1.7% at the aggregate level. This delinquency indicator grew 0.3 p.p. in the last 7 months, mainly in financing to families. The financial system had a high level of coverage of private sector loans in arrears with forecasts, exceeding 100% in all groups of banks.
• The broad liquidity indicator for the aggregate of the financial system (in domestic and foreign currency, including holdings of LEBAC and NOBAC) grew slightly in July to 39.4%. Excluding the holdings of bills and notes of this Institution, the liquidity ratio for the financial system also increased in the month to 25.3% of deposits.
• The net worth of the consolidated financial system expanded 2.7% in the month (31.3% YoY), mainly due to the effect of accounting gains. The banks as a whole continued to show high solvency ratios. In July, capital integration grew slightly to 16.7% of credit risk-weighted assets (RWA). The excess of capital integration stood at 64% of the regulatory requirement in the month, presenting a surplus capital position in all groups of financial institutions.
• In July, the accounting earnings of the banks as a whole increased 0.3 p.p. of assets to 3.6%y, mainly due to higher interest results and lower administrative expenses. Throughout the year, the financial system accumulated profits of 2.9% of assets, 0.4 p.p. more than in the same period of 2011. All bank groups improved their cumulative profitability year-on-year.
• In recent years, there have been some improvements in the availability of infrastructure for the provision of financial services. Overall, the number of inhabitants per bank branch fell slightly since the end of 2009, with greater progress in the relatively less supplied areas – NOA and NEA. This evolution is in line with the modification of the BCRA’s policy to authorize the installation of new branches: since 2011 it has been taken into account whether the request for establishment in areas with greater banking penetration is linked to a proposal for simultaneous opening in areas with less coverage. Since the entry into force of the regulation, the opening of 75 branches in areas with less availability of financial services was approved.