Report on Banks

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

Summary of the month

• In a context of high volatility, given the development of the international financial crisis, the local financial system continued to show adequate levels of liquidity and solvency as well as reduced equity mismatches. In particular, during the month there was a recomposition of the balance sheet balances of private sector deposits, in line with the measures implemented by the BCRA to restore balance in the money market.
• The balance sheet of total deposits in the non-financial sector recovered in November after the decline observed in the previous month. Total placements increased by $2,650 million (1.1% or 17.4% YoY) in the month, driven by private sector deposits (1.8% or 13.2% YoY). In particular, total deposits of the non-financial sector in pesos grew by $1,900 million in November (0.9% or 15% YoY). Demand accounts drove the rise in private sector deposits in November with an increase of $3,150 million (3.8%), while time placements showed a slight decline.
• The liquidity of the financial system continues to improve. Driven by the constitution of passes with the BCRA and by the increase in cash, the balance of liquid assets at the end of November showed a monthly increase of $7,100 million. Thus, the liquidity indicator stood at 28.1% of total deposits, 2.6 p.p. more than in October and 5.8 p.p. above a year ago. Including the Lebac and Nobac portfolio not linked to pass operations, the broad liquidity indicator grew 2.1 p.p. of total deposits in November, to 41.7%.
• The balance sheet of total financing to the private sector remained stable in November and, in this way, continues to soften its annual rate of expansion. There was a drop in commercial financing (2.5%) that was offset by the increase in lines with real collateral (2.2%) and those related to consumption (0.9%). Credit to the private sector remained at 39.4% of total banking assets in the month (2.6 p.p. more than 12 months ago), more than tripling exposure to the public sector, which stood at 12.8% (3.3 p.p. less than in the same month of 2007).
• The irregularity of financing to the private sector increased slightly in November, although it remained at historically low levels: 2.9% of the portfolio, presenting a reduction of 0.4 p.p. in the last 12 months, driven mainly by the corporate sector. For its part, the degree of coverage of total irregular financing with forecasts stood at 131%.
• The financial system continues to strengthen its solvency. The consolidated net worth of the banks increased by $230 million (0.6% or 12.4% YoY) in November due to the obtaining of accounting benefits and the receipt of capital contributions from financial institutions. The profitability of the financial system stood at 0.9% annualized (y) of assets in November ($240 million), reducing 1.5 p.p. in the month mainly due to lower gains accrued by differences in quotation and by other financial results, in a framework in which the peso-dollar exchange rate remained stable between peaks. Exceeding international recommendations and the minimum required locally, the capital that is computed for regulatory purposes stands at a level of 16.8% of risk-weighted assets.