Report on Banks

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

Summary

• Domestic currency credit channeled to the private sector increased in November, while non-performing loan indicators remained at historically low levels. The capture of deposits from the different sectors of the economy continued to be the main source of funding for the financial system. In the month, the banks as a whole maintained their prudential capital and liquidity margins, while accumulated accounting profits increased.
• In November, financing in national currency to the private sector grew 2.7% (35.6% YoY), with a positive monthly performance in all lines of financing. Total financing (in pesos and dollars) to companies and families expanded 2.4% in the period (31.7% YoY). This dynamism was mainly explained by the behavior of credit to the productive sector, which increased by 2.6% (32.5% YoY), while loans to households increased by 1.9% (30.9% YoY).
• In order to continue stimulating bank financing for productive purposes, at the end of 2013 the BCRA renewed the Credit Line for Productive Investment (LCIP) for the first half of 2014. The new loan fund to be allocated would amount to more than $22,000 million, an amount that is added to the $55,000 million corresponding to the first three stages of the LCIP. In this fourth tranche, the entire quota must be granted to MSMEs, establishing a fixed interest rate of up to 17.5% for the first 3 years at least. The imputation of up to half of this quota will be admitted to mortgage loans for individuals and to customers who do not fall into the MSME category who own certain investment projects.
• The irregularity of credit to the private sector stood at around 1.8% of total financing during November. The NPL ratio for loans to households continued to decline, reaching 2.7% in the period, while financing to companies kept its irregularity ratio stable at 1%. The financial system continued to exhibit high levels of forecasting, with irregular portfolio coverage reaching 139.2% in the month.
• The balance sheet of total deposits in national currency in the financial system increased by 2.2% in November (28.3% YoY), with an increase of 3.6% (20.2% YoY) in public sector deposits and 1.6% (31.8% YoY) in private sector deposits. Private sector placements in pesos on demand and term expanded respectively by 1.9% and 1% in the month. The balance of total deposits (including pesos and dollars) grew by 2.3% (26.9% YoY) in the period.
• The liquidity (pesos and dollars) of the financial system in relation to total deposits stood at 25.5% in November, 0.7 p.p. above last month. In the same sense, the broad liquidity indicator (which also includes the holdings of LEBAC and NOBAC) stood at 38.3% of total deposits, after a monthly increase of 0.2 p.p. The current levels of both liquidity ratios are high, although somewhat lower than those of twelve months ago.
• In November, the net worth of the consolidated financial system increased by 2.5% (32.2% YoY), driven mainly by earned earnings. Regulatory capital integration stood at 13.4% of total risk-weighted assets (RWA). On the other hand, the excess of capital integration above the regulatory requirement (capital position) was equivalent to 72.7%, accumulating a year-on-year increase of 11.2 p.p.
• The accounting profits of the banks as a whole reached 3.5% of assets in the month, with a slight drop compared to October. Throughout 2013, the ROA of the financial system stood at 3.2%a, 0.3 p.p. above the record