Report on Banks

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

Summary

• In order to facilitate access to financial services and continue to expand the financial infrastructure, the mechanisms for opening new bank branches were recently simplified. In addition, in order to promote competition in the sector and stimulate access to credit, banks were enabled to participate more actively in complementary
service companies (such as those aimed at the provision of technology-based
financial services and/or electronic payment services) and the surface right as
a bank guarantee was regulated. In addition, with the aim of improving transparency and the quality of service to
users of financial services, a communication channel was set up for users through a new website, through which they can make queries, suggestions and complaints, and
obtain useful information on financial services.
• The balance of total credit to the private sector grew 4.4% in June, reaching 3.2% when
adjusted for inflation1, a performance mainly explained by trade lines. Loans
in foreign currency grew 5.9% – in currency of origin – compared to the previous month,
while loans in pesos grew by 3.5% (2.3% in real terms). The acceleration evidenced in the growth rate of total credit to the private sector in recent months allowed a year-on-year increase of 40% in June, which is equivalent to 14.7% when adjusted for inflation.
• Mortgage bank credit continued to show a positive dynamic, reflecting an increase of 5.6% in June compared to the previous month (4.4% adjusted for inflation) and 36.5% year-on-year (11.8% y.o.y. in real terms). It is estimated that in the first half of 2017, almost 15,000 mortgage debtors joined
the banking sector.
• The irregularity of credit to the private sector remained unchanged in June, standing at 2% of total financing. The NPL ratio for loans to households stood at 3.2%, while that for companies reached 1%. The financial system’s accounting forecasts accounted for 131% of the portfolio in an irregular situation.
• In June, the balance of total deposits grew by 3.5% (2.3% in real terms), driven by a 5.4% increase
in private sector placements in national currency (3.1% in real terms) in the context of
seasonal factors (payment of the complementary annual half salary). In year-on-year terms, the balance of
total deposits increased 36.8% (12.1% in real terms), with an increase of 38.6% in private sector
accounts (13.5% real YoY).
• From high levels, in the month and in a year-on-year comparison, the
broad indicator of liquidity of the financial system decreased slightly – including passes with the BCRA and holdings of LEBAC – to 46% of deposits, within the framework of the observed increase in credit. The liquidity ratio
, which only considers the balance of the current accounts that banks have at the BCRA and the availabilities, totaled 26.2% of bank deposits and also decreased moderately compared
to the level of May and with respect to June 2016.
• In mid-2017, the regulatory integration of capital in the financial system represented
16.6% of risk-weighted assets (RWA). Tier 1 equity totaled 15.2% of RWAs. The
excess integration of regulatory capital reached 92% of the requirement. In June, the sector’s
net worth grew 3% in real terms (accumulating 6.4% real y.o.y.) driven by a private bank that made a public offering of shares and, to a lesser extent, by the profits accrued. At the beginning of the second half of the
year, new capital increases were verified in the sector.
• Earnings accrued in the month represented 2.5% of assets, falling from
the May level and in a year-on-year comparison. The monthly reduction was mainly influenced by adjustments made by one entity – reversing the increase that it had evidenced
in March – and the fall in the financial margin at the level of the system’s aggregate. In the first half of 2017
, the results totaled 3% y.a. of assets, falling 1.1 p.p. in a year-on-year comparison.