Report on Banks

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

Summary

• In March, the total credit balance (in domestic and foreign currency) to the private sector increased by 2.5% in nominal terms (22.7% year-on-year), exceeding the variations observed in previous months. Thus, in the first quarter of 2015 this financing grew at a higher rate than that evidenced in the three previous beginnings of the year. In the year to date, this performance was reflected in both the business and household segments.
• With the aim of deepening the promotion of bank credit to MSMEs, at the end of April the BCRA ordered a series of modifications that expand the implementation of the Credit Line for Productive Investment. In particular, participating banks may use a proportion of the quota corresponding to the first half of 2015 to discount public works certificates and invoices formed by MSMEs. Likewise, financing disbursed as local pre-financing of exports to companies that are not large exporters will be admitted, to the extent that they are funded with lines of credit from abroad, new external loans or negotiable obligations placed abroad; and new local financing of imports of inputs and/or capital goods that are financed with lines of credit from foreign banks.
• The non-performing ratio of credit to the private sector remained at 2% of the total portfolio in March. The stability of the NPL ratio in the month was verified both in loans to households (2.9%) and in financing to companies (1.3%). The coverage of the non-performing portfolio with accounting forecasts increased slightly in the month to 139.7%.
• Private sector deposits in national currency grew nominally by 4.3% (35.4% YoY) in March, driven by time and demand loans. As foreign currency deposits by households and companies fell slightly in the period, the total balance of private sector deposits expanded 3.9% (34.8% YoY) in the month. For their part, public sector placements decreased in March. Thus, total deposits in the financial system increased by 1.4% (30% YoY) in the third month of the year.
• Liquid assets – in domestic and foreign currency – stood at 23.6% of deposits in March, 1 p.p. below last month’s record. The liquidity indicator that incorporates the holding of monetary regulation instruments fell, from high levels, by 1.8 p.p. of total deposits in the period, to reach 45.2%. This level of the liquidity ratio in the broad sense was higher than that evidenced at the end of the first quarter of 2014 by 3.1 p.p. of deposits.
• The mismatch of foreign currency in the financial system stood at 18.9% of the computable equity liability (CPR) in March, 0.9 p.p. less than in February, mainly reflecting the effect of the increase in the net position sold at term for the aggregate of financial institutions. This currency mismatch accumulated a decrease of almost 13 p.p. in PRC terms compared to March 2014. · The net worth of the consolidated financial system grew 3% in March (32.6% YoY), driven by earned earnings. In the period, the integration of regulatory capital represented 14.7% of total risk-weighted assets (RWA), while the integration of Tier 1 capital stood at 13.8% of RWA. For its part, the excess of capital integration in relation to the regulatory requirement reached 93% in the month.
• In March, gains accrued by the financial system totaled 4.4% of assets, increasing compared to last month mainly due to the increase in interest and service earnings. The accumulated ROA in the first quarter of the year stood at 4.3% of assets.