Report on Banks

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

Summary of the month

• In the face of almost two years of international crisis, the local financial system has been able to respond with a significant degree of resilience, given the prudential regulatory framework and the liquidity provision mechanisms implemented by the BCRA. In this regard, in June the financial intermediation activity of banks with the private sector continues to grow, while the levels of solvency and liquidity of the sector are maintained.
• The balance sheet of total private sector deposits shows an increase of 2.1% in June. On the other hand, public sector placements show a fall in the month (-6.4%), so total deposits in the non-financial sector decreased slightly in June. So far this year, total deposits are mainly driven by placements from the private sector, which increase their participation in the total funding of all financial institutions.
• Within the framework of the measures implemented by the BCRA to reinforce the effective management of liquidity risk faced by banks, in June active pass options in pesos began to be tendered for up to one year. The local financial system adds additional tools that help maintain adequate levels of liquidity and predictability by strengthening the yield curve. In the month, the liquidity indicator (including items denominated in pesos and foreign currency) fell slightly to 30.1% of total deposits, although it accumulated an increase of 5.4 p.p. compared to the same month last year. The holding of Lebac and Nobac not linked to pass operations with the BCRA fell in the month, bringing the broad liquidity indicator to 40.7% of deposits.
• The balance sheet (adjusted for the constitution of trusts) of credit to the private sector grew by $780 million in June (0.6%). The increase was driven by credit card loans, documents and advances. Thus, credit to the private sector closed the first half of 2009 with an annualized growth of 7%.
• The irregularity of credit to the private sector increased 0.6 p.p. in the last 6 months to reach a level of 3.7% in June. The deterioration observed in the loan portfolio is being caused mainly by financing to households and, to a lesser extent, by those granted to companies. Consumer loans to households have seen an increase of 1.4 p.p. in their delinquency so far this year to reach 6.4%. This evolution is mainly explained by private banks and EFNBs. Loans of smaller relative size, by residual balance, have the highest irregularity ratios.
• The consolidated net worth of the financial system has expanded at a rate of 15.4%yr so far in 2009. Capitalizations total $120 million in the first half of the year. Capital integration increased 0.6 p.p. of risk-weighted assets over the course of the first half of the year, to 17.4%. The excess integration of minimum capital requirements is widespread among financial institutions (approximately 86.1% for the system). Accounting results amounted to 2.6% y/y of assets in June, accumulating 2% y/y of assets in the first 6 months of the year. However, the results excluding the accounting effects of the fluctuation of the nominal peso-dollar exchange rate stand at 0.5% of assets during the first part of 2009, equivalent to half of the value observed in the first half of 2008.