Report on Banks

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

Summary

• In June 2012, there was significant growth in both deposits and loans to the private sector. The expansion of financial intermediation levels was recorded under conditions of limited credit risk, maintaining low non-performing loans and ample coverage with accounting forecasts, while maintaining high levels of liquidity and solvency.
• In the period, the balance sheet of private sector deposits grew 2.7%, driven by accounts in pesos (up 5.2%), mainly on demand, and a decrease in the balance of deposits in dollars. In year-on-year terms (YoY), private sector deposits accumulated an expansion of 23.4%, with a greater dynamism of term placements denominated in pesos (41% YoY). For its part, the public sector accounts fell 4.8% in June, showing a behavior similar to that verified in previous years during this period, linked to the payment of half of the complementary annual salary.
• In June, the balance of credit to the private sector grew 3% (35.4% YoY), which represented the largest monthly expansion since the beginning of the year. This performance was driven by financing to the productive sector, which increased 3.9% in the month (32.8% YoY), while loans to households increased 1.8% (39.2% YoY). This dynamic was mainly explained by public banks, a group that accounted for 34% of the total balance of financing to the productive sector, increasing its participation by more than 6 p.p. in the last 12 months. So far this year, lending rates have been reduced in most credit lines in national currency.
• In the month, the non-performing loan ratio to the private sector remained low and stable at around 1.7%, a level similar to that evidenced in June 2011. The delinquency indicator of financing to families stood at 2.6%, reducing slightly in the month. For its part, the irregularity of loans to companies remained without significant changes in June, at around 0.9%. The coverage of the irregular portfolio of the private sector with forecasts stood at 145%, exceeding 100% in all groups of financial institutions.
• The broad liquidity indicator (in domestic and foreign currency, including holdings of LEBAC and NOBAC) stood at 39.1% of total deposits in June, down 1.6 p.p. compared to the previous month due to lower pass operations with the BCRA. The liquidity indicator (excluding LEBAC and NOBAC holdings) also fell in the month, to 24.7% of deposits, as did the ratio that considers only items in national currency. For its part, the foreign currency liquidity indicator remained at high levels until mid-2012. In a year-on-year comparison, the holding of LEBAC and the integration of minimum cash in national currency gained share among the assets with the highest relative liquidity of banks.
• The net worth of the consolidated financial system increased 2.4% in June (30.6% YoY), mainly due to higher accounting gains. The capital integration of the banks as a whole stood at 16.6% of risk-weighted assets (RWA), increasing slightly compared to May and accumulating an increase of 1 p.p. so far this year. The excess of capital integration in the financial system above the regulatory requirement reached a magnitude equivalent to 61% of the latter.
• The monthly profitability of the financial system stood at 3.4% y/y. of assets, 1.2 p.p. above the May figure, mainly due to the increase in gains from securities. The banks as a whole closed the first part of the year with an ROA of 2.8%y, 0.3 p.p. more than in the same period last year. In the first half of 2012, all bank groups earned in asset terms slightly higher than in the same period last year.