Report on Banks

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

Summary

• As part of the operation of the national payment system, in October the clearing of checks increased while the ratio between documents rejected due to lack of funds and the total number of cleared checks was reduced. The indicator of checks rejected due to lack of funds stood at 0.5% in terms of values of cleared checks and 0.8% when considering the amounts. For its part, another payment instrument that has been gaining depth in a sustained way are electronic transfers of funds with immediate credit. In the last twelve months, this operation accumulated an improvement of 70% in terms of values and 41% in terms of amounts.
• In October, total financing to the private sector increased 1.7% (21.5% YoY), driven by lines in pesos, which increased 2.3%. In the segment in national currency, the credit card line showed the highest relative growth, driven in part by seasonal factors and within the framework of the implementation of the “Ahora 12” Program. In the month, loans to households expanded 3.4% (20.8% YoY), above the variation observed for loans to companies.
• In terms of credit policy, the BCRA decided to renew the Credit Line for Productive Investment (LCIP) for the first half of 2015. On this occasion, the banks covered by the regulation must allocate at least an amount equivalent to 6.5% of the deposits of the non-financial private sector in pesos. The target for the total amount of bank resources to be placed in the first six months of 2015 would thus amount to approximately $37,400 million pesos. The entire quota must be channeled to MSMEs, at a maximum rate of 19% and for a term of at least three years. It includes a mechanism aimed at both privileging financing for smaller companies within MSMEs and also promoting the federalization of credit, favoring the spread of LCIP in areas with less economic development. The possibility of allocating up to 20% of the quota to finance working capital associated with investment projects was provided, while the percentage that can be applied to the discount of deferred payment checks was expanded.
• Non-performing loans to the private sector remained at 2% of the portfolio in the month, with a slight reduction in the irregularity of the household sector (-0.1 p.p. to 3.1%) and without variations in magnitude for companies (1.2%). The financial system continued to provide ample coverage of the portfolio in an irregular situation. The accounting forecasts in the system increased slightly in October to represent 140% of the non-performing portfolio, standing above 100% for all groups.
• Private sector deposits grew 1.6% (30% YoY) in October. Demand placements in pesos increased 1.8% (30.9% y.o.y.), while term deposits in pesos expanded 1.3% (25.6% y.o.y.). After the decline evidenced in September, public sector deposits recovered. Thus, total deposits in the financial system increased 3.2% (25.6% YoY) in the month.
• The liquidity ratio (considering items in pesos and dollars) increased 1.3 p.p. of deposits in October to 24.7%. For its part, the broad liquidity indicator – which includes LEBAC and NOBAC – stood at 44.2% of deposits, registering an increase of 0.6p.p. in the month and 6.2p.p. year-on-year. In the last twelve months, the share of the BCRA’s bills and notes in the total portfolio of assets with the highest liquidity increased by 8 p.p. to reach 43% of the total.
• The net worth of the consolidated financial system expanded 1.8% in the month, accumulating an improvement of 42.2% YoY, mainly due to accrued profits. The capital integration of the banks as a whole stood at 14.8% of total risk-weighted assets (RWA) in the period, while Tier 1 capital integration represented 13.8% of RWAs. In October, the excess integration of regulatory capital for all entities represented 91% of the regulatory requirement, increasing 5 p.p. compared to the previous month.
• In the month, the accounting profits accrued by banks stood at 2.9% of assets, being lower than those of September, mainly due to the fall in income from securities in dollars and extraordinary movements in the various items. In the last twelve months, the financial system accrued accounting profits equivalent to 4.4% of assets (increase 1.3 p.p. y.o.y.).