Report on Banks

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

Summary

• In May, total financing to the private sector (including domestic and foreign currency) increased 2.5% and accumulated a growth of 25.8% YoY, which was 1.9 p.p. higher than in April. The
  monthly evolution was mainly explained by the credits channeled to companies, highlighting
  advances in pesos and pre-financing for exports. Thus, in the first five months of the year
  , loans to the productive sector and households showed an acceleration in their nominal
  year-on-year growth rate, a behavior that was observed in all groups of banks.
• In order to continue deepening the supply of bank credit for companies, especially for smaller ones, at the beginning of July the BCRA decided to extend the Credit Line
  for Productive Investment (LCIP) for the second half of 2015. The total amount of
  loans to be assigned to MSMEs is around $52,000 million pesos (35% above the total
  expected in the previous stage). In this new tranche, the interest rate was reduced by 1 p.p. compared to the
  previous tranche, to 18% nominal annual rate at least during the first 3 years. On this occasion, the imputation of up to 40% of this quota to other purposes will be
  admitted, among which mortgage loans
  for individuals, financing to individuals for the acquisition of housing through the assignment as a guarantee of rights over trusts for the construction of these properties and
  credit to microentrepreneurs stand out.
• The non-performing loan ratio for loans to the private sector fell slightly to 2% in May, mainly due to the performance of loans to companies. The set of financial
  institutions continued to exhibit high levels of forecasting, with coverage of the portfolio in an irregular situation
  that reached 137.4% in the month.
• The balance of total deposits in pesos in the financial system increased 3% in May, based
  on the increase in contributions from the public sector (5.4%) and the private sector (2.3%). The monthly growth recorded in private sector placements in pesos was explained by demand accounts
  (3%) and, to a lesser extent, by term deposits (0.6%). Compliance with certain tax obligations influenced the monthly performance of public sector deposits and private sector time deposits in pesos. In a year-on-year comparison, in May, private sector deposits
  in national currency nominally increased 37.3%, with similar performances in
  demand and time accounts. For its part, the balance of public sector deposits exhibited a year-on-year variation of 12.4%. In summary, in May the total balance of deposits in the financial
  system increased by 30.3% YoY.
• The liquidity indicator of the financial system (considering national and foreign currency, without LEBAC holdings) stood at 23.1% of total deposits as of May, slightly above last month’s record
  . During the period, there were no changes in magnitude in the holdings of monetary regulation instruments in banks’ portfolios. Thus, the broad aggregate liquidity ratio (which includes LEBAC holdings) reached 44.4% of total deposits, only 0.4 p.p. less than in April and 1.6
  p.p. above the figure for May 2014.
• In May, the profits accrued by banks stood at 2.8% of assets, being lower than
  those recorded in April, mainly due to the fall in income from securities. So far this
  year, ROA reached 3.9%y, 1.1 p.p. lower than the level recorded in the same period of 2014.
  However, in the last twelve months the financial system recorded profits of 3.7% of assets
  .
• The net worth of the consolidated financial system expanded 1.6% in the month (30.2% YoY),
  mainly due to accrued earnings. Capital integration of the banks as a whole stood
  at 14.5% of total risk-weighted assets (RWA) in the period, while Tier 1 capital integration accounted for 13.6% of RWAs. In May, the excess integration of regulatory capital for all entities reached 90% of the regulatory requirement.