Report on Banks

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

Summary of the month

• The prudential regulatory framework implemented by the BCRA in recent years, combined with the sustained development of new liquidity provision measures, are making it possible to sustain the growth of intermediation with the private sector, ensuring financial stability conditions. In this way, banks continue to maintain high levels of liquidity and solvency in a context of international financial markets that continue to observe episodes of volatility.
• The BCRA continues to adopt measures to preserve financial stability and credit dynamics, providing for the auction of fixed-rate swaps for variable rates during May, while in June the possibility of tendering options for active passes in pesos was incorporated. In this context, the balance sheet of credit to the private sector grew 1.1% in May due to the increase in advances and lines for export financing. In year-on-year terms, the rate of expansion of financing to families and companies reached 11.4% in the month. In the last year, public banks accounted for approximately three-quarters of the total increase in financing to the private sector.
• The balance sheet of total deposits in the non-financial sector grew 1% in May, mainly due to public sector placements in a context of significant tax maturities. Private sector deposits increased slightly in the month, driven by the rise in demand deposits, which is partially offset by the decrease in term loans.
• The liquidity indicator (items denominated in pesos and foreign currency) grew slightly in the month, standing at 30.8% of deposits (7.8 p.p. higher than that corresponding to the same month last year). The holding of Lebac and Nobac not linked to pass operations with the BCRA increased in May, bringing the broad liquidity indicator to 41.9% of deposits (3.2 p.p. more than 12 months ago).
• From moderate levels, some materialization of the credit risk of households and companies facing the financial system continues to be perceived. The irregularity of credit to the private sector increased 0.1 p.p. in May to 3.8%, accumulating an increase of 0.7 p.p. so far this year, driven mainly by household consumer credit.
• The consolidated accounting equity of the financial system expanded 0.7% (14.2% YoY) in May. Regulatory capital continues to grow gradually in a context of slowing growth in risk-weighted assets, so that the capital integration ratio stands at 17.6% in terms of the latter, accumulating an increase of 0.8 p.p. in 2009.
• The monthly accounting result reached 1.4% of assets, down from last month mainly due to higher administrative expenses, charges for uncollectibility and tax charges. If the accounting effect of the variation in the nominal peso-dollar exchange rate is excluded, the accounting profits accrued by the financial system so far in 2009 are lower than those verified in the same period of the previous year. It is estimated that valuing the holdings of public sector assets at realisation prices at each moment in time, the aggregate of the financial system would be showing a loss of approximately $2,100 million, for the accumulated of the last 12 months (compared to the accounting profit accrued of $5,300 million in the same period). However, it is noted that the solvency of banks, measured in terms of capital integration, would remain at adequate levels even taking into account the aforementioned adjustment.