Report on Banks

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

Summary

• In October, the levels of intermediation of the financial system with companies and families increased from the growth of loans and deposits denominated in national currency. The operations of the financial institutions were carried out within a framework of adequate levels of liquidity and solvency. There was also an expansion of the infrastructure for the provision of financial services in the third quarter, with increases in employment, in the number of ATMs and branches.
• In the month, loans in pesos to the private sector expanded 2.3% (36.7% YoY), influenced by seasonal factors that affect the use of credit cards. Total financing (in pesos and dollars) grew 2.1% (32.7% YoY) in the period, with increases of 0.8% (33.9% YoY) in credit to companies and 3.7% (31.4% YoY) in loans to households.
• The BCRA continues to promote bank financing to companies through the Credit Line for Productive Investment (LCIP). Since its implementation – in the second part of 2012 – about $42,000 million have been disbursed so far. In addition, through the Bicentennial Productive Financing Program (PFPB), this Institution has awarded more than $7,600 million among fourteen financial institutions, effectively crediting almost 76% of this total to companies.
• In the month, the irregularity of credit to the private sector remained around 1.8% of total financing. The NPL ratio for loans to households fell slightly in the period to 2.8%, while the productive sector kept its irregularity ratio stable at 1%. The financial system continued to exhibit high levels of forecasting, with irregular portfolio coverage reaching 137.5%.
• The balance sheet of total deposits in pesos in the financial system increased 2% in October (30.1% YoY), with a similar monthly growth rate in the private sector (32.8% YoY) and the public sector (23.7% YoY). Among the placements of the private sector in pesos, the increase in those that are term (3.7% or 39.7% y.o.y.) stood out. The balance sheet of total deposits (including pesos and dollars) showed an improvement of 2% (28.2% YoY) in the period.
• The liquidity (pesos and dollars) of the financial system in relation to total deposits stood at 24.8% in October, 0.1 p.p. above last month’s value. Meanwhile, the broad liquidity indicator (which also includes the holdings of LEBAC and NOBAC) stood at 38.1% of total deposits, without presenting changes with respect to September. Both liquidity ratios accumulated a year-on-year reduction of 1.1 p.p. On the other hand, the coverage of short-term liabilities with liquid assets in the broad sense reached 43.7% at the end of the third quarter (latest available information), slightly lower than the value recorded twelve months ago, although similar to the average of recent years.
• The net worth of the consolidated financial system expanded 2.7% in the month, accumulating an improvement of 31.8% YoY, mainly due to accrued profits. The capital integration of the banks as a whole stood at 13.5% of credit risk-weighted assets (RWA) in the period, while Tier 1 capital integration accounted for 12.2% of RWAs. In October, the excess integration of regulatory capital for all entities represented 73.3% of the regulatory requirement.
• In the month, the profits accrued by the financial system stood at 3.8% of assets, being slightly lower than those of last September. In 10 months of 2013, all financial institutions accumulated an ROA of 3.1%y, 0.2 p.p. higher than that recorded in the same period of 2012. In year-on-year terms, all bank groups improved their accumulated accounting profits.