Report on Banks

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

Summary

• During the month of March, the expansion of credit to companies was once again highlighted, mainly due to the increase in private sector deposits and, to a lesser extent, the mobilization of part of the surplus liquidity accumulated in recent years. This behavior was developed within a framework of low non-performing loan indicators and broad coverage of the risks inherent to the intermediation activity.
• The balance of total deposits (in domestic and foreign currency) in the financial system increased 0.9% (25.8% YoY) in the month, driven by private sector placements, which increased 2.6% (27.3% YoY). In this segment, the dynamism of fixed terms in national currency stood out, which expanded 4.2% in the same period (44% YoY). Thus, these deposits increased their share of the total balance of private sector accounts by 5 p.p. in the last year and by more than 8 p.p. since the beginning of 2010.
• The liquidity indicator (pesos and dollars) stood at 23.8% of total deposits in March, after a decrease of 1.1 p.p. in the month; meanwhile, the broad liquidity ratio (which includes the holdings of LEBAC and NOBAC) registered a similar monthly reduction and stood at 37.8% of total deposits in the period.
• In March, the balance of bank credit (pesos and dollars) channeled to companies and households expanded 2.2% (30.7% YoY), a performance driven by financing in national currency (2.6% in the month and 41.6% YoY). The monthly increase in loans to the private sector was explained by financing to the productive sector, which contributed more than 65% of the variation in the period. Loans to the productive sector grew 2.4% in March (30.7% YoY) while loans to households increased 1.6% (31.1% YoY) in the month. In the first quarter of 2013, financing to companies with a residual balance of less than $5 million (related to micro, small and medium-sized enterprises) stood out, presenting growth rates higher than those evidenced a year ago.
• So far this year, there has also been an increase in the average term of loans to companies, partly stimulated by the set of measures implemented by the BCRA to promote investment for productive purposes, including the Line of Credit for Productive Investment and the Bicentennial Productive Financing Program. In the same sense, it is observed that the interest rates agreed, on average, for loans to firms were reduced in the first 4 months of the year compared to the same period in 2012.
• In March, the irregularity ratio of financing to the private sector decreased to 1.8%. The financial system continued to exhibit high levels of forecasting. The coverage of the irregular portfolio with accounting forecasts reached 137% at the aggregate level.
• The net worth of the consolidated financial system expanded 2.6% in March (30.3% YoY), mainly due to accrued accounting gains and, to a lesser extent, capital contributions. The integration of regulatory capital from the financial system totaled 14.2% of risk-weighted assets (RWA) in the month and Tier 1 capital accounted for 12.9% of RWA. On the other hand, the capital position (integration – requirement) stood at 62.5% of the regulatory requirement in the period.
• In March, the accounting profits of all financial institutions represented 2.9% of assets. The accumulated ROA in the first quarter of 2013 was in line with the monthly value and with the level of the same period last year. Distinguishing by group of banks, there was a year-on-year increase in the cumulative levels of profitability of public financial institutions, which was offset by a decrease in the registration of private banks; although the latter presented a higher ROA