Report on Banks

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

Summary

• The total credit balance to the private sector grew 2.1% in November (21.1% YoY). The monthly increase in loans to companies and families was explained by the segment in national currency, with a nominal variation of 2.5% compared to last October. Within the framework of measures aimed at expanding credit to families under favorable conditions, such as the “Ahora 12” program and the PRO. CRE. AUTO, loans to households increased 2.7% in November.
• From the implementation, in mid-2012, of the Credit Line for Productive Investment (LCIP) until November 2014, loans for approximately $116,000 million had been agreed, mostly being assigned to MSMEs. At the end of 2014, the BCRA decided to renew this tool for the first part of 2015, with a target amount of around $37,400 million additional pesos. On this occasion, the new financing must be allocated in its entirety to MSMEs, while the interest rate will be fixed at up to 19% for at least the first three years. A special mechanism is incorporated aimed at favoring loans to relatively smaller companies and stimulating financing to regions with less economic development.
• In the month, the irregularity of credit to the private sector remained at 2% of the total portfolio, with both households and companies maintaining their respective NPL ratios in their bank loans (3.1% and 1.2%). Thus, this indicator did not present variations in magnitude since the middle of the year. The coverage with accounting forecasts of the non-performing portfolio remained at 140% of the loan in this situation, with all groups of banks presenting comfortable levels for this ratio.
• The balance of deposits in pesos in the private sector increased 1.9% (28.6% YoY) in the month, with an increase of 2.2% (31.3% YoY) in demand placements and 1.5% (26.1% YoY) in term deposits. As the private sector’s foreign currency deposits did not show significant changes in the month (accumulating an improvement of 7.4% YoY in source currency), the monthly growth of the total balance (domestic and foreign currency) of private sector deposits was 1.8% (30.2% YoY).
• In November, the liquidity indicator reached 26.4% of deposits, increasing 1.7 p.p. in the month mainly due to the higher pass operations against the BCRA. Including the holdings of LEBAC and NOBAC, the liquidity ratio stood at 45.9% of deposits, also 1.7 p.p. more than in October.
• In November, the financial system accrued accounting gains equivalent to 2.8% of assets, being slightly lower than those of last month since sources of income were relatively lower than certain expenses. The ROA accumulated by the sector in eleven months of 2014 reached 4.2%y, 1 p.p. more than in the same period of 2013, mainly due to an increase in the results of securities in national currency.
• Accrued results continued to drive the growth of the financial system’s net worth in November (1.9% compared to last October and 41.4% YoY). During the period, the excess of capital integration increased slightly to an aggregate level of 90.5% of the regulatory requirement. Tier 1 capital integration (comprised of basic net equity from deductible accounts) increased slightly in the month to 13.8% of total risk-weighted assets (RWA), while total regulatory capital integration remained stable at 14.7% of RWA.
• In order to continue strengthening the financial system, at the beginning of 2015 the BCRA promoted regulatory modifications that are in line with the regulatory standards proposed by the Basel Committee and with the commitments assumed within the scope of the G-20. On the one hand, it was decided to introduce the “Liquidity Coverage Ratio” (LCR) at the local level as a technical relationship. On the other hand, with a macroprudential perspective, the establishment of an additional capital requirement for a set of financial institutions considered systemically important at the local level was contemplated. Both measures will be effectively implemented gradually.
• In addition, at the end of 2014, the BCRA issued new guidelines aimed at protecting users of financial services, establishing that the new fees and increases in any type of commission (including both basic and non-basic products) that financial institutions wish to implement must have prior authorization from this institution.