Report on Banks

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

Summary

• In October, the trend of expansion of the intermediation of financial institutions continued to deepen, in a context in which positive economic prospects prevail, ensuring conditions of financial stability. Credit to the private sector continued to increase its growth rate, being funded mainly throughout the year through the increase in deposits from companies and households, as well as from the public sector. In this context, in 2010 financial institutions increased their staff, branches and ATMs.
• The balance of total deposits in the financial system grew 2.9% in October, mainly reflecting the dynamism of public sector placements. The balance of deposits in the non-financial private sector expanded 1.8% in the month (26.7% year-on-year), driven mainly by demand loans. During October, the liquidity ratio of the financial system, considering items in domestic and foreign currency, rose 1.3 p.p. of deposits to 29.4%. Ample liquidity (including holdings of bills and notes from the BCRA) verified the same behavior.
• Financing to the private sector increased by 3.4% (32% YoY) in October, driven mainly by commercial lines, among which leasing and documents stood out. Thus, credit to the private sector expanded by 33% annualized (y) in the first 10 months of 2010, 28 p.p. more than in the same period last year, reflecting the greater dynamism of all loan lines. Bank credit to companies increased 3.7% in October and, in this way, continued to increase its pace of expansion, even exceeding that observed for household consumer loans.
• Within the framework of the Bicentennial Productive Financing Program, the BCRA held the second auction of resources in November. The total amount awarded reached $340 million. The interest rate to be paid by each financial institution was set at 9% nominal per annum. With this funding, the entities will grant credit with a total financial cost of 9.9%.
• The non-compliance ratio of financing to the private sector fell 0.1 p.p. in the month, reaching a new record low of 2.4%. In the last 12 months, this indicator fell 1.2 p.p., mainly due to the performance of loans from EFNBs and private banks. In the case of the latter, the improvement in the quality of financing to the private sector was observed mostly in large banks and, to a lesser extent, in those of relatively smaller size. The decrease in non-performing loans in the loan portfolio was mainly driven by behavior observed in the segment of financing for household consumption. The irregular portfolio of the financial system continued to show a high level of coverage with forecasts (152%).
• The recently implemented Cancelatory Check reached operations in mid-December for a total accumulated amount of almost $37 million (636 checks denominated in local currency) and US$7.7 million (567 checks denominated in foreign currency).
• The broad mismatch of foreign currency in the financial system continued to show the downward trend recorded in the last year, mainly explained by the lower net purchases of foreign currency in the future by private banks.
• The net worth of the financial system expanded 2.7% (or 16.3% YoY) in the month, explained by accounting profits. The capital integration of the banks as a whole stood at 18% of risk-weighted assets (RWA). During October, financial institutions earned accounting profits equivalent to 3.8% annualized (y.) of assets, increasing compared to September mainly due to the better performance of foreign public and private banks. Public banks showed the most significant increase in cumulative accounting profits for the year, although private banks made relatively higher profits. So far in 2010, there has been an increase in the profitability of relatively larger private banks.