Report on Banks

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

Summary

• In November, the balance of credit to the private sector (domestic and foreign currency) grew 4.4% (
  2.4% in real terms using the IPCBA1
  ), driven by mainly short-term lines: advances, cards and documents. The monthly behavior of loans mainly reflected the actions of private banks. In a year-on-year comparison (y.a.), bank
  financing to companies and households accumulated a nominal increase of 36.2% (9.9% y.o.y. adjusted for inflation).
  In recent months, financing to the private sector has accelerated its year-on-year rate of increase
  .
• With the aim of promoting credit to the most vulnerable productive and social sectors,
  seeking to promote a greater degree of financial inclusion, the BCRA renewed the Credit
  Line for Productive Investment for the first half of 2016. The financial institutions covered
  must maintain a balance of financing included that is at least equivalent to 14% of their
  private sector deposits in pesos. The interest rate will be fixed of up to 22% nominal per year for all
  those customers who meet the condition of MSMEs and the total term may not be less than three years.
• The non-performing ratio of financing to the private sector remained unchanged in November, at around 1.7% of the total portfolio, 0.3 p.p. below the value recorded at the
  end of 2014. The non-performing loan ratio of financing to households and companies remained at levels
  similar to those observed in October (2.4% and 1.3% of the total of each portfolio, respectively). The balance of accounting forecasts
  of all financial institutions represented 146% of loans to the private sector in an irregular situation.
• In November, the balance of deposits in pesos of the private sector grew 3.2% (1.2% in real terms
  ), accumulating a variation of 42.2% y.o.y. (14.8% y.o.y. adjusted for inflation). Within this
  segment, compared to last October, the increase in demand accounts stood out over the
  performance of time deposits. Considering the year-on-year comparison, the balance of time placements
  in pesos in the private sector increased 46.9% (18.5% y.o.y. in real terms), while demand accounts
  increased by 37.2% (10.7% y.o.y. adjusted for inflation). Total deposits in the financial system grew 5.3% in November and 35.3% YoY (3.3% and 9.2% YoY in real terms respectively).
• Liquid assets – including in domestic and foreign currency, without LEBAC holdings – increased 1.6 p.p. of total deposits in the month, to 24.6%. This increase was mainly explained by bank passes with the BCRA. In November, holdings of monetary regulation instruments were reduced, an effect that moderated the rise in the broad liquidity ratio – which includes holdings of LEBACs – to only 0.3 p.p. of deposits, to a level of 42.7%. This indicator was 3.2 p.p.
  of deposits lower than the record of a year ago, although it exceeded the average of recent years.
• In November, the accounting result of the financial system in terms of its assets (ROA) stood at 4.5%y, slightly reduced compared to last month, mainly due to lower gains
  from securities. The accumulated profits in the last twelve months represented 3.9% of the assets.
• Reflecting the effect of accounting gains for the period, the balance of equity in the consolidated financial system
  increased by 3.1% in the month (1.1% in real terms), and accumulated an increase
  of 33.7% YoY (7.9% YoY adjusted). Excess capital integration stood at 89% of the regulatory requirement
  in November, while the capital integration ratio accounted for 14.1% of total RWAs
  in the period (13.3% for Tier 1 capital). On the other hand, the level of leverage measured according to the so-called “Leverage Ratio” (following the standard defined by the
  Basel Committee on Banking Supervision -BCBS) stood at 11.1% for the average of the aggregate of the
  financial system (with a minimum observed value of 4.7%), a level significantly higher than the minimum initial value
  recommended internationally. It should be considered that the BCRA recently modified
  the rule of the minimum capital requirement p