Report on Banks

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

Summary

• In May, the financial system maintained the path of expansion of its levels of intermediation in pesos (loans and deposits) with companies and families. The month also highlighted the more intensive use of electronic funds transfers. Financial intermediation activity takes place within a framework of limited banking risks and adequate indicators of liquidity and solvency in the sector.
• The BCRA recently approved a regulation to extend protection to users of financial services that includes, among other aspects, the regulation of the charges and commissions charged by financial institutions for the provision of services. The measure, which will come into force as of September 30, 2013, is part of the attributions to comply with the new mandates conferred on this Institution from the reform of its Organic Charter.
• In May, credit in pesos to the private sector grew 2.3%, accumulating an increase of 41.6% in the last 12 months. Loans in national currency continued to gain relevance in the total credit balance to represent 93.4%, 6 p.p. above the value recorded a year ago. On the other hand, total financing (domestic and foreign currency) expanded 2% in the period (31.9% YoY). In this period, credit to companies increased 1.7% (31.7% YoY), while financing to households increased 2.2% (29.5% YoY). In year-on-year terms, loans to firms accounted for more than 57% of the increase in the total balance of credit to the private sector.
• The financing granted through the Credit Line for Productive Investment continued to gain weight in the total resources channeled to the corporate sector. Having far exceeded the goals established in the first two stages, the new amount of loans to be allocated would reach $20,000 million, equivalent to 8.5% of the total balance of credit to companies as of May, and consequently the credit quota induced by this line in the three tranches accumulates $52,102. Driven by the good performance of this initiative, loans to small and medium-sized enterprises (SMEs) more than doubled between May last year and May 2013.
• In the first 5 months of the year, active interest rates operated in pesos decreased in most lines of credit. Given the behavior of the estimated funding cost for deposit operations in pesos, interest rate spreads have also narrowed so far in 2013.
• In May, the irregularity ratio of financing to the private sector remained stable at 1.9%, an indicator that stood at only 1% in the case of financing lines to companies and 3% in credit to households. The entire non-performing loan portfolio continues to be over-hedged by the forecasts posted by the banks.
• Among private sector deposits in national currency (which increased 0.9% in the month and 35% YoY), time deposits stood out, with a growth of 2% in the period (45.2% YoY). In the last 12 months, these deposits increased their share of the total balance of private sector accounts by 5.1 p.p. For its part, placements in pesos in the public sector increased 5.1% in the month, reaching a year-on-year variation of 21.4%. Thus, the balance sheet of total deposits in the financial system increased 2% in the month (25.8% YoY).
• The liquidity indicator (pesos and dollars) of the financial system registered a slight increase in May (0.3 p.p.) and stood at 24.5% of deposits. The broad liquidity ratio (which includes the holdings of LEBAC and NOBAC) remained unchanged in the month, in the order of 38.1% of total deposits.
• The net worth of the consolidated financial system grew 1.6% in the month (30.5% YoY), mainly driven by accounting earnings. The financial system’s regulatory capital integration in terms of total risk-weighted assets (RWA) remained stable in the month, at around 14.3%. For its part, in May the capital position (excess integration above the requirement) increased slightly to 68.4% of the regulatory requirement, accumulating an increase of 9.7 p.p. throughout the year.
• In May, the accounting gains of the financial system stood at 2.3% of assets, observing a monthly decrease explained by lower earnings from securities and higher administrative expenses. So far this year, the banks as a whole have accrued an ROA of 2.8% y/y of assets.